Isavella Frangou, SVP of Global Sales at payabl., writes at length on the impact the payment process in the igaming and betting sectors can have, highlighting the varying risks such as fraud and chargebacks, as well as exploring the effects of regulations and compliance laws.
Payments are key for monetisation and driving profits for gaming businesses, whether that’s allowing users to add funds to their accounts or make in-game or in-app purchases to improve gameplay. The technology and services payment providers offer is also key for creating seamless experiences when making purchases in-game, and ultimately, encouraging gamers to keep engaging.
And with the gaming industry moving away from one-time purchases in physical stores, and towards online purchases which involve subscriptions and repeat, smaller transactions, the need for efficient payment methods is only increasing.
The payment process for in-game add-ons needs to be simple and minimally disruptive, to ensure a player stays engaged.
In light of growing scrutiny around in-game payments, striking a balance between revenue and client security is essential for the gaming industry’s long-term sustainability.
The scrutiny within payments in the gaming industry
The gaming industry is growing rapidly. In the UK alone, the industry is projected to be worth an estimated 7.1 billion British pounds by 2025. However, with this increase in popularity comes the potential for close examination and criticism of practices.
The rise of monetisation in gaming, particularly purchasing add-ons in-game, in-app or web-based gaming, is a key example of an area which has been put in the spotlight. For example, loot boxes, in-game rewards that can be won or purchased, have been banned in some European countries due to concerns around links between purchasing loot boxes and financial harm. Instances like this pose a dilemma for gaming developers, as in-app purchases are a big revenue driver.
According to Statista, more than 94% of hyper-casual gaming app revenues were via in-app revenue. The challenge for the gaming industry is to ensure in-game purchases are as simple and efficient as possible, while also upholding their duty of care towards customers and ensuring they don’t fall foul of predatory monetisation.
In addition, gaming developers have to ensure they are meeting regulatory requirements. For example, earlier this year, the European Parliament established new rules to protect gamers. Members of the European Parliament (MEPs) asserted that game developers should prioritise data protection for customers and that in-game purchases have to comply with national and EU regulations.
Another challenge gaming businesses are having to contend with is the growing risk of fraud, which has been catalysed by the increase in money spent on in-game add-ons. This includes payment fraud, identity thefts, card testing attacks, real money trading and customer account takeovers. Stolen credit cards are sometimes used to make in-game purchases, which results in an increase in chargebacks.
The responsibility for all of this doesn’t fall solely with gaming businesses – payment providers who work with them have an important role to play too.
How can payment providers support gaming developers?
When it comes to ensuring seamless in-game purchases, protecting gamers’ privacy, meeting regulatory requirements, and ultimately allowing gaming businesses to balance profit and protection, payment providers have a crucial role to play. Here are some key ways in which payment providers can support gaming businesses:
Risk assessment and fraud prevention: Payment companies can help video gaming companies implement effective fraud prevention measures to minimise the risk of fraudulent transactions. This includes real-time monitoring and analysis of transactions to detect and prevent fraudulent activities, and implementing authentication and verification processes to ensure that transactions are legitimate.
Chargeback prevention: Chargebacks can be a significant problem for video gaming companies, as they can lead to lost revenue and chargeback fees. Payment companies can help mitigate this risk by providing chargeback prevention tools that enable video gaming companies to manage disputes and reduce the likelihood of chargebacks occurring.
Compliance and regulation: Payment companies can help video gaming companies stay compliant with relevant regulations, such as the Payment Card Industry Data Security Standard (PCI DSS) and General Data Protection Regulation (GDPR), to protect customer data and minimise the risk of data breaches and other security threats.
User identification and verification: Payment companies can help video gaming companies implement effective user identification and verification processes to protect against fraud and ensure that transactions are legitimate. This includes tools such as two-factor authentication and biometric verification.
Revenue optimisation: Payment companies can help video gaming companies optimise their revenue by providing data analytics and insights that enable them to identify trends, patterns, and opportunities for growth.
Local payment methods: Payment companies can help gaming companies create a localised payment strategy by offering local payment methods that are familiar to users in a particular region to establish trust and credibility.
Working with a consultant rather than a provider
The UK government is anticipated to push stricter restrictions through discussions with the UK gaming industry for clearer information and legislation.
To ensure they are compliant, gaming businesses should look to work with payment partners who can provide bespoke consultation on meeting regulatory requirements, and help them to make the necessary changes.
Payments providers can also support gaming businesses with education for players, such as sending informative messages to customers on the risks of excessive gambling and in-game payments, particularly for those who are spending excessively or have been flagged as high-risk.
To further understand how well their messaging encourages responsible spending, payment providers can offer businesses with data analysis and reporting tools to help them curate their message accordingly.
By providing these tools and technologies, payment companies can help video gaming companies strike a balance between profit and protection, enabling them to generate revenue while protecting their customers and minimising risk.
Looking ahead
The gaming industry has skyrocketed over recent years and is still expected to grow further. To ensure this growth is sustainable, gaming businesses have a responsibility to their customers to protect them.
And this is where payment providers come into play, acting as the ‘middlemen’ in the payment process and work with developers and gaming businesses to ensure that policies and limitations are set in place to protect customers and sustain revenues for businesses.
It’s crucial to adapt the payment journey of customers to strike a healthy balance of in-game spending. Profits will grow as a result, because the number of gamers will grow, rather than due to excessive spending from existing customers. Profit is key for growth, but protecting customers is even more important.
