When we receive an inquiry for an online gaming merchant account (as in video gaming and not gambling), the merchant is often surprised and confused that his industry is regarded as high risk by acquiring banks. It takes a few minutes of explaining, but any confusion shortly turns to perfect sense to the merchant.
Many merchants across many industries often don’t fully understand what is entailed when described as a high risk business. Simply, it can be a number of things, such as operating in a card-not-present (CNP) environment opposed to point-of-sale (where the credit card is present at the time of purchase); a high rate of chargebacks, high volume concerns and health issues among other factors. Each factor causes acquiring banks to put their guard up.
5 Reasons online gaming is regarded as high risk
When considering the risks involved with online gaming businesses – video gaming, not gambling – we can understand a merchant’s surprise. As a payment processor for high risk industries, there is often a degree of educating involved. In fact, we welcome it. Thus, here are five instances that make an online gaming merchant account high risk:
The card and cardholder are not present
Since the dawn of e-commerce, if the credit card is not present at the point of sale at the time of sale, an acquiring bank will consider your business high risk. In card-not-present (CNP) situations, the risk of fraud increases exponentially, starting with the fact that the cardholder isn’t there to sign for the purchase.
Potentially high chargebacks
Chargebacks occur for a number of reasons with the online gaming industry. Many online gaming websites include memberships payable via recurring billing with trials, causing the age-old problem: The gamer joins on a 30-day trial, offers his credit card details in exchange, uses the 30 days and opts not to continue, though forgets that he gave his credit card details and incurs payments long after the trial.
Gamers often try out new games with a payment of their credit card. Oftentimes, they may not like the game or may not succeed at it, prompting frustration and a chargeback with their card issuer.
We often hear of children and teenagers playing video games online, knowingly or unknowingly paid for by the credit card of one of their parents. A child asks their parent if they can play an online video game, for example an auto racing game. After playing for 10-12 minutes and enduring several crashes, a message appears reading, ‘Press Y to continue.’ The child obliges, unknowing that each time he opts to continue, a charge is made to his parents’ credit card. This is a practice we do not condone, since it is simply an invitation to a chargeback.
Downloads opposed to physical goods
Files downloaded from websites pose significant risk because of the possibility of what can go awry:
- Corrupt files
- Online gamer downloaded the wrong file
- The downloaded game isn’t to the liking of the gamer
- Computer, perhaps outdated, can’t handle the download.
Reseller’s agreement
One important question we always ask an online gaming merchant is whether or not s/he has a reseller’s agreement to sell a particular video game download. If the answer is ‘no,’ we cannot offer an online gaming merchant account solution until they obtain such an agreement.
Online gaming businesses have volume concerns
With a domestic online gaming merchant account, an online gaming merchant will be imposed volume caps – and nearing or exceeding such caps can get a merchant in trouble. We know of many merchants who open a second merchant account, or multiple merchant accounts, to alleviate volume restrictions and occurrences of chargebacks.
However, we see the majority of online gaming merchants opting for offshore and international merchant accounts which have generous volume limits — and sometimes none — with good payment processing history.
Online gaming merchant account solutions here
With the sharp rise in e-gaming popularity, Instabill can offer online gaming merchant account solutions – domestic and offshore – with competitive rates. With a 10-minute conversation, our merchant account experts can walk you through the possibilities at 1-800-530-2444. With a merchant account from Instabill, we offer live support Monday through Friday (8 a.m.-6 p.m. U.S. eastern time) for the life of your partnership.
