Since video gaming become popular in the early 2000s, it has grown enormously.
Amazingly, it is now a bigger market than the music and movie industry combined.
To grow and appeal to the widest range of customers, online gaming businesses need to accept and process a variety of payments efficiently and securely.
In this article, we will take a deep dive into the online gaming industry, how it compares to the online gambling industry, and how the payment process works.
What is the video gaming industry?
The video gaming industry has three main branches.
Whilst there are some similarities between them, each also has its own dynamics and individual features.
To a large extent, the cost and accessibility of a particular kind of gaming reflects its popularity. Mobile games are easier and cheaper to access than those played on consoles, which are easier and cheaper to access than PC games.
However, there are exceptions to this rule. Browser games, for example, are much easier and cheaper to access than downloaded/boxed PC games, yet much less popular.
Here are the three main video gaming categories, in order of overall market size (largest to smallest).
1. Mobile games
Mobile games are a type of online game played on smartphones.
According to some estimates, they make up approximately 50% of the video gaming market. And they have the strongest growth of all online gaming segments.
Their popularity is largely down to their accessibility. They are cheap and easy to access - no expensive PC or console is needed and games are cheap.
2. Console games
The console format enables games to be played with hand-held controllers and displayed through TV screens. Well-known console providers include, PlayStation, Xbox, and Nintendo.
Console games make up approximately 28% of the video gaming market.
Consoles themselves have a rich history dating back to the 1970s. Their online functionality became widely popular in the 2000s.
Nowadays, titles released by production companies can usually be played as standalone games or online with friends and strangers.
Console gaming is a billion-dollar industry. Morgan Stanley recently reported that one major video game console player expected to sell 18 million units by March 2023 alone.
3. PC games
PC games are a type of video game played on a personal computer rather than an arcade machine or console. They make up approximately 21% of the video gaming market.
PC games have a reputation for gaining devoted fans. They have spawned their own unique sub-industries, including:
- Professional leagues and competitions
- Live-streaming services
- Specialist gaming computers and associated hardware equipment sales
- Online economies - sales of software features such as character clothing or weapons
PC games can be sub-divided into two main groups.
Downloaded/boxed PC
Games that can be downloaded online or via CDs (shipped in boxes) make up the vast majority of PC games.
Browser PC
Games played on desktop browsers make up less than 5% of the total PC gaming industry, and are only 1% of the total online gaming market.
The video gaming industry today
In the last few decades, the video gaming industry has exploded in popularity. It is considered to be one of the fastest growing industries in the world and is projected to be worth $321 billion by 2026.
With innovations in augmented reality, the metaverse, and virtual reality, the video gaming industry is set to grow across all markets.
By 2025, the number of video gamers across the globe is set to excel 1.3 billion.
With this in mind, secure payment processing for video gaming is crucial to the commercial success of the industry.
Without the ability to securely and effectively collect payments from customers within the gaming platform, a video gaming business will not be able to operate.
Gaming industry geographies
According to research by Newzoo, 53% of the video gaming market share lies in Asia. This is followed by the Middle-East and Africa (16%), Europe (13%), Latin America (10%) and North America (7%).
There are differences in the popularity of video gaming types in each region, which in turn will affect the volume of revenue generated in each market.
Gaming in China
Consoles were banned in China (the largest market in Asia) between 2000 - 2015. So, PC gaming remains more popular there, despite being less so globally.
However, the number of online PC gamers is declining. In 2022, there were 323 million PC gamers in China - the equivalent of nearly the entire population of the US! But due to policies aimed at reducing gaming addiction, this number is projected to fall to 309 million by 2026.
Gaming industry demographics
Overall, the video gaming industry has a relatively even split between male (52%) and female (48%) players.
However, each sector and geography has its own demographic breakdown. In Europe, for example, 53% of mobile/tablet video games players are female.
Broken down by age, it's clear that the young are make up the largest section of the market: 24% of video gamers are under 18 and 36% are aged between 18 - 34.
What are the differences between the gaming and gambling industry?
It's important to understand the difference between the gaming industry and the gambling industry and to not use the terms interchangeably.
Gambling is the act of betting or staking money when playing a game. Online gambling is an extension of this, and usually involves a range of activities, from online casinos to sports.
Video gaming does have some features in common with online gambling, such as the importance of both skill and chance. However, though there can be some gambling involved in certain types of video gaming, it is not - unlike gambling - a primary feature of the industry.
1. Gaming merchant account
A merchant account is an account established by a business for accepting payments in multiple forms, such as credit cards and other electronic payment types.
They are typically held by an acquiring bank, which provides merchants with the ability to seamlessly accept payments.
Due to the significant growth of online gaming, merchant account providers are able to offer gaming companies various payment facilities when processing payments.
However, acceptance rates and processing fees will vary for different industries, according to the level of risk related to it.
This means that gaining approval for an online gaming merchant account should be easier than for an online gambling business. And the processing fees should be lower, too.
2. Gaming payment gateway
A payment gateway is a secure payments service that enables merchants to accept payments online.
To process payments, gaming companies need a secure payment gateway and a suitable merchant account. It serves as a crucial intermediary between an online gaming merchant account, customers and payment service providers.
The payment gateway ensures that the gamer's card payment details are kept safe and secure.
Payment gateways for the gaming industry
Partnering with a payment gateway that's familiar with the gaming industry is crucial. It can provide key industry experience and the ability to tailor a gaming payments solution.
Various factors will determine the right payment gateway for your gaming company such as:
- What currencies you need to accept
- If you need advanced payment methods such as Apple Pay or Google Pay
- The platform your game is built on (website or app)
- How your merchant account wishes to accept and settle payments
When choosing a gaming payment gateway provider, it's imperative to look at how secure they are. They should PCI DSS compliant, for example. This is a non-negotiable in gaming due to the high-risk nature of the industry.
3. Payment Processor
A payment processor is an organization that makes transactions happen by communicating between customer's banks, gateways, and other payment systems.
It is responsible for the secure transfer of funds between parties. It's the customer and merchant's banking accounts' data to securely process their payments.
How video gaming payment processing works
A video gaming business needs a reliable payment provider to ensure the payment processing experiences run smoothly and securely.
1. The checkout experience
Once a customer has selected a video game they want to purchase, they fill in their personal information on the gaming business' website. (This information is often saved for customers who make repeat transactions, enabling them to make a one-click purchase).
A frictionless checkout experience can be decisive in whether a customer trusts the gaming provider, completed their purchase or makes repeat purchases.
Payments can be made with a debit card or credit card, or sometimes even alternative payment methods such as crypto. The customer's data will then be encrypted and transmitted to the payment gateway.
In the customer's eyes, the whole process seems to have been completed at this stage. However, as far at the payment processing providers are concerned, it has just begun...
2. Payment processing
The online payment gateway will then send the secure data to the payment processor, who mediates between the gaming merchant account and the payment providers.
The payment processor will then transmit the customer's payment data to an acquiring bank. The acquiring bank typically issues the gaming merchant account.
3. Card associations
The acquiring bank will communicate with the card association of the payment.
The card association will connect with the issuer of the customer's card to verify the customer's identity, availability of funds, purchase limits, and a general security and fraud check.
What is a card association?
A card association is a financial institution that offers credit, debit and prepaid cards. Examples include VISA and Mastercard.
They are typically owned by large banking conglomerates. They serve as the main channel between merchants, banks, customers, and payment service providers.
Card associations create, maintain and manage the infrastructure that enables all members of the payments process to securely process payments.
4. Verification & approval
After verification, the transaction approval or decline notification is sent back to the payment processor, who forwards it to the online payment gateways.
The transaction status is then sent to the merchant account provider and the customer by the online payment gateway.
The video gaming merchant will then receive the payment on the merchant account.
Nuvei's video gaming payment processing
Nuvei can fully support your online gaming business on our powerful global platform. Our video gaming payment processing services include:
And more.
Conclusion
There are three main branches of gaming: mobile, console, and PC-based online gaming. Each has its own price entry points and geographic and demographic breakdowns.
So, every company looking to provide services in the market must ensure they accept payments that caters for the needs of their target customers.
Opening a merchant account connected to an appropriate payment gateway will ensure your customer's checkout experience is positive. And it will help strengthen trust in your brand.
Payment processing providers will offer different rates depending on the perceived risk associated with your service and customers. This means video gaming companies should be able to find lower processing fees than those in online gambling industry.
Choosing a payment processing company that can offer competitive pricing as well as the technology and payment methods is key to your profitability and customer experience.
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