The contributions of financial technology are not limited to banking, financial services, insurance, and e-commerce. It has also introduced innovations that benefit the gaming industry. FinTech has arguably made gamification more effective and gaming more engaging. It has also helped many game developers and companies prosper.
In 2019, the global gaming industry was estimated to be worth $120.1 billion, around 60% higher than its 2015 value, and nearly double its 2010 worth. In the next five years, industry analysts project gaming to have a CAGR of 12%. The boom in the gaming sector can be attributed to various factors including greater internet penetration, the popularity of powerful mobile gaming devices (smartphones in particular), as well as innovations from FinTech players. These innovations have helped improve gaming for players and game creators.
In the past, online games relied on credit cards and major payment systems such as PayPal to facilitate the purchase of game items, upgrades, and other in-game transactions. Back then, bank accounts and ATMs were common, but it was relatively difficult to obtain credit cards. Some gaming platforms also made use of prepaid cards, but they were notably inconvenient.
Now, prepaid and credit cards are not the only ways to spend money on games. New payment solutions allow more gamers to enjoy premium and freemium games. Google Checkout, Amazon Payments, Dwolla, Stripe, and many other payment systems make it easy to make gaming-related purchases. There are also various online wallets that can be linked to bank accounts.
The advent of mobile payment systems such as Apple Pay, Samsung Pay, and WeChat also allows mobile gaming enthusiasts to use funds quickly and enjoy their favorite games. It’s now significantly easier to buy weapons, lives, access codes, coins, and other in-game items with a mobile wallet in the same device.
Moreover, digital currency and blockchain help gaming evolve further. As pointed out in the Global Gaming Industry: Growth Trends and Forecast 2020-2025 report: “The collision of blockchain technology and gaming holds great promise for the growth of industries. Blockchains provide a useful tool for gamers for various reasons including decentralized asset exchanges, verifiable scarcity of virtual objects and collectibles, fast and secure payment networks, and an ability for developers to properly monetize their creations.”
FinTech has also given rise to alternative means of gaining value from games. For instance, tokenized digital assets mean that players have full control and ownership of their in-game assets and items, which can be traded in the secondary markets. Such non-fungible tokens drive value without necessarily being pegged to a fiat value.
Secondly, FinTech has given rise to secondary markets in terms of trading for statistics, valuables, and similar game collateral. Such a market can include arbitrage in outcomes and valuable gaming assets, which can result in profitable trades.
“Arbitrage is like a small-scale kind of investing, but it’s attractive because it is virtually risk-free. Over time your gains can add up with this low-risk strategy. You just have to find the right conditions that allow you to profit from the arbitrage,” says Tony Jackson, CEO of Jubilee Ace, which provides an automated platform for the execution of arbitrage trades in the cryptocurrency, financial, and other markets.
This is an example of a rising trend that demonstrates how FinTech innovations give rise to new concepts or business models that are at the intersection of finance and gaming.
Better financial inclusion for gamers does not only benefit the players. It’s actually the game developers who gain the most out of it. When players are able to spend money on games more easily, developers are more likely to be successful in monetizing their work. They no longer have to rely totally on the revenues they get from advertisements.
Improved monetization encourages developers, especially the amateurs and independents, to offer more games. With more of them competing for potential players, there’s an impetus to provide more creative, innovative, and optimized games.
In their 2020 Global Games Market Report, Newzoo projects that around 4 out of 10 mobile gamers will spend money on the games they play. “Overall, there will be 2.6 billion mobile gamers in 2020; of which, just 38% will pay for games,” the report says. This number may not sound impressive, but it is a massive leap from the 5% estimated from around half a decade ago.
As gaming purchases increase, opportunities will rise as gamers find more marketplaces to buy and sell their in-game items. “Speed is the key when it comes to arbitrage as opportunities are often available for a short period of time. So technology will come into play,” says Jackson, noting how technology will be a key factor to making the most of trading platforms that involve games and gaming marketplaces.
FinTech innovations such as digital currencies and interconnectivity among payment services will be advantageous for players, game creators, and the gaming industry in general. Much of the benefits may be on the commercial side, but it’s undeniable that gaming becomes more engaging and rewarding with the infusion of financial innovations. “Through FinTech development, there will be more opportunities to trade and arbitrage in different assets,” concludes Jackson.