Choice and Flexibility Help Digital Entertainment Merchants Catch Their Customers
Gaming and Digital Entertainment is one of the fastest growing verticals within the broader merchant sector, as boundaries continue to blur. Many forms of entertainment that once only took place in the physical world, or through the purchase of physical goods, have gone fully digital – with significant ramifications for businesses that provide payments services to suit a wide range of merchant needs. I spoke with Andy McDonald, ACI’s vice president of merchant payments, to find out more.
Chris Taine: The market for digital goods has grown immensely in recent years, spurred on by rapid advancements in mobile gaming – bringing with it new forms of gaming such as augmented reality (i.e. Pokémon Go) – as well as driving the adoption of streaming services that have massively disrupted forms of entertainment traditionally based upon physical goods. But the needs of merchants serving the gaming and digital entertainment sector are different. What do you see as the key differences?
Andy McDonald: The principal difference is that all these different forms of digital entertainment exist only in digital form. There is no physical good – so in a way, the product is the customer experience. Customer experience therefore does not end with the delivery of a physical good, it is something that the end consumer encounters each and every time they use, or ‘consume,’ digital goods. Because payments play an increasingly important role in the customer experience, it is imperative that payments are part of the seamless online world that many forms of digital entertainment seek to create. Payments need to be ‘invisible’ if possible, and enable an immersive experience. This will only become more important, with the rise of virtual and augmented reality gaming experiences.
In the case of in-app purchases, if payments are seamlessly integrated into the gameplay, it is possible to significantly boost revenues – as the gameplay is not interrupted. For payment vendors, it’s necessary to adopt a fully digital mindset.
CT: Continuing with this theme, the need to deliver digital goods instantly must also create challenges on the fraud prevention front. What’s the best way to tackle the fraud challenge for digital goods or gaming?
AM: Fraud prevention strategies must carefully balance the consumer experience (it should be immersive and not distract from the experience, as already discussed) with the need to protect against fraudulent activity. Deep insight can help formulate a tiered fraud strategy, dealing with high-value, low-risk customers in a different manner to low-value, high-risk. One-size-fits-all fraud solutions tend to be inefficient, and can lead to false positives and poor customer experience. This, unsurprisingly, can threaten consumer loyalty and the company brand. With so many competitors in the gaming and digital goods space, there are no shortage of competitors waiting to take that lost business.
Ultimately, a flexible and dynamic fraud solution can help support the objectives of a business; optimizing the user experience, whilst protecting their customers.
CT: Digital goods are also “shipped” across geographical borders in a way that physical are not – that obviously means that logistics and delivery are not as complex as for physical goods – but on the other hand there’s an expectation of serving customers globally. What are the implications of this in terms of payment acceptance? For example, connections to card acquirers, and offering local alternative payment methods?
AM: As gaming continues to migrate to digital delivery and consumption, it is vital that the payment experience matches the consumers’ needs. Research shows that 75% of gamers find it frustrating if their preferred payment method is not available, and 72% of gamers are open to saving payments details for their preferred method of payment for future purchases. This means enabling the right alternative payments for each country or market, without overwhelming the consumer with choice. In a fully digital world, traditional geographical boundaries tend to disappear, even if in the background there are still different regulatory environments and rules at play. Digital goods and gaming companies essentially have to have a global mindset to be successful – so payments need to be a core part of the business strategy right from the outset.
CT: Netflix and Spotify are two often-cited examples of companies that have hugely disrupted the television/film and music industries, respectively. What other opportunities, or areas for disruption, do you see in the digital entertainment sector? What should we keep an eye on?
AM: Companies that are in tune with changing consumer demands will ultimately be the winners in this sector, but we are already starting to foresee the impact that Augmented/Virtual Reality (AR/VR) will have. We will see digital entertainment and gaming experiences become increasingly immersive, and available across multiple end-points. It will be interesting to see how voice-enabled virtual assistants become part of these immersive experiences, and related to this, how new forms of authentication may be used for payments.
Companies that remain agile are well positioned to meet these changing needs, as well as those companies that are catering for the changing user base, as social gaming brings more female and older users into a traditionally younger male-dominated sector.
Download our latest report "What Turns Players Into Payers: Understanding the Gaming Payments Experience," which reveals the payment preferences, motivations and experiences of gamers in the largest games markets in the world.
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