Micropayments, they grow up so fast: How in-game purchases have evolved to survive

Karl MacGregor, VP of digital content at Worldpay, examines how in-game purchases have moved with the times in order to remain one of the hottest topics in today’s industry

Digital gaming is where micropayments have no-doubt seen the highest adoption rate.

Digital wallets, subscription services and aggregation models have been particularly successful in this space. According to the 2014 poll of GDC attendees, 21 per cent of developers in North America admit their profits came at least in part from micro-transactions and in-app purchases.

It’s only natural that developers have been quick to go down the micropayment route. For one, there is a strong precedent for this; micro-transaction models have been a mainstay of online gambling for at least a decade.

Secondly, today’s software development kits have given developers more flexibility when building games for mobile and more freedom in deciding how to charge players.

Customers have been highly receptive to mobile titles, with the smartphone having now essentially replaced downtime with ‘game-time’. Today, you’d be hard pressed to look up on a bus or in a waiting room and not spot at least a few faces flashing with scenes of Candy Crush or Crossy Road.

Then there’s social gaming. Titles like FarmVille and Game of War have attracted tens of millions of players by tapping into peoples’ inclination to share their triumphs on social media.

Of course, these games face a steady stream of upstart competition, but their success has highlighted the viability of digital wallets for the wider games market.

Console game developers have also been quick to adopt digital wallets as their preferred means to integrate micropayments into their software, although the reaction from their audience has been mixed – to say the least.

"Advances in payments technology have been swift, but any form of ‘perfection’ is still some way off."

Karl MacGregor, Worldpay

FIGHTING AN UPHILL BATTLE

Digital content providers have had a harder time on the path to monetisation.

They have to convince their audience that what they are offering is worth more than the near-endless amount of free content and information available online. They also need to deliver an exceptional user experience, in order to justify the additional charge levied for the ability to consume superior digital content curated just for them.

Nevertheless, subscriptions models have worked for online content. Netflix is an indisputable success story, having built a cult following simply because it offers such great TV shows.

The subscription approach has also been successful with online publishers; Kobo, Readly, Sribd, and Kindle all have successful subscription options.

But even for these outlets, the shift from paper to digital is throwing up all sorts of pricing challenges as businesses try to strike the optimum balance between generating quality content at speed, whilst maintaining advertising revenues.

Some start-ups are finding ways to improve publishers’ chances. For example, paywall operators support metered payments in addition to traditional subscriptions. What’s attractive about this for readers is that they can elect to only pay for what they actually read, instead of committing to regular fees, which is a much easier segue into mainstream subscription payments.

A TOKEN SOLUTION

Consumers are not only less than thrilled about having to pay more to fully enjoy a game or access digital content – they’re also increasingly concerned about the security of their personal information online.

Tokenisation is considered by many as the key to giving people this peace of mind. The payment processor exchanges the real card number for a token that a merchant can store and re-use in the future, without having to re-request from the customer or invest in expensive security.

While tokenisation is nearly ten years old, the latest form of the technology took off in the US last Autumn as it was considered a must-have to ensure the security of contactless mobile payments.

Adoption elsewhere has been slower, although this is expected to change with the increased frequency of new mobile NFC payments driving consumer demand for ‘invisible’ payments.

Looking forward, the UK launch of Apple Pay and competing services will drastically speed up adoption.

Advances in payments technology have clearly been swift, and the implications for micro-transactions are indeed promising.

For now, however, developers and digital publishers are still figuring out how best to engage consumers who may be happy to look elsewhere for a free equivalent (or just pirate their first choice).

When they do get it right, there will be an enormous audience waiting – 6.1 billion people are expected to be using smartphones by 2020 – but for now any form of ‘perfection’ is still some way off.