Betfair Premium Charges Unplugged
 

Guess it's up to me to dedicate a thread to this immensely important development which threatens all honest, informed and responsible punters.

First, let's get the official quote correct.

Betfair claims this new premium charge affects:

"less than 0.5% of active customers"

Now what is an active customer?

From Betfair's material we can infer that any customer who places at least 1 bet in a particular week is considered an active customer for that week.

So someone who simply has 1 minimum bet a week on the West Coast Eagles (say) would be counted.

when I google news for "Betfair" I get 2,366 matches.

Trouble is that 797 of those matches happen also have "cashback" in the text.

Clearly there is a massive industry promoting a free money scenario at Betfair based on one bet per week.

So you have the opportunity for individuals to open accounts in as many names as they can muster merely to bonus binge. Then withdraw money from their account.

Can these people really be considered active customers?

You have inferred this. Moderators do not have time to be running back and forth to Betfair's site to see that fair comment has been made. Please substantiate your comment and provide the quote from Betfair that supports this.

Moderator 3.

"At the other end of the scale if we look at just a week then clearly the number of customers who’ve placed a bet will be less, but then so will the number of those who would be affected by the charge in the period, and the proportion is still about 0.5%. Any customer who doesn’t bet with us during a period isn’t included in the active number."

http://site.forum.betfair.com/jive3...hat+&schatname=

As we can see Betfair avoided defining an active customer until pressed. Then it responded in a roundabout fashion.

The criterion of at least one bet that week, is hardly what reasonable people would consider active.

It includes freeloaders, once-a-year'ers and many others whose turnover is so inconsequential that they are a loss-making segment for Betfair.

If instead Betfair had chosen a more meaningful group say "regulars" with a disclosed criteria of say 100 markets a month, then we would be in a position analyse Betfair's claims.

But obviously that sensible move would result in a figure far in excess of that 0.5%.

That figure of 0.5% received a thorough caning on the Betfair forum, since a very high percentage of posters found themselves affected.

And common sense suggests that Betfair would not bother tackling such a minor percentage - unless of course there was some far more significant statistic it was not disclosing.

Yet for some reason we find people actually going in to bat for Betfair, quoting that questionable statistic as if actually signified something.

You are arguing against yourself here, the figure also includes the traders, the arbers, the punters who bet every race every day. It also includes the bookies laying off huge amounts on the exchange.



Clearly there is some degree of misinterpretation here. The 0.5% figure relates to people affected, the rest actually pay no premium charge because they already have paid their share of commission. Many quite large investors on various forums have queried their account statements and done a premium charge reconciliation, finding they are not affected at all. Possibly in the future they may be affected, but this would be a one-off circumstance.



a very high percentage of posters claimed to find themselves affected, a very different thing.
They are scared that they will pay in the future. The number of posters claiming to be affected does not tally with all analysis of winning customers.
It is clear that people are inflating their own capabilities to mount an effective argument.



It's not a matter of going into bat for Betfair, it's a matter of getting some accuracy.
Betfair did not cause a mass exodus from the markets, punters overreacting caused it. The whole announcement has caused confusion and controversy because they did a very poor job of explaining it fully.
I will be affected because I don't pay commission unless I win on a market, therefore I don't currently pay as much commission as a punter.
However, I'm far from throwing in the towel to another exchange which has it's own problems.
There are ways to get around things, almost always.

I find it mind boggling that Betfair seems to be up to their armpits in ambiguous rules, or am I wrong?

Mainstream long-term winners don't win every week.

The charges don't immediately apply in losing weeks, which is of little consolation, because even if Betfair garnishes you only 1 week in 10, it can slug you for up to 20-something% of all your profits for the past 60 weeks. So it will get you in the end.

Say that affected customers average 50% winning weeks.

If the 1st week reels in 1,000 the 2nd would also get ~1,000. But in week 2, 50% of the previous customers would lose and get a temporary reprieve, and 50% that lost last week would now win and get slugged.

So you would expected the cumulative affected customers in successive weeks to be:

1,000
1,500
1,750
1,875

until eventually 2,000 is reached.


But Betfair is claiming that its 0.5% figure is constant irrespective of how big the sample period is.

Considering my example above, that constant 0.5% claim is staggering.

If that claim is actually true then Betfair has withheld some other important relevant statistics from us.

There is no cumulative figure.

The Premium Charge only affects customers who are in profit over a 60 week period and have not paid full commission on winnings and is calculated weekly.
If you are losing other weeks, you are already paying enough commission.
This is why only .5% of customers are affected.
There is so much misinformation being bandied about, it's done Betfair more harm than the actual charging process.
I do find it unbelievable that Betfair have done very little to correct or explain the situation fully, and remarkably stupid that any client cannot have instant access to the 60 week report.

Chrome, have you received the email............and even worse, the dreaded phone call??

Yes I have, I cannot risk the multiple account thingamy - they know and are watching for this I was told :(

Now consider the effect of that ~$2,222 initial charge allowance.

The very convenient consequence for Betfair is that it conveniently allows it to understate the true % of customers affected by the charges.

Without that allowance there could easily be say 10 times the number affected.

But as that allowance is only a once only offer, more customers will blow it forever week after week and the % affected will soar and soar.

One more reason to question Betfair's claim of how few will be affected.

Hi, this is my first post on this forum so am prepared for all the flack that may fly my way :D

I get the impression from JFC's comments that the $2,200 allowance is a one off and reduces if any is used, my interpretation is that it is for "each 60 week period"

i.e Period 1-60 week, next week it would apply to week 2-61...etc

Hi Chrome,

You seam to have some grasp on the subject. What do you mean have not payed full commision? How can you not pay a commision when you win? Or is it that they give you a 3% discount for large volume and then take 20% of your profit ??? I really strugle to understand how someone could not pay commision, and what is the level of commision that is right? I thought it was 5 to 2% ???

Michal

This wouldn't all fit on the one post so did 2

These are for the past 12 weeks and profits for $1: (my 12 weeks have been good)

Bets...459
Wins...130 (S/R 28.3%)
Place..326 (S/R 71%)
Gross Profit Win......$82 (17.8%) before 5% commission
Losing win bets.......459-130=329

Gross Profit Place....$110 (24%) before 5% commission
Losing Place bets.......459-326=133

Extrapolate these figures out to 60 weeks (BetFair period)
Bets...2,295
Wins...650 (S/R 28.3%)
Place..1,630 (S/R 71%)
Gross Profit Win......$410 (17.8%) before 5% commission
Losing win bets.......1,645
Gross Profit Place....$550 (24%) before 5% commission
Losing Place bets.......665

I then calculated the Premium charge in 2 separate types Win & Place bets to see how each affected me:

BFPC - Win only
20% of $410 = $82 (this is the figure I need to be greater than so that I do not qualify for BFPC calculations)
Actual commission on win collects (410+1645)*0.05 = $102.75
Implied commission on losing win bets 1645*0.05 = $82.25
BFPC calculation (102.75+82.25)/2 = $92

My BFPC ($92) is greater than 20% of gross profits ($82), hence no BFPC no matter what my bet size is


BFPC - Place only
20% of $550 = $110
Actual commission on place collects (550+665)*0.05 = $60.75
Implied commission on losing place bets 665*0.05 = $33.25
BFPC calculation (60.75+33.25)/2 = $47

My BFPC assessed figure for $1 on place only is 110-47 = $63

Using $20 bets
63 * 20 = $1,260

$35 place bets
63 * 35 = $2,205 (takes care of the 60 week allowance allocated for EACH 60 week period)

By betting win & place the bet could be increased over $40 before I would expect to donate to BFPC using the above figures
What would $40 Place only mean:
$550 * 40 = $27,500 less $2,430 (commission on place collects) = $25,070

If this became a problem for me, I have several choices:
a) move from Betfair
b) keep my bet sizes below $40 (happily doing that now)
c) Win only or each way betting
d) plan more holidays ( loving wife has put a big tick next to this one)
e) pay the BFPC


All that is needed is a bit of thought - apply some common dog-@#$% - do some simple calculations.
Basically the figures show thatwith a normal 10% POT then there is no worries about BFPC,
where the S/R is high and POT is over 20%, it then boils down to the bet size

How many do over 2,000 bets/year and average over 20% POT - according to BetFair, only 0.5% of their customers
I have no reason to disbelieve this figure.

Very interesting user name.

Now, having dredged through that material I am so confused that I am prepared to concede that you may be correct about the allowance applying to a rolling 60 week window, instead of only applying initially.

So presumably after 60 weeks are up, for every subsequent week Betfair credits your allowance by ~$37 = (2222/60).

Pity Betfair didn't bother spelling that out to eliminate confusion.

Anyway imagine those who manage to stay completely within the allowance by averaging pre-allowance charges of $37 per week.

From week 61 that changes.

If 50% stay below $37 then they escape charges.

But the other 50% who exceed $37 will get charged!

In essence anyone slightly below the allowance should now start getting charged upon encountering an above-average run.

So the proportion of affected customers will increase.

An important fact that Betfair has failed to disclose.

That is not the way I interpret it - whatever your figure was for Week 1 would be added to the amount and Week 61 would be deducted - not necessarily $37

BF will be advising of our actual Premium Charge status so that we all will know where we stand on a weekly basis...and if in the event that a person does pay a fee, this is also taken into account when calculating future Premium Charges

I really can't see how it will affect the majority of the punters

The username was a nickname give back to me in my footy playing days :D

Post deleted.

Generalised allegations such as "X did not properly disclose its fees to me and caused me distress" etc. are not appropriate in this place.

Our standard response to these types of posts is to see Consumer Affairs, see a lawyer etc. if there is any substance to the allegations.

From the Forum Terms of Use:

The following types of postings are not acceptable.

Potentially defamatory or libellous. This especially relates to the identifying of businesses, racing products, racing personalities or other individuals in a context that could harm reputations, even if justified.

Moderator.

Michal it gets extremely confusing for everyone actually, including Betfair - even they can't explain it, so how do they expect their members to understand it?

What I mean by full commission is not the commission rate, nor the actual dollars paid at the end, I mean something a bit different.

Punters pay commission on losing winning bets, traders do not.

Yeah it sounds weird but I'll try and explain it as I understand it.

Punter A has 100 bets of $100, turning over $10,000
He makes $2,000 profit.
He does not pay 5% commission on just the $2,000 he won, he pays commission on every individual winning bet along the way.
He might have a lot of winning bets, but still only win $2,000.
So he's paid probably $200 in commission at the very least.

Trader B has 100 trades of $100, turning over $10,000
He makes $2,000 profit
He pays commission on his winning trades only, so probably $100 in commission because almost all his trades are winning trades, but small dribbles of profit every trade (nearly).

The punter has paid "full" commission, the trader will probably pay half commission plus a very fat premium charge now.

I hope I explained it enough, it's hard to put into words, but they have everyone running for cover, and most are not even hunted.

Yep under stand that Chrome

Trader A would pay $600 (at 5%) commission he would have to win $12000 , all bets in different races.

Trader B has his bets in one race wins the same amount as trader A $2000 and only has to pay $100 commission

So what Betfair are saying is that Trader B isn't covering the cost that is incurred on Betfair for his 100 bets, this is why the new charge.

Yes, you put it better than I did Crackone.

It seems that something else has happened which has gone un noticed by everyone caught up with Premium Charges.....

Australians are now allowed to bet in running on international horseracing events.

They lifted the ban last night :D

Last night we lifted the restrictions on IP blocking that prevented customers in Australia from betting in-running online on horseracing events. Customers will now be free to bet on markets which offer this functionality i.e. UK horseracing.

For an absolute LAYMANS view here it is: I always thought it was too good to be true (remember the old adage?) but it didn't affect me as WA was excluded so I couldn't indulge anyway.

They changed the rules ..... BUT:

Then the main thing was 1 & 1/2% deposit charge......... NO WAY!, I deposit EVERY DAY AND (USUALLY WITHDRAW EVERY DAY)

Now all this bulaaaa, I think I'll just stick to what I know, and steer clear of all the crap!!

I am affected by the charges.

Yet I have had losing weeks in that period.

So how on earth can you justify your extraordinary modification to Betfair Premium Charges?

If losing weeks provided a loophole to escape the charges then imagine what would occur between colluding customers.

Actually Betfair are not saying anything remotely like your claim.

You apparently have missed the part where Betfair reveal what covering the cost really means.

Now if you study the situation there is no valid reason to suggest that Trader B costs Betfair more than Punter A.

Loser C who very rarely gets a bet matched but wastes tons of resources might actually cost much more.

Party,
That 1.5% is credit card only I used Bpay and never pay a cent. If I remember correctly NSW TAB charges 3% or was it $3 ? Either way its the method you choose you obviously need the instant funds so this isnt for you.

Chrome thatnks for trying to explain, as you said its hard because they are trying to plug something and the band-aid is not that good. Yes but generaly if you make a profit grinded out from POT then most likey you are ok. If you have a high strike rate or you trade your position then you are effected. I suppose people then need to make the choice if the betfair 'advantage' is worth it to them if they are punters or just cop it because they are traders and there is nowhere real to go.

Thanks

Michal

I won't pretend to understand how the new charges work, all I know is I will be affected. I have been with BF since they started betting on our races and have been happy to recommend them to all and sundry. But not any more. This is simply a money grabbing exercise that all monopolies succumb to. Why?, because they can. I have been told (over the phone) that I can always go elsewhere for my lay betting. This is their attitude. The other thing that really irks me is that people who place bets less than $6 are receiving emails threatening to close their accounts, however if the bets are placed via a bot, then that's ok. See the difference? They even advertise this fact on the BF site !!!

To the moderator, if you want proof of the threat I can send it through.

Party, why do you need to deposit every day ???

Elk,

if you spend some time watching how UK horse markets build up, then you should eventually realise that most long term Betfair winners bet in a different way than you do.

Essentially you are not availing yourself of all the best options in a market. Had you done so your 12 week streak would have reaped far bigger returns.

However since your figures are not representative of the aforementioned winners, your strategies and conclusions would not necessarily apply to them.

Personally, I comfortably play over 2,000 markets in far, far, far less than a year. And don't even bother trying to calculate POT, but would be surprised if it was over 1%.

Yet I am affected by the charges.

Mark, I find the tone of the "marketing" equally as annoying as the charge. It has a real "these people are cheating all you battlers" feel to it. I've not been contacted about the charge. I suspect the backing side of my ledger pop's me over the threshold.

Elk, thanks for your example. What a shame Betfair couldn't have done the same thing.

jfc, it doesn't work on one or two losing bets or one or two marginally losing weeks, it isn't about the actual losing, it's about the ratio of profit to turnover.

Losing isn't a loophole, but the way in which you win is.

I don't believe Betfair are telling us accurately the reasoning behind this, I don't believe that one customer costs Betfair more than another generally.
They are already set up, they already have their staff and software.
The previous costs have been offset by transaction charges (loads on their server and processing volumes of single bets from one customer etc).

The premium charge is just another area to raise revenue.

In fact it's quite ingenious when you think about it...possibly dastardly ;)

Losing customers are generally not affected, so keep betting.
Winning customers will keep betting because they are winning.

It's the traders, arbers and bookmaking punters who are the worst off.

They don't care if they lose these clients, because the premium charge from those that stay will more than make up for those who leave.

All that suffers is liquidity, but where short term people leave, there are replacements always waiting to have a crack at it.

A lot of people think that the droves leaving and decrease in liquidity will put Betfair out of business, in fact I think it will create more effective advertising than any planted garden or race sponsorship could do.

I can guarantee that this time next year, a lot of regular winners will have moved elsewhere or changed the way they do things, but that Betfair's liquidity will be better than ever.

Quote from the link you posted in your first Post

"The Premium Charge will only apply to customers who pay us less in commission than it costs for us to service them. The reason they do is because a) many of them use the Betfair infrastructure extensively, or b) they drain liquidity from the exchange by withdrawing their winnings faster than new funds are added back by other existing or new Betfair customers, or c) both of the above. Overall, these customers are a cost to Betfair, which means ultimately that they are a cost to the entirety of our customer base."

Trader A and B cost the same, 100 bets each. Trader A pays $600 commission betfair happy. Trader B uses same amount of resources pays only $100 commission.

Firstly, that is not the full story from Betfair. Dig further and you'll find more.

Secondly, Betfair's claim here can easily be challenged.

I provide considerable liquidity and commission to Betfair.

My infrastructure consumption per market would be much lower than that of many losers. Particularly since I could not indulge in in-running markets.

And until now I rarely withdrew any funds.

So according to Betfair, the Premium Charge should not apply to me.

But it does in spades.

So how can Betfair's claim be correct?

Note also that it costs Betfair next to nothing to service me. I avoid having contact with it.

That is I never now contact its service segments or managers because I know how slim the chances are of getting anything rectified.

Yet I generate considerable commission for it.

So Betfair are way, way, way ahead in their servicing of me.

So how can Betfair's claim be correct?

It isn't a claim, it is an excuse by the sharp minds in Betfair Towers to generate revenue without actually increasing commission structure for losers who are attracted to better odds, so it will help with the price of the IPO.

Unfortunately, the finance team forgot to talk to the marketing team.

It's not a very good implementation, but the sharp minds at Betfair have outdone themselves with brilliance.

I don't support it in any way, and it will probably drive me away quite soon, but it is brilliant.

Hundreds of thousands of dollars pushed through the exchange on every UK race, yet effectively Betfair are making a flat 5%.

Now they'll be making a cumulative 5%.

The bottom line is enormous.

To save some time for all, here is Betfair's real reason:

Charming.

"Servicing customers also includes the cost of replacing liquidity that has been taken out by customers with an extremely high success rate. Unfortunately, the cost to acquire and retain new customers continues to increase and we want to ensure that the Betfair exchange continues to thrive by being vibrant and liquid."


Winners are blamed for losers disappearing! Why is it our fault?

If I knew whether I was matching a winner or a loser life would be so much easier. But I don't.

But go where??? :( :(

Dillema for most. Betdaq aren't in a rush on adding aussie races, and I thought Robert Nason was not surprisingly very disappointing on Racing Retro last Sunday. The question was asked 'would Tabcorp consider implementing a betting exchange'. It's not on the radar, as well as his head-in-the-sand comment about still having reservations of the 'integrity' of it all

I'll probably have to go back to the bookies I think.
I'll also have to change my whole modus operandi.

But I won't be going to BDaq unless they can offer something apart from reduced commission that value adds to what I do now.

Michaelg and Mark, I wish I could *scream* it from the rooftops,.../.. but I can't sorry; I just cant risk having the door SLAMMED shut, I'll just say that I fly FIRST CLASS, and stay in 5 star................ for free!

PS And I'm nowhere near as successful punter as many here!

Consider this gem from Betfair support (from the allowance thread at the Betfair forum).

"However, the 1000 allowance would have already come into play around 59 weeks ago."

Now if this is true, it means that many customers who were historically not affected by the charge, and have nearly used up their allowance will get charged on the 1st live week. All they need to get charged is an above average week.

So the proportion of affected customers will immediately grow.

I can hardly wait until tomorrow when customers' charges will be revealed, to find the furore from formerly unaffected customers now getting slugged.

A number of flaming comments. Post deleted. Moderator.