Stop Gaming Chargebacks in a Booming Industry
Gaming is a large industry with 2.6 billion gamers worldwide. Already in 2019 it was the third most popular app category after social media and shopping apps.
Despite the rough year the pandemic-stricken economy had in 2020, Covid-19 actually benefited the gaming industry as people looked for at-home distractions as sources of entertainment. For example, gaming platform Steam achieved a record 25 million concurrent users in January of this year after regularly breaking records during the preceding 12 months due to lockdowns in China and Europe. All told, the gaming industry generated an estimated $160 billion in revenue in 2020 and is expected to grow at a sizzling compound annual growth rate (CAGR) of 12 percent until 2025.
Gaming is a big deal and only getting bigger.
Gaming’s growing fraud problem
The downside to this large global presence and rapid growth is that the gaming industry is a major target for fraud. This means game publishers must deal with a large volume of payment disputes that result in chargebacks and that isn’t going away. Last June, a U.K. survey of gaming compliance managers found that 93 percent anticipated growth in the number of chargebacks during the Covid-19 pandemic.
Publishers are not the only people in the gaming ecosystem who must deal with chargebacks. Many video game live streamers make their income from the sale of merchandise and fan subscriptions, both carrying significant chargeback risks. Streamers are paid primarily for their skilled gameplay and entertaining banter and are often unprepared for the chargeback element of being a de facto merchant.
Some of these chargebacks are legitimate and due to true fraud from tactics ranging from account takeover (ATO) to carding attacks. Carding is when fraudsters make small purchases using stolen credit card details to test if cards can be used for larger purchases on other sites. Quite a large share of gaming chargebacks is illegitimate and due to friendly fraud. Friendly fraud is when a person either files a chargeback for a transaction they or a family member made with or without the intent of defrauding the merchant.
Game design encourages friendly fraud
Digital games, by their nature, are perfectly designed for generating friendly fraud claims. They typically offer assistance in achieving difficult game goals with micropayments, which are a recipe for buyer’s remorse once the goal has been achieved. Some video games are created intentionally in a way to take advantage of addictive behavior, leading some users to make repeated in-app purchases beyond what they can afford. Afterward, the user regrets their purchase and, perhaps out of shame, files a chargeback rather than request a refund. Many games are subscription based, which means users are likely to forget that they are paying for the game on an ongoing basis. In addition, some games save payment card information, making it easy for children to abuse a parent’s credit card once an initial payment is made with parental agreement. Lastly, games often lack a responsive customer support function, which leads customers to resort to chargebacks to get refunds instead of waiting for a response from the company.
Once a person commits friendly fraud, it is tough to make them stop. It is estimated that friendly fraud will be repeated at least 3 times if merchants do not block the perpetrator.
Fighting gaming fraud
The solution to true fraud in gaming is to increase site security. Longer, more complex passwords and two-factor authentication will go a long way towards foiling ATO attacks. Velocity checks that examine the number of transactions initiated by a buyer with the same IP address or other unique data elements should help block carding attacks. Buyers that exceed a predetermined number of transactions in a set time frame can be blocked.
For friendly fraud chargebacks, the perpetrators are found among your regular customers, so the way to fight off illegitimate chargebacks cannot be just a simple block using a technical solution or two. What is needed is a payment dispute solution that addresses cardholder claims at every stage of the chargeback process.
Introducing the AcroCharge solution
AcroCharge provides a tailored chargeback mitigation solution that combines technology with human-powered know-how to achieve the highest success rates in the industry. Importantly, AcroCharge charges a success-based fee that doesn’t add to your fixed costs. That means there is no financial risk to you, the service can only help your bottom-line. Contact us to learn more.