Why Online Gaming Startups Struggle to Get Payment Processing

Wednesday, January 5th, 2022

Thinking of launching an online gaming business in the new year? According to the Secretary of State Offices, January tends to be one of the busiest for processing incorporation paperwork. If you already have plans in motion for getting your business off the ground, you might’ve stumbled across one big problem: this industry is often referred to as a “high-risk” industry.

This doesn’t have to be the end of your big plans and goals. It simply means you will need to spend a little more time planning and searching for the right partners. The first step is to take a closer look at why your business falls within the high-risk category. The following are a few of the most common reasons:

High chargeback rates

Online gaming is known for being prone to high chargeback rates. Essentially, a chargeback is a credit or debit card charge that is reversed by a bank after a customer disputes the transaction. In some cases, chargebacks are accidental. For example, your merchant name may not match your site name. Players might get confused, think it’s a charge they did not authorize and ask for a chargeback. However, in other cases, the chargeback is the result of fraud.

“Risky” industry

Since this gaming industry is often a target for those looking to move illicit funds, it has gained a negative reputation. While unfair for those who are not involved in questionable activities, it is a reality of the industry in some areas. As a result, traditional banks and payment processors shy away from accepting gaming clients.

Offshore jurisdiction

There are many advantages of incorporating the offshore jurisdiction, but it also comes with many challenges. One of the biggest is trying to secure certain accounts, like a merchant account. Even if you can access one, it can be difficult to maintain a good standing due to the high chargeback ratios offshore often involves.

Online business

Accepting and processing transactions from a customer in person is much more reassuring than processing transactions online. You can see your customer and know it’s them making the purchase. In some cases, you may even know the customer personally. Online, however, everything is done remotely and digitally. Fewer safeguards are in place.

To complicate matters further, startups are often given a “high-risk” label because they lack financial history. The best way to solve this problem is to partner with a payment processor that understands high-risk businesses and specializes in working with them. These high-risk processors create customized products that help you safely process high-risk payments, safeguarding both your business and customers’ information.