Payment gateway is a web-based technology for the secure processing of electronic transactions. It authorises online payments and establishes contact between a customer, a merchant and the rest of the payment processing parties. The most important function of a payment gateway is to protect sensitive data through encryption, tokenisation, SSL and other security methods.
Payment gateways accompany each online transaction from start to finish, providing the protection of card data and preventing possible leaks or fraud.
Thus, the payment gateway’s functionality includes the following:
Customer’s data encryption
Routing the payment information between processing players (processor, acquirer, issuer, card network)
Notification about approval/rejection of the transaction.
Let’s find out how payment gateway participates in online payments:
A customer enters their card details on a merchant’s checkout page.
A payment gateway encrypts the received information and securely sends an authorisation request to the merchant’s acquiring bank. It also sends another request to the card network serving the cardholder (Visa, Mastercard, or other).
The card network sends a confirmation to the acquiring bank via a payment gateway and informs it of the amount to be debited from the customer's account.
The issuer checks the customer’s account balance and sends the transaction confirmation back to the network.
The card network sends the approval both to the acquirer and to the payment gateway. Now the funds will be debited from the customer's account and credited to the merchant's account.
Thus, a payment gateway acts as a communicator between all online transaction participants, making it absolutely indispensable for any merchant who wants to accept and process online card payments globally. Of course, the online video game industry isn’t an exception.
In 2020, the global online gaming market generated approximately $21.1 billion in revenues, translating to a record 21.9% increase compared to the previous year. This means only one thing: the demand for video games around the world is snowballing. The pandemic and quarantine restrictions have forced millions of people to stay at home and look for ways to have fun. Thus, those who have never been into video games before are now avid gamers. The online gaming business is currently in its prime, but at the same time, it suffers from heightened competition in the industry. Game business players’ battle for customers is getting tough, and whoever adapts the fastest to the gamers’ needs has a chance to gain a foothold and excel in the online gaming business.
Every prospective payer appreciates simple and secure payments, especially when it comes to online purchases. Payment gateways have been specifically designed for industries where online payments are indispensable, and online gaming is no exception. They allow gamers worldwide to buy subscriptions, expansion packs, or new game characters with a single click, providing an uninterrupted and secure checkout process. Merchants also benefit from the payment gateway because it helps them expand into new markets and accept multiple payment methods and currencies.
Next, we’ll talk about the specifics of the online gaming business and how a payment gateway can help.
The skyrocketing popularity of online video games naturally has its drawbacks. The game industry has become a tasty morsel for scammers, forcing game publishers to deal with a large volume of payment disputes that mostly result in chargebacks. The point is that online games are a favourable environment for carding, where fraudsters make small in-app purchases using stolen credit card details to check if the card can be used for larger purchases on other websites. Another common reason for chargebacks is that video games are addictive and encourage users to make multiple in-app purchases beyond what they can afford. After that, players often regret their purchase and initiate a chargeback. Plus, many games are subscription-based, and users may forget that they are paying on an ongoing basis. In addition, some games store card information, making it easy for children to use their parents' credit cards for future payments. Thus, game publishers have to bear the cost of handling chargebacks instead of spending resources to develop games.
Game platforms bring together thousands, if not millions of people around the world. Of course, game merchants need to adapt to the global audience and accept different currencies and payment methods. For example, some gamers traditionally prefer to pay with a credit card, but there are also digital gift cards, e-wallets, which are also extremely popular in games. Since gamers' payment preferences vary from country to country, managing such a large transaction flow can be a real challenge for publishers. That’s why most of them opt for comprehensive payment solutions that allow them to accept and efficiently manage the transfer of funds, customise the checkout page, and keep track of money in their merchant accounts.
Cybersecurity is an acute issue for the video game industry, as it is where a large number of hacker attacks are observed. Gaming’s skyrocketing popularity made it very attractive to fraudsters who use video games to test stolen cards and make account takeover attacks (ATO). The only solution to prevent fraud, data breaches and carding attacks is to increase the security of your platform. This is precisely what payment gateways provide. Every transaction that a player initiates goes through the payment gateway and is always accompanied by a set of security measures, including encryption, tokenisation, and TLS/SSL, which help identify suspicious activity, block ATOs and prevent card testing.
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Getting a merchant account for online gaming can be tricky as this industry falls into the high risk business category due to a high chargeback rate. However, there are providers who will be happy to see you as a partner.
Here are the top points to consider when choosing a reliable payment gateway for games.
As the main purpose of a payment gateway is to protect gamers’ sensitive information, it must comply with each of the 12 clauses of the PCI standard. Connecting an unprotected gateway can entail negative consequences in the form of data breaches and fraud. Therefore, the integration of a PCI-compliant payment gateway is crucial for the online gaming business.
A payment gateway’s operation also depends on the way you integrate it. Some payment gateways provide an API that can be embedded directly into your platform. In contrast, others redirect visitors to third-party services, while both are located on the payment service provider’s server. Think about what integration type will provide the best user experience for your customers.
Naturally, integrating and configuring a payment gateway will come with a cost. Apart from this, the provider will also charge various types of fees for their services, such as processing fees, chargeback fees, recurring monthly fees, currency conversion fees, etc. Check and estimate these expenses before you conclude a contract with a PSP.
Unfortunately, no technical system is completely stable, and there is always the possibility of failures and malfunctions that can spoil the gamers’ experience. However, if your PSP ensures timely and competent support, such issues are resolved promptly and will not affect your platform’s performance.
A secure and efficient payment processing system is a must for a fast-growing and highly competitive gaming market. Corefy’s feature-rich platform offers gaming businesses a wide range of tools and services for accepting, processing and managing all types of payments. Find out more about our product by trying a free demo .