Anyone who has made it a point to follow the latest trends in online payments is likely aware of the impact that cryptocurrencies have had across the ecosystem. From stablecoins and altcoins to novel assets such as non-fungible tokens, it seems as if crypto is quickly becoming king. There is perhaps no better example of these observations than the influence that the blockchain exerts across the digital entertainment sector.
Why does this marketplace always seem to lead the way when it comes to adopting new types of payment technologies? Would it not make more sense for other industries, such as online banking, to enjoy the lion’s share of attention?
There are actually some very practical reasons behind the role that digital
entertainment continues to play, and these will be discussed in greater detail
below. Whether you happen to be a fan of digital gaming, or you are thinking
about taking a leap into the cryptocurrency sector, it is always wise to
appreciate the current “state of play”.
A Brief History of How Online Payments Have Evolved
Virtual payments can be traced back to the halcyon days of the e-commerce
community. These first entered into the public domain during the latter half of
the 1990s, and at the time, they primarily involved bank transfers, and credit
cards. While convenient for the era, these methods still suffered from a
handful of drawbacks. Third-party fees, lengthy processing times, and merchant
chargebacks were three typical examples. Mounting hidden charges also made it
more likely that consumers would not follow through with a payment; leading to
higher online cart abandonment rates.
Things nonetheless began to change when the PayPal system was introduced in 1998. This was also the first time that the term “e-wallet” would be used to describe a bridge between traditional transfers, and streamlined digital alternatives. Another interesting feature of PayPal is that it was purely virtual; unlike real-world bank accounts, or physical credit cards. The subsequent growth of PayPal was also related to the launch of several other well-known ventures. PayPal Executive Vice President Reid Hoffman introduced LinkedIn in 2002, and a trio of former PayPal employees were behind the introduction of YouTube in 2005. In other words, it was clear that the era of e-wallets had come into fruition. This movement also coincided with similar wallets intended to expedite the online payment process. Examples included:
- Skrill
- Braintree
- Stripe
- Authorize.net
These systems represented ideal solutions for countless online consumers, as they offered a sense of convenience that had been specifically engineered to support digital payments. They boasted user-friendly interfaces, they were outfitted with the latest security protocols, an no prior experience was required. Having said this, another method was already lurking in the shadows.
Betting on the Blockchain
A white paper released in 2008 described the potential for yet another leap forward in relation to the online payment community. It proposed a type of decentralised transfer service that no longer needed to rely on third-party intermediaries (such as banks, and credit card providers). This was also when the concept of peer-to-peer transactions would be introduced, although to a relatively limited audience at the time. As the reader may have already guessed, we are referring to the birth of Bitcoin here. Some of the main benefits that this alternative was said to offer included:
- A Proof-of-Work consensus designed to ensure that transactions cannot be
- altered
- Augmented security features
- Rapid settlement time
- A massive reduction in fees
- Enhanced levels of end-user anonymity
The only issue is that these propositions were largely theoretical. While certainly impressive, several questions remained. How would the blockchain itself be implemented across the Internet? What type of oversight could be needed, and how might these regulations be enforced. Perhaps most importantly, would cryptocurrency payments appeal to the average consumer?
These are some of the reasons why cryptocurrencies were largely relegated to
the investment sector for some time. The necessary infrastructure could not be
built overnight, and we would have to wait for some time before viable transfer
solutions entered into mainstream circulation.
However, the die had already been cast. It was clear that decentralised payments represented the next great leap forward, and patience did indeed prove to be a virtue from a long-term perspective. We can now play our favourite games with the help of a trusted crypto casino that accepts virtual tokens doubling as cash. Transfers can be completed within a matter of minutes (or less). Cryptocurrencies can be stored within digital wallets. It is possible to transfer between fiat and crypto. A growing number of real-world establishments have likewise begun to recognise cryptocurrencies alongside traditional fiat methods, such as credit cards.
We can now appreciate the paradigm shift that has been attributed to cryptocurrencies. While cash transactions are still common, crypto-friendly payment gateways seem to be emerging around every corner; especially when
discussing the online entertainment sector. So, why has digital entertainment
remained at the forefront of innovative payment solutions? There are several
reasons behind this trend.
The Demand for Friction-less Payment Solutions
There are many differences between the online entertainment ecosystem, and standard e-commerce platforms. One example can be seen in payment frequencies.
Digital portals (such as casinos) rely on microtransactions as opposed to one-off static purchases. So, they require payment rails capable of supporting a significant amount of volume at any given time. This is sometimes referred to
as the Games as a Service (GaaS) model.
Let’s also remember that consumers are just as eager to take advantage of cryptocurrency payment gateways promising lightning-fast settlement times. So, it only stands to reason that developers wishing to test their latest services will leverage the scope of the digital entertainment industry to appreciate what customers have to say about their experiences.
Support for Smaller Transfers
Another aspect of the digital entertainment community that makes it an ideal
proving ground for new types of payment systems involves the sizes of the transactions themselves. Examples of repeat purchases include online movie
rentals, topping up a gaming account, using credits to obtain non-fungible tokens (NFTs), registering for an account at a low-deposit casino, and adhering to minimum wagering thresholds.
In any of these cases, transfer sizes tend to be relatively small (hence the term “microstransaction”). The associated payment gateways must be capable of supporting high volumes within any given period of time, so the digital entertainment community is an excellent means to litmus test new services that may still be in the beta testing phase.
Catering to the Global Community
The digital entertainment sector is now enjoying a global audience base. The notion of geographic borders has been largely ablated. A consumer located in the United States can easily stream a live broadcast from Sky Television. An Indian gamer is often able to register with a casino headquartered thousands of miles away. We are living in a border-less online society, so satisfying the demands of an international audience is crucial.
Payment providers are just a eager to resonate with as large of a virtual audience as possible. So, it only stands to reason that they frequently turn to the entertainment industry due to its sheer footprint. When discussing cryptocurrencies, users are also not subject to many of the transfer fees associated with traditional fiat providers. The online entertainment sector represents the ideal means to test novel architecture, and to obtain real-world feedback that can be used to streamline payment processes.
The Rise of One-Click Transactions
Streamlined transactions are no longer privileges. They are considered the norm
when discussing digital entertainment. Consumers expect to click an icon, and
to receive an immediate confirmation that the payment has been processed. So,
the gaming industry was forced to adopt architecture capable of supporting this
level of efficiency. In other words, customers are rarely willing to wait for a
significant amount of time during the checkout process.
Cryptocurrency payment ecosystems hoping to implement the latest solutions will
frequently turn to the digital entertainment sector to introduce their services, to ensure that the system is functioning as it should, and to obtain valuable real-world feedback from customers.
The Next Generation of Online Consumers
Some estimates have placed the value of the global online entertainment industry at over $500 billion. Major sectors include streaming services, video gaming, gambling, sports betting, and virtual advertising. Not only does this represent one of the largest marketplaces in existence, but it also signifies that payment providers can begin to appreciate the needs of the next generation of customers. This demographic is associated with several trends directly related to e-commerce, such as:
- The desire for highly intuitive user interfaces
- A variety of payment options
- The need for hybrid payment gateways (systems that accept fiat alongside crypto)
- Superior levels of customer support
- Reduced fees and commissions
Brands that can provide these services are more likely to enjoy a competitive edge, so their DevOps teams will obviously be keen to test their products within the digital entertainment community before expanding into other sectors.
Access to Big Data
The importance of this metric cannot be overstated. Research and development
can only go so far in relation to implementing the latest online payment solutions. It is just as crucial to appreciate the role that big data plays. A handful of metrics that payment providers will often examine include:
- Customer-centred metrics such as age, gender, and location
- Device usage
- Cart abandonment rates
- Average processing times
- Which payment methods are the most popular
- Payment approval ratings
- Transaction metadata
- User behaviour
Interpreting this information will enable providers to engineer hyper-personalised marketing campaigns, and to appreciate which segments of the population should be targeted.
The Introduction of Web3 Technology
Web3 technology is yet another factor which has enabled the online entertainment industry to represent such a popular opportunity for crypto-ready payment solutions. Web3 systems are primarily associated with decentralised transfer platforms that do not rely on third parties. In other words, they transfer the power from big tech into the hands of the average user. This transforms passive stakeholders into active participants, allows individuals to own digital assets (such as NFTs), and encourages higher rates of end-user engagement.
It just so happens that many of these elements have become associated with the
latest iteration of virtual payment services, and with cryptocurrencies in particular. Brands hoping to achieve a competitive edge with the help of Web3 software will naturally gravitate to the digital entertainment community to better determine if their platforms resonate with users.
Digital Entertainment: The Ideal Sandbox for the Latest Cryptocurrency Payment Solutions?
Whether referring to smartphone applications, browser-based payment platforms,
or even contactless cards, cryptocurrency transfers have indeed taken on a life of their own. Firms conducting research and development will always seek to use all potential resources at their disposal. This is when the true power of the digital entertainment ecosystem becomes abundantly clear. To summarise, here are some of the reasons why this industry often represents the first step before a much larger foray into mainstream e-commerce:
- Firms can envision, develop, and perfect friction-less payment solutions
- This ecosystem is ideal when performing smaller transactions
- The digital entertainment sector is now a global industry
- Brands can analyse the behaviour of the next consumer generation
- Web3-friendly payment gateways are becoming commonplace
Although fiat-backed transactions still occur across the digital entertainment community, the rising tide of cryptocurrencies cannot be denied. Providers hoping to properly vet their software before tackling the mainstream e-commerce landscape will continue turning to this sector, and for good reason.
