If you work in the online gaming industry, then you are already pretty familiar with why your business is going to be regarded as a high-risk enterprise. It’s hard to go a month in the online gaming or casino business without seeing a massive chargeback from someone who’s, well, being a sore loser over a bad poker hand. Someone who works in an adult entertainment industry or someone who runs a liquor store might not fully grasp why they’re being forced to look for a high risk merchant account provider when their actual chargeback rate is pretty low, but nobody has to tell a gaming website operator about high chargeback rates.
Online gaming is an exciting field to be a part of. The industry is only expected to grow from here, and it’s fun creating the casino experience on the internet, providing a platform for games of luck and skill. There’s no reason to consider selling off all your online gaming assets and opening up a used book store if you really enjoy working in the online gaming industry. It’s just… there are obstacles that are unique to this field, and running an online gaming site isn’t a job for the part-timer, the weekender just trying to earn a few extra bucks for their upcoming vacation.
There’s also the fact that online casinos are kind of a legal gray area. If you operate in a state where it is one hundred percent legal, then you’re not breaking any laws. But someone can log on from a state where it is illegal, and that involves some risk on everyone’s part. They might file a chargeback just because they didn’t realize they were breaking the law and are hoping to buy it back.
If we’re talking about MMO’s like World of Warcraft, there are more common issues there, as well. Given that so many MMO games rely on a low purchase price, or free to play games, with microtransactions in order to finance the game’s further development and maintenance, there is a constant flow of cash that can put some merchant account providers off. When you add this microtransaction model to a largely teenaged playerbase, you wind up with a lot of people wanting their money back when their parents start wondering what those credit card charges were for.
It’s not hard at all to find stories of eight year olds buying a lot of in-game items through microtransactions because they didn’t even realize that there was going to be an actual exchange of real money taking place. Online gaming companies in this field typically don’t see chargeback rates in the same numbers as online casino websites, but they do get their fair share, and they face many of the same issues that online casino operators are confronted with.
So how can we tackle these obstacles when confronted with them?
Here are a few ideas.
Gaming Merchant Account: Keeping Your Chargeback Rate Down
In online gaming, you’re going to have a higher chargeback rate than most businesses do in other fields. That’s just part of the job. We’re used to it. But that doesn’t mean that it has to spin out of control. There are a few things that you can do to bring your chargeback rate under a reasonable number. Two percent isn’t uncommon, but if you have five percent chargeback rate, you’re probably doing something wrong.
Here are a few tricks to keep your chargeback rate down:
- Contest every chargeback. Even if you don’t think the bank is going to overturn the chargeback, you should still take the time to contest it. The banks will handle these cases much like the courts will handle precedent in criminal law, or how a civil case will use precedent. If you make sure to contest a chargeback, then you have a record that you are against this kind of chargeback being made. This will make it easier to fight in the future simply because the bank can’t say “Well why didn’t you say anything when someone did the same thing a month ago?”
- Make follow-up calls. The bank doesn’t care, no matter what they say. They’re not going to call you back. After calling to contest a chargeback, call them back in a few days. Get all the information you can as to whether there’s anything that you can do to help expedite your case. You have to be really proactive here, because the banks will be happy if you never call back again. It’s less work for them to do. So you need to make sure that you’re the one taking action and pushing the case forward.
- Keep your subscription deals transparent. If you run an online casino and you have a five hundred dollar offer where people can play the slots or throw in for a few hands of poker at no charge, then you need to make sure that they know full well what this deal entails. If this is a five hundred dollar bonus, but only with a one thousand dollar buy in, make sure that they know that. Don’t hide it with an asterisk in the fine print. Make it clear what it is that they’re signing up for and they’ll be less likely to file a chargeback.
- On that note, automatic subscriptions following a free trial, in both online casino and MMO business models, is kind of a bad idea. For every one person who doesn’t notice that they’ve been signed up until it’s too late, and just takes the loss before canceling their subscription, there may be a dozen who will go directly to their credit card company or bank and file a chargeback. Don’t sign people up for anything that they don’t know that they’re agreeing to. Whether or not it’s legal, it’s just bad business sense nine times out of ten.
- An easy but fair refund policy should be in place. If you operate an MMO, for instance, and somebody accidentally buys two of an in-game item that they only needed one of (far easier a mistake to make through video game menus than in a physical store location, for example), then you should make it very easy to return the item right away so that they don’t have to go to their bank or credit card company in order to get their money back. Likewise, we can go back to the example of the eight year old who doesn’t realize that he’s spending mom and dad’s actual money. Make it easy for a parent to reverse any purchases within a reasonable amount of time. Typically a no-questions-asked twenty four hour refund policy should be enough to reduce your chargebacks significantly in this area.
Of course, even after all of this, you’re still going to have to search for a high risk merchant account provider. It’s just the nature of your industry. Even if you could bring your chargeback rate under the generally-accepted two-percent limit, merchant account providers are still going to categorize you as a high-risk merchant simply because people in your field tend to attract a lot of chargebacks.
So this begs the question: Where do you go from there? You’ve brought your chargeback rate down, so now what?
Well, now you have to find a merchant account provider who will be a good fit for you.
What’s A Good Fit?
No two merchant account providers are exactly the same. This doesn’t just mean that there’s a difference between standard and high-risk account providers, rather, two different high-risk merchant account providers may have two very different ways of doing business. They may cover two completely different areas of the private sector with little to no overlap. A provider who covers online casinos, for instance, might not even cover MMO and other forms of multiplayer gaming, and vice versa.
So of course, the first step to narrowing your list down is to find out what any individual merchant account provider covers. If your industry isn’t something that they work in, then obviously there’s no reason to bother giving them a call or sending them an email.
It may sound like it’s more difficult to find a merchant account provider when you work in a high-risk industry, but the truth is that, in many ways, it’s actually quite a bit easier. Consider that a standard merchant, someone who ranks as low-risk, could select from almost any merchant account provider in the world. Well, that’s an intimidating place to start from. These merchant account providers don’t always specialize because they don’t really need to, and they may have a one-size-fits-all approach to doing business, where a merchant account provider who specializes in working with high-risk sellers, and indeed, only those in a certain area of the economy, and only in certain industries, is going to have a lot more experience addressing the specific needs of these companies.
Something that you do need to look out for when working in the high-risk industries is that there are going to be some businesses out here that will prey on your worries about finding someone to work with you. You have a lot more options open to you than you might think, so there’s no reason to sign with some fly by night account provider that routinely gets poor reviews and has lousy customer service. It’s not that merchant accounts are a shady business, it’s just that any industry where the customer base has a percentage of, shall we say, desperate people, is going to attract people who are eager to take advantage of that desperation.
So first of all just remember that you are not, in fact, desperate. There are plenty of merchant account providers out here who will be able to provide you exactly the support you need while treating you fairly.
Beyond checking to see that your industry is covered and reading some online reviews, what else should you be on the lookout for?
You have choices available to you, so how do you narrow them down?
How you select your merchant account provider is largely a personal decision given that this is going to be a partner in your business for years to come, but we do have one tip: Look for one with a twenty four seven help desk.
People are going to be logging on at all hours of the day, which means you’re going to be running into technical and monetary issues at all hours of the day. Which means that you need a merchant account provider that can pick up the phone and help you solve that problem as soon as possible.
There’s a certain amount of risk that goes hand in hand with the online gaming industry, but with careful planning and a good business partner on your side, this risk can be managed.