Now that we've all had a little time to sit back and think about what happened at Betfair today, here's why I think it was entirely the right decision for them to void all bets. I did not have a financial interest in the race, and like it says up in the top corner, I am an ex-Betfair employee - but I hope neither have any bearing on my position on this.
The punter's biggest lament with bookies is when they cry 'palpable error'. Having worked both sides of the counter, on the whole, I don't have a problem with this rule - when there is no doubt an error has been made, by whatever reason. Do unto others as they would have do unto you. I have no sympathy at all for punters bitching and moaning on forums when they identified an obvious mistake with a bookmaker, and tried to put their life savings on it. Those guys have the moral code of John Terry or Ryan Giggs, and some might say the gene pool would be better off without them. When it does hit very thin ice is when bookies roll out the palpable error rule when it isn't blatant - when a reasonable person would struggle to differentiate between the right and wrong offers. Online bookies in offshore havens such as Malta or the Caribbean have been known to do this, and put a blight on the industry worldwide. The punter's comeback will be that they have no form of a comeback if they make a mistake - which is untrue. Every betting firm allows the customer to confirm their bet - it's there for a reason. Betfair (and other exchanges) are the only companies I know that allows the punter to switch off this confirmation - but that is not the default setting - if you switch off the option to confirm all bets, then you are stuck with what you enter.
There is no doubt whatsoever that this was a technical glitch of the highest magnitude. Occasionally you see lumpy bets with some joker trying to spoof the market, but nothing of this price or size. This offer was so big, it barely fit on the screen for most people. And the race comments from AtTheRaces tell us that the price was always way out of line as well:
held up towards rear, headway into 3rd before 3 out, travelled best to challenge entering straight, soon led and shaken up to assert before last, kept on well run-in, comfortably
Now it's drawing a long bow to suggest everyone would recognise it was a wrong price, after all, with no bookmakers with automated systems betting in-running, there is no 'right' price - it all comes down to opinions of individual punters. But, this wasn't a 10/1 shot, it was the second favourite which started at a Betfair SP of 2.96. For it to hit 29, it would need to be hard-ridden early and going backwards, with the favourite looking very strong.
In combination with the eight-digit offer, so big that the price never moved despite Voler la Vedette winning by 4 3/4 lengths, even a first-day novice would realise something was seriously wrong in the market.
Betfair's biggest problem in all of this is that the firm, in the UK at least, have sunk to an all-time low in popularity. Everything they do is seen as part of an agenda to screw punters for every penny they can get. Sure, as a start-up evolves into a multi-national corporation, then its values have to change - but it is the relationship with its customers which has faded severely: once regarded as welcome friends joining a cause against those 'evil' bookies, now seen as numbers with wallets which should be drained as efficiently as possible. Back in the old days (circa 2005), a site outage during a key period would result in compensation for everyone, such as a commission-free day. When was the last time you can recall a commission-free market? Such offers these days might cost a lot more... but so is a PR disaster like this one. It was pointed out that the company value of Betfair lost more than the £23m in question between 1400 and 1630 when the stock market closed today. Tech glitches which cause bets to be repeated, or you don't know if they have been matched for several minutes, races not being turned in-play on time, site going down at crucial times.... these are all major issues which piss punters off big time, and it's not as if they are unique. Compensating customers might be costly - but hiding behind the Ts&Cs every time really kills the trust factor from punters. (Yes they often will compensate individuals who complain, but it often seems quite selective on when and to whom).
Cynics will point to this scandal as being an 'obvious' sign that Betfair are trading in their own markets. I don't see that at all. Yes, there is a cross-matching bot involved, that is stated in the market rules, but it could have been any account with a bot (trading programme) which went haywire. To me (a non-techie with a reasonable knowledge of how the system worked a few years ago), it looks as if the liability cap failed in conjunction with the account balance on a single, largely automated, account. You might ask why they both failed - it's possible (in my mind at least) that the liability cap overrides the account balance (if checked elsewhere in the system), in an effort to remove redundant code and reduce transaction time.
Betfair have no bet confirmation option internally, apart from the checks performed on each bet. Of course they can't manually check every bet which goes on the site (nor can a bookie offering 100s of markets in-play) - so the safety net of the option to void has to be there. In an ideal world, that control would be placed in the hands of an independent body - but with financial authorities being shown as being asleep at the wheel before the financial crisis, would that genuinely make us feel any better?
Re why did it take so long to make the void decision if it was so clear-cut? The decision to void bets worth over £20m couldn't be taken lightly, and at this time of year, it is likely that key members of staff weren't in the country, let alone the office. It's not the decision of the graduate in Market Operation to make that decision - senior management would make the call. Also, being a listed company, it was probably deemed necessary/appropriate to wait until after the market closed at 1630 to make the announcement.
To the punters concerned, this void all in-running bets ruling will suck - but let's face it, most of them were well aware of what they were doing - if not initially, then certainly by the end of the race when there was still £20m or so available to back on Voler La Vedette at 29. But if Betfair had enough customers to take all of the offer, leaving someone with a liability of nearly £600m, do they honestly believe forcing them to pay up, effectively sending the company bankrupt, would be the best policy? What if it was another firm which didn't have strict rules on segregating client funds? Would you be happy if a legal challenge forced the company to go bust, taking remaining client funds with it? Thought not. There's no way known a customer would cough up on that debt if it was a technical glitch which caused it, and if it was owned by a billionaire, they'd lock this up in a court case which took years to settle. Remember, if you want all companies to be liable for episodes like this, then expect commission rates/overrounds to increase severely to cover it. You can't have the cake and eat it too.
A legal challenge is expected to be mounted, but I can't see it winning. Betfair might see value in settling out of court, but that would require an attitude change from them.
For Betfair - how do you fix the acidic relationship with customers now?
Invest heavily in solving the tech issues.
Be generous with compensation - no reasonable person expects you to pay the full amount here, but customers and investors need to see you are serious about solving the problems and mending the damaged relationships with customers.
Stop treating your most loyal customers as cashpoints who need to keep paying for the service - if they win, they have to keep paying the premium charge, they shouldn't have to wear avoidable errors through system failures.
Stop trying to be just another bookie - the reason most people joined is because you offered something different.
Put customers before profits for a change - it costs far more to acquire new customers than retain the old ones, if you look after what you have, the profits will take care of themselves.
And as I said in a tweet yesterday - this is about the 17th own goal that Betfair have handed to Betdaq - will they ever cash in on one?
Feel free to make comments below...
Further Betfair explanations:
In response to a number of customer questions on this matter, we would like to clarify that the account in question has no commercial relationship with Betfair other than being a customer.
Further update to 2pm Leopardstown race
Firstly, we would like to re-iterate that anyone betting in-running in yesterday’s Leopardstown race clearly received a very poor customer service and betting experience. We apologise once again for this.
We have identified the issue and replicated it in a test environment last night. A fix was applied overnight, and is now subject to rigorous testing. A further update on this will be made today.
Contrary to some media speculation, we can confirm that all in-running bets on this market would have been voided, had Voler La Vadette won or lost. There was never any chance of the account in question profiting yesterday. The account in question was also immediately suspended after the Leopardstown race.
There has been some criticism from customers, and in the press, that Betfair took too long to void. Quite simply, we made the decision after we were in full possession of the all the facts and input from the relevant internal departments. A decision was then made to void in accordance with our terms and conditions.
We will update when more information is available.