Betting exchanges? Betfair? Commission? Premium Charge? For those without an intimate knowledge of the areas, the above phrases can be somewhat alien. However, the whole betting exchange business model is actually fairly straightforward and can be explained succinctly. Betting exchanges are platforms which facilitate the betting between individuals, much in the same way as the London Stock Exchange allows shares to be traded. Betfair are the largest betting exchange company in the world and have been since their inception. However their recent business practices have left customers disgruntled and have opened up the door for new competition.
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Betting exchanges were devised with a number of unique selling points over bookmakers. They enable individuals to bet on selections to win and lose – with the latter action particularly poignant. Prior to betting exchanges, only bookmakers could take bets on a horse, football team or tennis player, etc. not to win an event. However, by facilitating peer to peer betting, exchanges changed the landscape. Without overheads associated with a business, individuals are able to offer truer odds to each other, i.e. there is no inbuilt profit margin and the prices available are generally better than at the bookmaker. Lastly, as customers are able to bet on selections to win and lose, and bet during events, this opens up the possibility of trading on sports. Trading involves betting on both sides of an event, when the odds are favourable and a profit can be locked in.
Betfair and other betting exchanges make their money through commission. The individual who wins the bet pays a small percentage of their winnings for the pleasure of being able to strike their bet. The job of the betting exchange is therefore to generate as much turnover as possible, in order to maximise commission.
In their relative infancy, betting exchange Betfair used to proudly push their motto ‘where winners are welcome’ across any medium possible. They were intent on exposing potential customers to the fact that unlike traditional bookmakers, winning punters would not be penalised for their success. In the early days, everything was rosy – the shrewd customers were making lots of money. But then Betfair got greedy. In 2008, the introduction of a premium charge for winning customers rendered their mantra somewhat redundant and indeed factually incorrect – no surprise then that it was swiftly removed.
The initial 20% premium charge, which is effectively a tax on those customers who have won over a certain amount, was met with complaint from those affected, although ultimately they knew their hands were tied as Betfair retained a monopoly on the market. In June 2011, the Betfair board made the audacious decision to raise the premium charge to 40-60% for the top earners, slicing their future profits by half. Furthermore, in the following year commission levels were increased to 6.5% on Australian racing, and were increased to a general level of 7.5% in some countries such as Bulgaria. It was clear by this point that winners were not welcome at Betfair.
Betfair Commission Hikes – Your Alternatives to 6.5% + 60% Premium Charge
So what can be done? The quandary customers find themselves in is that if they leave Betfair, will they be able to get enough liquidity to generate an income elsewhere? What are the alternatives? WBX is an up and coming exchange that has a wide range of benefits over Betfair. Their commission rates start at 3-5%, with markets that have three entrants such as football matches staying at the lower end. Loyal customers receive up to a 60% discount upon commissions, meaning that the take from WBX can be as little as 1.2% on some events.
There is absolutely no premium charge for those successful punters, and what is more, if a customer decided to change from Betfair to WBX, they will match the loyalty discount, so the commission paid is immediately lower. The liquidity on WBX is growing all of the time and a snowball effect is inevitable. Betfair have taken advantage of their market position for too long, and their aggressive tactics to maximise profits will eventually come back to haunt them, as the new and vibrant exchanges like WBX rise to prominence.
Check out WBX and you’ll see what we mean.
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Additional Alternatives to Betfair Questions:
Would You Recommend Leaving Betfair for WBX?
Not yet. Betfair still has its positives – especially over your standard bookie, and the liquidity is yet unmatched. However I would recommend having multiple accounts – one at Betfair, one at WBX and when betting, always care.
Remember too that even though WBX doesn’t have the liquidity of Betfair yet – that’s actually a positive for laying bets as you can push higher odds.
The answer to the question What’s the Deal with Betfair Commission Hikes? is also applicable for the following questions: