Adopting instant payments could improve video games for both players and video game companies, specialists for the Federal Reserve Bank of Kansas City argued in an April research briefing.
Players often must convert fiat currencies, like the dollar or the euro, into in-game currencies to pay for character accessories and items their characters can use. This system, however, is expensive for game companies and leads to confusion about precisely how much money players are spending, the April 9 research briefing authored by Kansas City Fed payments specialists Julian Alcazar and Sam Baird said.
Popular games like Fortnite, which features an online world in which opposing players compete with one another, lets players buy accessories like new uniforms or items that give them an advantage over other players.
If video games adopt instant payments, that would allow for more straightforward buying in fiat currencies without the need for an in-game currency, the briefing said.
“A direct-purchase micro-transaction would allow a consumer to spend exactly the price of the item” the briefing reads. “This method of transaction may give players a clearer understanding of their spending habits and improve their overall gaming experience.”
The move to instant payments would also lower costs for video game companies, according to the specialists.
Most U.S.-based video game players buy in-game currencies with credit cards, according to the briefing, and “a typical card fee ranges from 1.5% to 3.5% of the transaction value.”
However, Singapore-based payments company Tazapay, which offers instant payments and is used by some video game companies already, charges between 0.8% and 2.5% of the transaction, according to the specialists.
A switch to instant payments may help video game companies broaden their customer base, the briefing said. “Although some consumers may not want to spend $10 or $20 for an in-game currency bundle, they may be more interested in spending $1 or $2 directly on an item,” the briefing reads.
Payments in online games like Fortnite and game creation platforms like Roblox have long been a source of controversy. In written comments submitted to the Consumer Financial Protection Bureau in February, parents and video game players complained that in-game payments systems are not secure and enable overspending.
The KC Fed brief touched on regulators’ concerns about video game payments. “Some aspects of video game transactions have drawn regulators’ attention due to issues related to consumer protection, data privacy, and financial crime,” the briefing said.
Research published by the CFPB in April of last year showed that theft and scams happen frequently in online video games.
The CFPB put forward an interpretive rule in January that would make video game developers subject to the Electronic Fund Transfer Act, allowing for the same oversight as is the case for financial institutions and giving players more consumer protections.
The future of the rule, however, is uncertain after President Donald Trump replaced Director Rohit Chopra in February and shifted away from regulatory oversight, especially of electronic payments.
The bureau is led by an acting director, Russell Vought, who sought to terminate roughly 90% of the agency’s staff and narrow the scope of its regulatory work. Trump has nominated attorney Jonathan McKernan, who is supported by business groups, to permanently lead the agency. The Senate has not yet voted on his nomination.
A CFPB spokesperson did not respond to a request for comment on the status of the rule.
A spokesperson for the Electronic Software Association stressed in an email that the briefing represents only the opinion of the authors, but declined to comment further.
Spokespeople for the Roblox Corporation, Epic Games — which publishes Fortnight — and the International Game Developers Association also did not respond to requests for comment.
