Paytech Adoption: The Evolution of Paytech within Gametech | The Fintech Times

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This February, The Fintech Times is taking a deep dive into the world of gametech. Grab your headsets and controllers and plug in to hear about the latest tech and celebrities influencing the market to the development of eSports and much more.

Following our investigation as to why payments are important within the use of gametech, in this next segment, we’ll be taking a step back to assess paytech’s journey to becoming a core pillar of the gaming industry.

In its more physical form, gametech has a long history of pay-to-play (P2P). Headsets, consoles, disks and any other associated accessories all required a purchase, something typically done within the realms of a physical store – remember those?

In its most basic, and probably cheapest form, one would simply have to insert a couple of pennies into the slot to fire up the bright bulbs of their favourite arcade machine.

Fraser Edwards, CEO of cheqd
Fraser Edwards

Remembering the payments model of 10 years ago, Fraser Edwards, CEO and co-founder at cheqd comments: “The old-school and ‘traditional’ payment model for a game, i.e. purchasing the game for a lump-sum, with the option of a few downloadable content paid additions are now largely outdated. Broadly speaking, this is because this model keeps the total revenue for a specific copy of a video game contained within a certain boundary.”

Online-spheres have historically centred themselves away from this approach, instead harnessing a free to play model which would then bombard users with ads to score a revenue.

Of course, when games became smarter, more advanced and more popular, the method of transaction would also have to change, with many traditional P2P games beginning to establish themselves shoulder-to-shoulder with incumbents of the online gaming sphere; usually offering a wider depth of gameplay.

But paying for a game, or a separate addition inside a game, isn’t like paying for everyday groceries online. During such a task, consumers would be expected to input their billing address, shipping address, name and so on.

Games aren’t supposed to be like real life, which is why their gameplay has been ramped up to full speed. In order for a consumer to complete a purchase successfully, they must be able to do this as quickly and conveniently as possible. We’ve noticed similar links to checkout efficiency and eCommerce, but in gaming, the edge is even sharper.

Fintechs recognised this dilemma with the gaming industry and set out to offer alternative payment methods (APMs) by means of a remedy; best administered through a single application programming interface (API).

Zak Cutler, CEO of iGaming North America
Zak Cutler

“To maximise payment acceptance, iGaming brands need to offer a comprehensive range of payments spanning APMs,” comments Zak Cutler, CEO of iGaming North America.

“Against the backdrop of operators’ payment needs, innovative payment service providers and fintechs have developed platforms to connect an iGaming brand to every payment solution it could ever want through a single API integration,” he continues. “Operators avoid having to manage multiple separate integrations of individual payment solutions, allowing their brands to go live and maximise payments acceptance more quickly and efficiently.”

Kamran Kamran Hedjri, CEO of PXP Financial
Kamran Hedjri

Kamran Hedjri, CEO of PXP Financial added to these thoughts with: “Fintechs are constantly innovating to offer more convenient and faster payment methods to avoid frustration. By creating a seamless payment process, they can create ever-more immersive games where players can make real-time payments as part of their gaming experience.

“New APMs are key in this space, and because the gaming community brings together players from around the world who are generally more open to new technology, online gaming is the perfect ground for trying out different payment methods.”

It appears that the direction of paytech within gametech use cases has been derived from what we would historically expect to see from gaming services; as if all the pieces were already there, and it was just up to fintechs to put them into place.

As Edwards explains, fintechs are basing developing payment systems off the already existing microtransaction payment models present in everyday gaming:

“Following the emergence of smart mobile phones supporting video games, this payment model began to evolve. When mobile games were initially released, because they were generally lower quality than console games, most began as free-to-play but tended to contain an endless supply of microtransactions to add content to the game. This model of payments, whilst not fetching the guaranteed lump-sum of the traditional game market, has been able to hook players in and generate substantially more revenue overall through microtransactions.

“More recently, the payment model in gametech has evolved once again, catalysed by the rise in fame of Fortnite: a free-to-play, cross-platform shooter which mimicked the payments model of mobile games. The accessibility and low-entry barrier of Fortnite, being open to everyone, made it hugely popular and successful, as people were able to play with friends, across consoles, without any financial cost. The payments model here is again based on microtransactions, with skins, customisation and seasonal content being the source of revenue.

“From the success of Fortnite, other games companies have tried to replicate the same model, with slight variations and adjustments. Generally, the concept of a ‘live-service’ game, with ongoing updates and ‘seasonal content’ has become a mainstay. With once ‘traditional’ modelled games such as Call of Duty, Destiny and Halo following suit.”

Ahsan Tahir, co-founder of Walee
Ahsan Tahir

Ahsan Tahir, co-founder of Walee added to these thoughts with: “As a gamer, when within the game, you need the ability to be able to make payments from the channel of your choice to buy yourself that extra armour, or essential dragon or diamonds, but it becomes mission-critical when it needs to happen during the gameplay, you need extremely low latency comparable to tick-to-trade solutions such as used in financial markets, optimised down to the nanoseconds to ensure smooth payments and games plays.”

As Tahir goes on to explain,  payments can become the single point of failure for games monetisation, causing many gaming providers to cultivate their own payment rails: “With such crucial dependency, it was only natural to gaming companies such as Razer to rush to manage their own payment channels, rails, loyalty points, practically becoming digital banks, and now that social networks, fintech themselves, eCommerce stores everybody is looking to ‘gamify’ for that spiked lifetime value reports, we might very soon see gaming first Fintech companies coming into replacing Google Pay, Apple Pay, Stripe, PayPal, Amazon Payments, traditional FIs, their wallet solutions, payment service providers and operators, etc.”

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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Author: Tyler Smith