In 2021, video gamers, on average, spent about eight hours and 27 minutes each week playing games. This is an increase of 14%, up from 2020, according to a report by Limelight Networks. No wonder revenue in the online games segment is projected to reach US$175.10 billion in 2022. The number of users is expected to equal 3,197.7 million by 2026, so to state the obvious - gaming is big business that is not going away!
Fraudsters are ingenious in their attacks, especially when thinking that the industry itself, through gaming platforms like Steam, Origin, Epic, and other similar streaming services, is partially defined by the concept of anonymity. It is, however, confirmed that because of the time and money spent on in-game purchases by players, the online gaming world has become the ideal place for fraudsters to operate and thrive. But as the industry thrives, so do the fraudsters who prey mainly on gaming companies through the many unsuspecting gamers.
The sale of gaming subscriptions, while highly profitable, carries unique challenges and an increased chargeback risk, leading to severe financial and reputational damage for your business, causing a significant inconvenience, and potentially seriously harming your customers' data privacy and finances. The high-risk fraud is growing, and scammers are constantly developing new methods to cheat and steal. So it has become critical for gaming businesses to ensure they can detect and prevent scams.
On top of chargebacks resulting from fraud, we are also witnessing the so-called friendly fraud, which is almost impossible to combat. This, too, has its own set of costly repercussions that should be noted.
The truth is that fraud has expensive consequences and a high potential of breaking companies in a critical moment in their growth process.
We’re here to explain all the ins and outs of online gaming fraud to help you prevent the chances of dealing with these growing threats.
Top 6 Repercussions of Online Gaming Fraud on Businesses
1. Reduced Overall Profits
Fraud can set a series of events in place that lead to profound revenue loss for game developers, stunting or even crippling businesses. Money that should be channeled into your business from your users will fall into the open hands of fraudsters, unrecoverable, and go unnoticed.
2. Chargeback Losses
As mentioned earlier, chargebacks carry expensive repercussions. Fraud-triggered chargebacks are unauthorized transactions. This puts your business in a tough spot because investigating suspicious transactions is costly and time-consuming. Not only are you required to provide the user with a refund, but you are also required to pay chargeback fees. As this workload grows for your risk team and you become more vulnerable to opportunistic fraudsters, it becomes a logistical and financial burden.
Worse yet, you could also end up on the suspicious activity lists of banks and card companies, putting your business at risk of losing the ability to process payments if the acquiring banks refuse to do business with you. For example, Visa and Mastercard’s claims resolution processes are becoming more stringent for businesses as the window of opportunity to dispute chargebacks gets smaller and the pressure to resolve these disputes increases. Under pressure for their reputation, online payment providers will increase processing fees before suspending and dropping specific platforms from offering card payments.
On top of chargebacks resulting from unauthorized transactions, you will likely encounter chargebacks triggered by “friendly fraud”(a customer purchases with their credit card and then requests a chargeback from the issuing bank). This, too, generates costs, and to make it even more complicated, eliminating friendly fraud is impossible.
3. Squandered Marketing Efforts
Another type of fraud that can not only cause your marketing ROI to suffer but cost you time and money needlessly is affiliate fraud and bonus abuse. Affiliate fraud is a type of advertising fraud where corrupt activity is used to collect commissions from an affiliate marketing program fraudulently. Bonus Abuse is signing up for a service multiple times using marketing offers for new users. The resources you spent on attracting potential customers and onboarding them could be wasted on bad leads that never intended to convert.
4. Damaged Reputations
You don’t want your game to be associated with fraud for several reasons. Gaming is all about communities built around video games in the marketplace. And with the industry growing and changing so fast, the last thing you want is to be seen by users as an unsafe platform or, worse yet, by fraudsters as an easy target. You can imagine the profit losses damaged reputations are responsible for. Gamers are heavy users of chat forums and review sites and aren’t afraid to use them to complain when they become victims of fraud. Your users will quickly abandon your game and continue to spread the bad news, leaving your reputation tarnished.
5. Loss of Trust From Users
Gaming users often invest hundreds of hours into their characters and gaming experience. This makes this type of account a gold mine for fraudsters. Game developers need to make sure they create a gaming environment that is both fun and safe. Players are unlikely to stick around if their gaming experience is compromised by bots and scammers. If they believe they can be easily exploited while playing your game, they’ll most certainly avoid it. High incidences of fraud can erode trust and loyalty, causing the business to take a hit financially.
6. Fines From Government Regulators
Although the online gaming industry isn’t heavily regulated in most countries, stricter regulations will likely come down the line from government agencies soon. You could end up with severe penalties and fines if your game is found to be harboring fraudsters and creating an unsafe environment for users. You must get out in front of this and strengthen your business against fraudsters. This, combined with greater transparency and accountability, will ensure that the regulators don’t come knocking on your door in the future with hefty fines for non-compliance.
The 6 Common Types of Online Gaming Fraud
Read on to learn the 6 common types of online gaming fraud and how to prevent them on PayPro Global's Blog.
Top comments (0)