How is open banking changing the eSports industry
The eSports industry has experienced outstanding growth in the last few years. From a pastime to a multimillion-dollar industry, eSports is now recognised as an official sport across a growing number of countries, attracting talent and high-value investments. This is especially true for eSports tournaments, where millions of viewers from around the world tune in, both virtually and in person, to watch their favourite teams compete. Governments are noticing the opportunity too, as evidenced by the French government's announcement to invest in the country's eSports ecosystem ahead of the 2024 Paris Olympics (European Gaming, 2023).
With as many as 80,000 fans attending the League of Legends World Cup tournament in 2017 (Owayo, 2022) and Singapore's 2021 Free Fire World Series becoming the most-watched eSports event of all time, amassing over 5 million online viewers (Statista, 2022), demand for tickets, premium online features and merchandise have skyrocketed. However, because competitive eSports is still a relatively new concept, the market is still in its regulatory infancy and handling increasingly high volumes of transactions has become a challenge for many businesses in the sector. Yet many of these issues can be easily alleviated by open banking payments technology.
In this blog post, we will examine how open banking can help eSports businesses, from tournament organisers to teams, to monetise their audience effectively and get rid of payment challenges for good.
Payment issues in eSports tournaments
In the eSports industry, payment issues are not uncommon. Tournament organisers often rely on legacy technologies to handle high-volume transactions while keeping customer information secure. As a result of the vulnerabilities of old technology and the high number of microtransactions (low-value payments made repeatedly), eSports has become a target for fraudsters.
We’ve outlined five of the most cited barriers to making transactions within the industry and the pitfalls to avoid:
1. Processing fees and volume of payments
The rapid growth of the eSports industry has led to high volumes of frequent transactions from all over the world as demand for tickets rises. Moreover, as fan bases grow, so does the desire to get hold of team merchandise. The international nature of the demand makes it challenging for payment processors to handle the scale and complexity of payments.
Furthermore, debit and credit card payments can charge up to 3% per transaction and take up to three business days to settle. This means that businesses that receive lots of payments in quick succession, like tournament organisers, have to suffer a suboptimal cash flow, as well as potentially losing substantial amounts of revenue on card processing fees.
Looking to new payment technologies that offer reliable payment processing that can handle high volumes of transactions while offering low fees should be a priority.
2. Secure payment system
Ensuring the secure transfer of funds, protecting customer information, and preventing fraud are critical considerations in any payment process. As the eSports industry is often a target for fraudsters, businesses within the sector must find robust ways to ensure the security of financial information and prevent fraud, without compromising on the customer experience, in ways that avoid being resource-intensive and subject to human error.
Another thing to consider is the age of eSports customers. Whether they’re virtual or in-person spectators, fans, participants, or even team members, it is not uncommon for customers to be below the age of 18. Protection of vulnerable customers, such as minors, from fraudulent activity is imperative.
3. Payment preferences
Offering customers their preferred way to pay is not only crucial to a great customer experience, but also to the organiser's conversion rates. The eSports audience is a niche market with global reach, with fans located in multiple countries, spanning many generations. So organisers need to understand that it is unlikely that one payment method will get customers through checkout. Local currencies must be considered, as should alternative payment methods more commonly adopted by younger and tech-savvy customers, such as neo-banks.
4. Poor user experience
A good user experience during the checkout process is vital for high conversion rates - a clunky payment journey with long safety checks risks customers abandoning their purchase. Old payment systems are not usually built with the user in mind. They tend to have poor visuals and graphics; a long process that involves typing card details; multi-step authentication processes; and pop-up pages that slow browser loading speeds, discouraging users from completing more payments with the business in the future.
5. Compliance with Regulations
Payment compliance is an issue in the eSports industry because it involves the transfer of high volumes of money, often across geographical borders, which can attract fraudulent activities and create regulatory challenges that add additional complexity to the payment process.
Financial regulations, such as Anti-Money Laundering (AML) and Know-Your-Customer (KYC) requirements, are put in place to mitigate these risks. Still, failure to implement these checks and comply with regulations can result in legal and financial consequences.
Open banking for eSports businesses
To stay ahead of the competition, tournament organisers and eSports teams will have to overcome these barriers and be open to adopting new technologies. Open banking is a concept in which banks allow third-party providers, like Citizen, to access financial data with the account holder’s consent and enable them to make account-to-account (A2A) payments via the bank of their choice. It is this technology that offers a solution to the many payment processing challenges faced by eSports businesses.
Lower fees and instant settlement
Open banking payments are more cost-effective (typically 1% per transaction) and less time-consuming than traditional payment methods. With an open banking payment, the transaction is handled by the banks, so traditional payment intermediaries and their fees are bypassed, and funds settle in a matter of minutes, rather than days. This not only lowers overhead costs, but the immediacy with which funds settle improves cash flow and customer experience.
Increased security and better compliance
Open banking uses secure APIs and bank-level security protocols to protect consumer data and transactions, adding an increased level of security and significantly reducing the risk of fraud and chargebacks. Unlike card transactions, card details are not saved online and therefore in the unfortunate event of cyber theft, customer data won’t be stolen because it hasn’t been exposed.
Open banking can also help eSports businesses comply with relevant financial regulations, such as AML and KYC requirements, as the underlying infrastructure can facilitate the collection and verification of information required for compliance purposes. And unlike traditional card transactions or bank transfers, these processes are inherent within the technology and ultra-fast. Citizen’s instant cardless payments, for example, use the banks’ built-in facial biometrics to verify account ownership and process the payment all in the blink of an eye, with no apps, codes or pins required.
Refined user experience
Open banking payments present an opportunity for better user experiences. By having a user experience (UX) designer on the team since the start, Citizen has focused strongly on creating seamless payment experiences for our users. We have seen conversion rates double from 35% to 70%, regardless of whether a payment is completed via a desktop or mobile. Whats more, with technological innovation at the heart of what we do, we are continuously adding more banks to ensure that our instant cardless payments provide consumers with their payment method of choice, regardless of demographic.
Citizen and the eSports industry
Citizen is an account-to-account (A2A) payments company backed by open banking technology. We offer instant pay-ins and payouts, as well as corporate holding accounts to securely hold your funds. Our instant cardless payments have supported business across the iGaming sector, including ticketed event partners, to scale and grow their offering to customers, and we’d love to show you how. Watch our 30 second demo to see a payment in action, and for a full demo or to talk to us about adding Citizen as a payment provider, contact us here.
Looking to improve in-app purchases for your customers? Look no further. To learn more about how open banking can optimise your payments to process in-game microtransactions, from skins to upgrades, without compromising on player experience, check out our article on the impact of digital environments on payments, here.