Although there is great potential for success, online gaming merchant accounts face a number of complex and difficult issues. One such issue arises at the most basic level: the name of the industry. Online or otherwise, “gaming” means different things to different people. If you were to ask a typical American teenager what “gaming” means, the response would likely be something along the lines of “playing video games.”
On the other hand, a sixty-year-old man is likely to mention some type of gambling. In fact, in legal terminology, “gaming” almost always refers to gambling. Organizations that oversee matters related to gambling are often referred to as “gaming commissions.” Rules and regulations that apply to the gambling industry are collectively referred to as “gaming law.”
Gaming law is not a specific branch of law, per se, but can be criminal law, corporate law, contract law, regulatory law, constitutional law, international business law, competition law, or administrative law that deals with matters related to gambling. In addition, generally speaking, “online gaming” refers to online gambling, while “online game” refers to a video game that is played via the Internet, complicating the matter further.
To avoid confusion, in this article, the word “gaming” refers only to the various types of gambling, and does not include video games that do not involve gambling.
As is the case with any business that accepts payment by credit card, online gaming businesses need to have merchant accounts so that customer payments can be received and processed. Most businesses open accounts at a traditional bank, but traditional banks and payment processing companies tend to be reluctant to provide services to businesses that are considered to be high risk.
Unfortunately for operators of online gaming businesses, the online gaming industry is considered to be high risk.
So, why is online gaming viewed by banks and other financial institutions as high risk? The two most common reasons that a company is labeled “high-risk business” are a high chargeback rate and a high frequency of fraud. These both apply to online gaming, and that alone would get it placed in the high risk category.
There are other aspects of online gaming that make traditional banks and payment processors hesitant to provide a merchant account, as well. Although defined in part as a type of entertainment or leisure activity, most forms of gaming are considered by the general public and the legal system to be gambling. Along with the mixed image that gives to gaming, gambling is illegal in some states and other areas of the world.
In addition, although gambling itself has been around for many centuries, online gambling did not even exist in any meaningful form three or four decades ago. It was made possible by the creation of the Internet, which, despite now being widespread and a normal part of everyday life, is still a very new technology that continues to change dramatically. Among other things, this means that new security measures are being developed and implemented all the time.
On the other hand, the newness and rapidly occurring changes introduce new risks and vulnerabilities. If they are not eliminated, or at least reduced as much as possible, the business, the payment processor (such as the bank providing the merchant account), and other people connected to that network could suffer significant loss.
This, of course, means that you need a high-risk merchant account. You will need to find a payment processor that is willing to take on clients that are high-risk businesses and that has knowledge and experience in high-risk payment processing, the infrastructure for underwriting high-risk clients, and the technological tools needed to provide timely and reliable payment processing services.
One of the features that you will most likely need is geofencing. Geofencing is a function that is built into a program or application and uses the global positioning system (GPS) or radio frequency identification (RFID) to set geographical boundaries and detect whether a device is inside or outside the defined boundaries.
Because laws and regulations related to online gaming can differ drastically between cities, states, and countries, online gaming businesses need a way to limit the areas from which their services can be purchased or used. Geofencing can be used to deny services automatically when an attempt to access them is made from a device that is outside an area you have authorized.
There are, of course, ways to prevent detection, but at the very least, geofencing can make it enough of a bother that the person attempting to access your services inappropriately will move on to his or her next target.
You also need to make sure that the account is PCI compliant. The Payment Card Industry Data Security Standard (PCI DSS) is a set of requirements for companies that process, store, or send credit card information. The purpose of the PCI DSS is to make sure that those businesses maintain a secure environment for that work.
A high-risk payment processor can be a highly effective resource in getting your business off on the right foot as well as in strengthening your protection against risks that could do serious damage. If possible, find a high-risk payment processor that has a good level of experience in the gaming/online gaming industry.
Don’t hesitate to ask questions or to see what other payment processors have to offer in both services and expertise. Your business and the payment processor will both benefit from ensuring that your needs and the processor’s abilities are a good match.
Whether you are still trying to figure out exactly what you need to do or you have already decided to use a high-risk payment processor, Zen Payments can answer your questions and provide solutions that meet your specific needs.