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Navigating the Rapidly Growing Video Gaming Industry: Payment Trends You Can't Ignore

January 9, 2024
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Eye-Popping Growth

Video Gaming is one of the hottest global growth stories we don't hear enough about. This market is projected to reach an annual revenue of almost $300 Billion in the upcoming year, reaching close to $400 Billion within the next 3 years.1 Its sub-segments are forecasted to grow even faster - Cloud Gaming at 59% YoY in 2024, Game streaming at 16.7%, and In-Game Advertising at 16%.2

It is estimated that approximately 3.2 Billion people worldwide play video games and that 89.5% of video game sales happen in the digital world.3 Gaming companies with a massive number of users multiplied by an even larger number of payment transactions should think of three things:

1

Keeping their sensitive payment data secure

2

Unlocking their data's revenue potential by getting more utility from it

3

Ensuring that payments are transacted securely across channels - on mobile, a web marketplace, and more

As the video gaming industry grows, we see payments needs become more complex, and spread across new channels. We think effective payment management will unlock the next change in the industry - and the trends we're seeing in the market and with our clients are proof of the opportunity.

Industry Trends

A few trends specific to the Video Gaming industry particularly necessitate the ability to process high volumes of payments both securely and reliably.

Micro-payments for Online Games

Gamers typically interact with games by making small purchases. Success here requires 3 things: 1) A set of processors with the infrastructure to handle the high throughput (large volumes) of small ticket transactions, 2) risk models that balance acceptance rates while filtering out suspicious transactions, and 3) optimized economics for small ticket payments since the traditional fixed payment fees model is prohibitive to gaming companies.

In-app Purchases for Mobile Games

Mobile games are controlled by the operating systems they work on - iOS and Android - so the gaming companies haven't had control over how PANs used to make in-app purchases are processed. For example, in-app purchases on Apple devices are normally processed as iTunes transactions, with Apple as the Merchant of Record. On Android devices, such purchases were marked as Google Play Store transactions.

Gaming companies want to maximize their player audience, regardless of the payment infrastructure of the underlying operating systems. Having the ability to offer more payment options as well as store all payment data types is critical. This situation is already changing for Android, as the recent Google Play ruling allows gaming developers to “implement an alternative billing option alongside Google Play's billing system” for in-app purchases. Gaming providers are no longer tied to the Google processor and now have choices. On the iOS side, developers still need to abide by Apple's rules - so controlling their data and optimizing their processors isn't possible yet.

Subscriptions

Video game subscription revenue is forecasted to reach $22 Billion by 2027.4 Updated payment credentials are necessary to keep revenue flowing and offer a friction-free user experience that retains customers. When failed payments cause 48% of customer churn5, products like Account Updater that ensure that cards on file have up-to-date payment credentials become essential to avoid lost customers.

Live Commerce

Video game streaming marries creator payouts with gamer pay-ins. On a live streaming platform like Twitch, gamers will watch and follow their favorite gaming streamer and show appreciation by sending "Twitch Bits," the on-platform digital currency. The "tips" gamers provide become the creator's revenue and are typically sent live. Once the revenue is added to their balance, creators, like any small business, will pay their balance into a card or bank account. A poor experience for either side could cause an engagement drop or even a permanent exit. Maximizing options for pay-ins and payouts, along with a sophisticated payment infrastructure that offers processor redundancy to process any type of payment, is key. Both are available when payment data is collected in a single, secure Vault for creators cashing out their revenue or for gamers paying and supporting their favorite streamers.

The video gaming industry would be well placed to look into building a robust payments infrastructure - and to do it now. The industry is maturing, PCI 4.0 will be a requirement within months, and companies need to manage a globally decentralized developer and creator workforce. Securing sensitive information and having a reliable way to make global payouts while managing processing costs will be key to their success.

Contact Us to learn more about how we help our Gaming customers ensure they are well-prepared for the future.

Resources

  1. https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide#:~:text=In%202024%2C%20the%20Video%20Games,to%20reach%201%2C472.0m%20users
  2. https://www.statista.com/outlook/dmo/digital-media/video-games/worldwide#revenue
  3. https://truelist.co/blog/gaming-statistics/#:~:text=Approximately%203.26%20billion%20people%20worldwide,free%2Dto%2Dplay%20games
  4.  https://insider-gaming.com/game-subscription-revenue-2027-report/
  5. https://www.pymnts.com/subscriptions/2021/almost-half-of-subscription-churn-caused-by-preventable-friction-in-failed-payments/#:~:text=This%20is%20preventable%20with%20the,is%20coming%20from%20failed%20payments
Senior Director of Product Marketing Khyati Soparkar

Sr Director, Marketing

howard-bio-blog Howard Xiao

Sr. Director, Partnerships

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