Gaming Payments vs. Gaming Payment Gateway: What You Need to Know

“Success! Check your inbox for the receipt from your recent purchase,” is a common message on phones, tablets, monitors, and TVs as increasing online gaming transactions transform the gaming industry into a bigger market than both the music and movie industry. 

Online gaming revenue has increased by more than $40 billion since 2020 and is on track to drive the gaming industry into a  $321 billion giant by 2026. The explosive growth in gaming purchasing is powered by a complex network of payment solutions that allow for seamless and near-instantaneous transactions all across the globe.

Enter the world of online gaming payments, payment gateways, and global payment solutions.

The Benefits of Gaming Payment Solutions

There are many reasons for game studios, gaming app developers, game server owners, and SaaS companies to use a gaming payment solution. This is by no means an exhaustive list of the benefits of gaming payments but rather an opportunity to highlight the main factors to consider in partnering with a payment provider.

1. Frictionless - Frictionless gaming payments not only provides better user experience but also increases revenue. In a highly competitive market, such as gaming, removing obstacles from the time a customer decides to purchase until they hit ‘submit’ is an absolute priority.
2. Ease In Entering Global Markets - Companies looking to expand their offering to global markets need to offer customers the payment methods customers prefer. (Let’s be honest, who isn’t looking to sell digital goods on a global scale these days?) Customers from one region might be accustomed to purchasing online using a different payment method and currency than customers from another region.
   
   Supporting the go-to currency and tool users are already using builds trust and confidence in the brand. 
3. Taxes and Regulation - Last by not least, selling in different regions comes with the added responsibility of paying the relevant taxes and complying with all local regulations. VAT (Value Added Tax), local laws, and regional compliance and standards are a complex topic and navigating them effectively can take an entire team of professionals with knowledge in finance, tax law, and standards. The right gaming payment solution provider manages all taxation and compliance obligations, freeing their partner to focus on what they do best - create great experiences for customers and gamers.

The Different Types of Payment Solutions

The truth is that not all payment solutions are created equal. There are many gaming payments providers in the industry, with more joining each year each offering a unique approach or targeting a niche audience. Choosing the right payment stack requires understanding the differences between different payment solution providers. 

Payment Processor vs Merchant of Record

One of the most common misunderstandings about well-known payment solutions like PayPal and Stripe is the role they play as a payment processor. In essence, a payment processor connects between the buyer's bank and the sellers to facilitate the transaction. 

A payment processor never takes ownership of the goods and may or may not be on the hook for chargebacks and fraud disputes depending on the agreement between the seller and the payment processor.

A Merchant of Record, on the other hand, plays a different role in the transaction: they are the seller of the goods and take the responsibility of not only charging the buyer for the transaction but also delivering the goods. 

Because of this added level of responsibility, the Merchant of Record is the one tasked with handling delivery, chargeback disputes, fraud inquiries, deducting appropriate tax etc. for each transaction. 

Tebex is the leading merchant of record for gaming companies looking to maximize their revenue. As your merchant of record, we handle all chargeback disputes in addition to tax handling, reporting, and compliance with all global and local regulations. In fact, if a chargeback dispute is lost, Tebex covers the cost out-of-pocket. You’ll never lose a cent even if the dispute is lost.

Credit Cards, Alternative Payment Methods, and Digital Wallets

Undoubtedly the most common of payment methods, credit and debit cards are still highly popular methods for gaming payments and for buying gaming related goods and services.

While a payment processor or merchant of record defines the relationship between the partner, the merchant, and the buyer, a payment gateway refers to a technology used by merchants to accept debit or credit card purchases from customers.

Additionally, alternative payment methods are also growing in popularity as Apple Pay*, Google Pay*, Amazon, CashApp, etc. have become household names. An alternative payment method is simply any payment that’s not through a credit card, debit card, or cash.

As digital purchases keep striving for frictionless experiences that remove the barrier between deciding to make a purchase and completing the transaction, sellers are looking to add the payment methods their buyers use to stay competitive.  

Digital wallets in a way are a combination of the above as they offer a convenient way to manage, store, and use money. A payment through a digital wallet might draw from funds stored in the wallet, ‘pulls’ funds from a credit card (e.g., charge a traditional credit card and use the funds for the transaction under the name of the wallet), or a combination of both. 

*E.g. Apple and Google Pay are digital wallets so every purchase through them pulls charges the credit card. Since the actual transaction doesn’t involve keying the card or handing it over, it’s categorized as an alternative payment method.

What To Look For In A Merchant of Record

When choosing a payment processing solution, there are several factors in evaluating the right partner, regardless of whether you partner with a payment processor or a merchant of record.

But since a merchant of record is a legal entity that takes on the operational processes and legal liabilities involved in the transaction, there is added responsibility that they take on. 

4 critical factors in choosing the right merchant of record (MoR): 

1. Fraud prevention - it’s important that the seller have robust capabilities to prevent fraud so transactions are real and the seller gets an accurate picture of how their store performs. 
2. Chargeback protection - a chargeback or dispute is a demand from a customer’s payment method for a payment to be returned to their account.
3. Fast payouts - after earning revenue from game sales, in-game items, DLC, subscriptions, etc. the funds typically sit in a digital wallet or account. Withdrawing the the money, typically through a transfer to the bank, can take anywhere from a few days to a month, depending on the partner. As everything else in life, the shorter amount of time from selling to receive the money is better. 
4. Transparency and no hidden-fees - keep more of your cash and don't experience any surprises when it comes to your profit.

Conclusion

The world of gaming payments, including online gaming gateways and global payment solutions,  can be a complex one. With multiple entities, regulations, laws, and technology providers present at every transaction, it’s critical to choose the right partner to ensure that gaming operations are safe, legal, and frictionless for customers.  

Tebex is the growth and monetization platform for game servers and game studios. With over 12 years of experience and more than $1B USD processed across its monetization platform, Tebex offers creators a seamless, transparent, and efficient way to monetize their work. Contact Tebex to maximize your revenue today.