Monetizing a gaming platform often involves processing user payments for services and digital goods. However, handling payments carries legal obligations around security, taxes, disclosures, and more.
This article will examine key payment considerations for gaming platforms.
Payment Processing Setup
To accept payments, gaming platforms must establish proper processing capabilities:
Obtaining a Merchant Account
A merchant account through a bank is required for the gaming company to collect customer payments. High-risk sectors like gaming may encounter obstacles getting approved.
Integrating Payment Gateways
Platforms need payment gateways to route information from the website or app to facilitate transactions through the merchant account. Popular options include Stripe, PayPal, Authorize.Net.
Fraud Tools and Risk Monitoring
With gaming purchases, there is higher risk of fraud or chargebacks. Utilize tools to screen transactions. Leverage services verifying customer information.
Supporting Recurring Billing
For subscriptions, in-game purchases over time, etc. implement recurring billing through payment gateways. Let users easily update card details.
Carefully vetting financial partners and building secure, compliant payment infrastructure is crucial for monetizing gaming platforms.
Permitted Payment Methods
Gaming platforms should offer various convenient payment options:
Credit and Debit Cards
Accept all major card brands like Visa, Mastercard, American Express, Discover. Follow security rules like PCI compliance.
Mobile and Digital Wallets
Support mobile payment services like Apple Pay, Google Pay to facilitate in-app purchases or transactions via mobile apps.
Cryptocurrency
Consider accepting decentralized payments through crypto coins like Bitcoin, Ethereum, etc. Research regulations in your jurisdictions.
Prepaid Cards
Allow prepaid gift cards or game cards as a payment method. These may appeal to younger gamers.
Local Payment Preferences
Offer region-specific payment types preferred in target countries. WeChat Pay, PayTM, iDeal, etc.
Accommodating users’ favored payment methods can boost conversion and retention.
Terms of Service and Policies
Gaming payments should be accompanied by clear policies governing transactions:
Pricing and Fee Disclosures
Transparently communicate charges, commissions, taxes, currency conversions, and fees per your jurisdiction’s consumer laws.
Auto-Renewal Terms
Notify users in advance of any automatically recurring subscriptions and require their opt-in consent to activate auto-renewals.
Refund Policy
Outline under what conditions users may request refunds for purchases, returns, or canceled subscriptions. Stick to posted policies.
Cancellation Policy
Allow reasonable means to deactivate or cancel user accounts and associated billing/payments.
Dispute Protocols
Have a formal process for submitting transaction disputes for investigation of potential errors or fraudulent charges.
Clear terms, disclosures, and policies establish expectations around payments and minimize disputes.
Taxation Requirements
Depending on transaction volume, gaming platforms may have tax obligations:
Sales Tax Collection
Know when sales tax must be collected and remitted per tax laws in jurisdictions where your users reside.
1099-K Reporting
Payments processors send 1099-Ks for user earnings over $600 which may obligate senders to file tax returns.
Withholding Taxes
You may have to withhold income tax on seller earnings depending on residency, tax treaties, incorporation, etc.
Stay compliant with changing economic nexus laws and evolving tax codes for digital transactions.
Minors and Family Purchases
Special considerations apply to payments from minors and families:
COPPA Compliance
Follow COPPA rules around notice, parental consent when collecting data from children under 13, including for payments.
Parental Controls and Authorization
Allow parents oversight of kids’ spending and require authorization for large or recurring purchases by minors.
Child-Oriented Design
Avoid dark pattern gaming commerce that encourages excessive purchases by children. Design ethically.
Family Billing and Linking
Let parents link family member accounts to manage and facilitate purchases through a shared payment source.
Adhering to laws protecting child consumers and accommodating families promotes legal compliance.
Legal Obligations and Liabilities
When handling gaming transactions, platforms take on duties including:
PCI Compliance
Follow data security standards outlined by the Payment Card Industry to protect cardholder information.
Fraud Monitoring
Monitor transactions using tools to detect suspicious patterns indicative of potential fraud or money laundering activities. Report concerns to regulators per local laws.
Chargeback and Dispute Response
Have a defined process to promptly investigate and respond to payment disputes, chargeback requests or reversal demands. Provide evidence and customer service.
Consumer Protection Laws
Honor legal rights and protections consumers have regarding billing errors, mandatory disclosures, canceled subscriptions, refunds, etc. that apply in their jurisdiction.
With payments come added compliance, security, and customer service duties gaming platforms must fulfill. Failing to do so can spur legal action from regulators or consumers.
This covers key areas related to payments that gaming platforms must consider from setup through ongoing operations. Be sure to consult qualified legal and financial advisors to determine specific requirements applicable to your business. Adopt prudent practices that put users first and keep platforms compliant.
FAQ
Do I need to report user earnings to tax authorities?
If users of your gaming platform earn over $600 in a tax year from activities like selling virtual goods, ad revenue sharing, etc., you may have to report their earnings to tax authorities using 1099-K forms.
The latest economic nexus laws mean even foreign sellers now exceed reporting thresholds for US state purposes quicker. On the federal side, the 1099-K threshold remains $20,000 and 200 transactions.
Be sure to consult a qualified tax professional to understand 1099 reporting requirements in the jurisdictions your users reside. You will need to collect taxpayer identification numbers and track earnings accurately per user.
What are the consequences of non-compliance with PCI standards?
Failure to comply with the robust data security standards outlined by the Payment Card Industry (PCI) can result in substantial fines levied by the card brands themselves, in addition to other penalties.
For example, Visa charges around $100,000 per month for Level 1 merchants who are out of compliance. MasterCard, Discover and AMEX also issue PCI non-compliance fines.
Beyond direct fines, not adhering to PCI raises the chances of a serious payment data breach significantly, which can lead to enormous costs related to forensic investigation, customer notification, remediation, lawsuits, and reputational damage.
Maintaining PCI compliance is critical for securely handling cards. Work closely with your qualified security assessor (QSA).
How do I handle VAT for digital services across jurisdictions?
To correctly charge and remit VAT on digital services like in-game purchases across multiple jurisdictions worldwide:
- Identify your VAT taxing nexus in each country based on revenues and users.
- Integrate VAT calculation and reporting tools to determine the precise VAT rates per country. Rates range 15-27% across the EU.
- Automatically apply the appropriate VAT rate based on user’s billing address for digital purchases.
- Issue compliant VAT invoices to business customers.
- File required returns and remit VAT owed to each country on a monthly/quarterly basis.
- Maintain audit-proof VAT reporting records, including geo-IP data.
- Register for VAT compliance schemes like MOSS in the EU.
Staying compliant globally requires VAT automation integration. Non-compliance results in hefty interest and penalties.
How can I accept cryptocurrency safely?
To minimize risks, it’s advisable to use an established mainstream payments processor that handles cryptocurrency rather than directly accepting tokens yourself.
Services like BitPay and Coinbase Commerce take care of:
- KYC identity checks on users to prevent fraud and money laundering.
- Handling AML and SEC regulations applicable to crypto payments.
- Instantaneously converting cryptocurrency deposited to stablecoin or fiat currency to avoid volatility.
- Providing reliable exchange rates and locking in values.
- Integrating directly with your payment gateway using settled funds.
- Reducing needed cryptocurrency storage and security measures on your end.
While supporting cryptocurrency payments offers advantages, the regulatory complexities make using a crypto-savvy payments specialist prudent.
What payment provider rules apply to high risk sectors like gaming?
High risk merchant categories like gaming face more stringent requirements from payment providers:
- Enhanced identity verification and underwriting to approve accounts.
- Providing business licenses, legal documentation, financial statements.
- Higher processing fees, rolling reserves, held funds.
- Lower chargeback thresholds prompting holds.
- Limiting payment methods, blockingPrepaid cards.
- Extra diligence handling fraud disputes.
- Potentially requiring PCI audits and security questionnaires.
- Restricting access to features like recurring billing.
- Monitoring for illegal or brand-restricted activities.
Be prepared to comply with additional rules payment providers impose to mitigate their higher financial risks.
When are users entitled to payment refunds?
In many jurisdictions, consumers have defined rights to refunds for digital purchases within a set window – e.g. 14 days in the UK and EU. Ensure your posted refund policies align with regional consumer protection laws.
How should I notify users about auto-renewals?
Notify users of upcoming auto-renewals clearly via email and within your platform/app itself. Give advance notice e.g. 72 hours before renewing. Re-secure opt-in consent to continue auto-renewals for additional periods.
What are some security best practices for payment sites?
Use HTTPS with TLS 1.2+ encryption. Never store raw card data. Tokenize and encrypt stored customer data. Input validation. Role-based access controls. Code auditing. Pen testing. DDoS mitigation. Backup securely.
How do I comply with KYC and AML regulations?
Follow identity verification, transaction monitoring, suspicious activity reporting, and risk management requirements in your jurisdictions to comply with anti-money laundering laws surrounding payments.
What happens in a chargeback dispute?
If you dispute a user’s chargeback claim, you must submit compelling evidence to the bank proving the charge was legitimate and authorized. Otherwise, the transaction will likely be reversed. Maintain order records, communication with user, and Terms of Service showing allowed charges.
