If you’re considering online gaming for your next business venture, you need to understand the industry and its subsets. There are a variety of ways to run an online gaming business. Here, we break down the difference between iGaming and eGaming, and discuss payment options for online gaming companies. Keep reading for a full guide!
What is Online Gaming?
Online gaming is a broad term that refers to playing video games or other types of games over the internet or other network-enabled platforms. This can include games played on personal computers, consoles, mobile devices, and virtual reality systems. Online gaming allows players to connect with others from all over the world, either to play together or to compete against each other.
Online Gaming Payments Table of Contents
Online gaming can include various games, including first-person shooters, massively multiplayer online role-playing games (MMORPGs), sports games, strategy games, and casual games. Some popular examples of online games include World of Warcraft, League of Legends, Fortnite, and Minecraft.
Online gaming also includes real money games, where players can wager money. These games are considered online gambling and are regulated by different laws and regulations in different countries.
Online gaming is a rapidly growing industry, with millions of players worldwide and revenues in the billions of dollars. In addition to playing games, many online gaming communities also allow players to chat, share content, and participate in virtual economies. “Online gaming” can be loosely divided into two subtypes: eGaming and iGaming.
What is eGaming?
The term “eGaming” refers to various games that can be played on electronic devices, as described above. These games can be single or multi-player games. They often include a network of other gamers who are either watching or participating in the game.
The key difference is that eGaming does not typically include gambling. Some apps and computer games allow in-app purchases, but they are not generally for gambling. Instead, players can purchase tools to use in their game.
What is iGaming?
In contrast, “iGaming” typically refers to online gambling offered through casinos. This industry is highly regulated to protect players from major financial distress. Laws differ between countries and states regarding what is legal in iGaming, but they are difficult to enforce due to the nature of the online environment. Additionally, iGaming involves chance, odds, and real money that can change hands between the casino and the player. This is a distinct difference between eGaming and iGaming.
What is a Payment in Online Gaming?
Payments in online gaming are simply the exchange of money between the player and the gaming institution. This can be subdivided into two groups, just like the definitions themselves. Payments in eGaming are different than those involved with iGaming.
- Payments in eGaming
- Payments made during eGaming are usually in-app or in-game purchases that help the player perform better. Players can purchase different tools, weapons, energy, and other features depending on the game. They can occur while the player is playing the game, or they can purchase items before beginning play. Again, this depends on the game.
- Payments in iGaming
- Conversely, payments in iGaming include more considerable sums of money, typically placed as a bet on a particular game. They can also be in the form of purchasing “chips” or “credits,” just like a real casino. For example, if a player wants to play online poker, they would make a payment upfront for the chips they plan to wager during the game. Some casinos take lump sum payments for scraps, while others connect to the player’s credit or debit card and charge them each time they place a bet.
How Does Online Gaming Payment Processing Work?
Online gaming payment processing involves a series of steps that allow players to make payments to purchase in-game items, virtual currency, or to place wagers on games of chance or sporting events. The process typically works as follows:
- Players select the items or services they wish to purchase or the amount they want to wager.
- Players are directed to a secure payment gateway, a secure platform that processes the transaction. The gateway will typically ask for the player’s billing information, including credit card or debit card details, and then verify that the information is correct.
- The payment gateway will then communicate with the player’s bank or card issuer to authorize the transaction.
- Once the transaction is authorized, the funds are transferred from the player’s account to the merchant’s account, which is the game developer’s or operator’s account.
- The player will then receive confirmation of the transaction and the item or service they purchased will be available to them in the game or online casino.
Online gaming payment processing is a complex process that involves several stakeholders, such as game developers, operators, payment gateway providers, and financial institutions, which are regulated by different laws and regulations in different countries. To ensure security and compliance with regulations, gaming companies use various fraud detection and prevention techniques, such as SSL encryption, PCI compliance, and others to secure the transaction and protect players’ data.
Online Gaming Payment Gateway
An online gaming payment gateway is a secure platform that facilitates payments for online gaming transactions. It connects the game developer, operator, and the player’s bank or card issuer. The payment gateway is responsible for securely transmitting the player’s billing information, such as credit or debit card details, to the financial institution for authorization. It also ensures the transaction complies with security standards and regulations (PCI-DSS).
When a player initiates a purchase or a wager, the payment gateway will typically redirect them to a secure page where they will enter their billing information. Once the information is entered, the payment gateway will communicate with the player’s bank or card issuer to verify the information is correct and authorize the transaction.
Once the transaction is authorized, the funds are transferred from the player’s account to the merchant’s account, which is the game developer’s or operator’s. The player will then receive confirmation of the transaction, and the item or service they purchased will be available to them in the game.
Many online payment gateways also offer fraud detection and prevention features, recurring billing, and integration with various payment methods, such as credit and debit cards, e-wallets, bank transfers, and more. In the case of online gaming, many payment gateways will require the merchant to have a high-risk merchant account. These accounts typically have higher fees for processing because the bank is taking on more risk to give the merchant an account.
Payment Types for Online Gaming
Depending on the type of gaming a player is involved with, the payment options may change. For example, many online casinos do not allow players to use credit cards for payment. This is a fairly new protocol that online casinos implement to protect consumers from financial ruin. Given the high risk of addiction to gambling, most casinos will only allow players to use the cash in their bank account. Players must use a debit card or an ACH/eCheck to make purchases, place wagers, or buy credits.
On the other hand, most eGaming merchants allow players to use any payment type they prefer, including credit cards, debit cards, ACH/eChecks, PayPal, and more. Since these merchants aren’t allowing players to gamble their money, the purchases are considered safer than those made in an online casino environment.
How do You Set up a Merchant Account for Online Gaming?
Setting up a merchant account for online gaming involves a few steps and can be a bit more complex than setting up a traditional merchant account due to the specific requirements and regulations of the online gaming industry. The merchant account provider will usually require a high-risk account to process these payments. Here is an overview of the process to set up a merchant account for online gaming:
- Research and choose a payment processor: Look for a payment processor that specializes in online gaming and has experience in dealing with the industry’s specific requirements. They will be able to guide you through the process and ensure compliance with relevant regulations.
- Apply for a merchant account: You must provide the payment processor with information about your business, including your company’s legal name, tax ID number, and business address. You must also provide personal information about the business owner and any partners or shareholders.
- Provide documentation: The payment processor will require you to provide various types of documentation, such as business registration, articles of incorporation, and a copy of your driver’s license or passport. They may also require a lease or mortgage statement copy to verify your business address. They may also request six months of history as a merchant.
- Undergo a background check: The payment processor will conduct a background check on the business and its owners. This ensures that the company is legitimate and the owners have a clean criminal record.
- Set up a merchant account: Once your application is approved and you have provided all the required documentation, you can set up a merchant account with the payment processor. This will allow you to accept player payments for in-game purchases or wagers.
- Integrate the payment gateway: Your payment processor will provide you with a payment gateway you will need to integrate into your online gaming platform. This gateway will allow players to make payments and facilitate communication between your venue, the payment processor, and the player’s bank or card issuer.
Please note that laws, regulations, and requirements for online gaming merchant accounts can vary depending on the country, state, or region you are operating in, so it’s essential to check with local authorities and consult with a specialized payment processor before starting the process. Some merchants use an offshore LLC or entity to avoid such regulations.
Final Thoughts
Online gaming can be an incredibly lucrative business if you do it right. Protecting your players’ financial data is one of the most important things you can do as an online gaming merchant. Be sure to do additional research on gaming platforms and payment processors prior to making any decisions for your business.
