Chargebacks in the Gaming Industry

Jennifer Blake Posted on March 04, 2021

Online gaming has grown significantly recently and especially during lockdowns in response to COVID-19. With more people at home and more time on their hands, there is an upwards spike in the number of players taking to online and mobile gaming.

This puts online gaming businesses in an incredibly lucrative position as part of the fastest-growing eCommerce industry. However, it isn’t all plain sailing with online fraud increasing. Furthermore, the gaming industry is more prone to this compared to any other eCommerce sector.

Why the gaming industry is prone to chargebacks

The gaming industry has created a payment model that leverages small value one-off transactions and micro-subscriptions to create revenue. Additional purchases are motivated by the player getting stuck, encouraging them to buy power-up items, character skills, level skips, or removing countdown timers that prevent gaming progress.

Customers engage in friendly fraud because:

  • Subscriptions: The correct cancellation procedures can be too complicated or long-winded. This creates a situation where it is easier for the customer to call their bank and force a subscription cancellation by requesting a chargeback.
  • Small value transactions: Buyer remorse is spurned by disappointment, regret, or an accidental purchase. This encourages players to make chargebacks by what they consider as deceptive marketing practices.

Fraud is further facilitated by the bank card not being present during online transactions. Merchants take this path to remove roadblocks and make payments easier. However, it is also easier for fraudsters to make purchases using stolen cards or for children to make purchases without their parent’s consent.

Fraud may not be much of a problem for large gaming publishers, such as Sony, Blizzard, or Electronic Arts, but the consequences can be significant for smaller merchants. Rising chargeback numbers and payment processing fees can cripple a small merchant. They may even get labelled as a high-risk merchant by banks and payment platforms such as Stripe and PayPal.

How gaming merchants can prevent fraudulent claims

Merchants can reduce fraudulent claims by:

  • Introducing better policies that remove bad practices 
  • Removing the game elements that generate the highest number of chargebacks
  • Listening to customers to improve satisfaction levels
  • Creating customer-friendly, sustainable revenue streams 
  • Utilizing chargeback management software

Payment help’s chargeback management software can significantly reduce the number of chargeback claims that gaming merchants receive. To find out how our service can help you reduce chargebacks, please contact our team.