A new partnership in the gaming-payments sector is another sign of the rise of alternative payments in general and gaming payments in particular.
The deal between cash-transaction network firm ZipZap Inc. and online game payment service provider Xsolla announced Jan. 26 is the latest activity in a corner of the payments industry that created plenty of buzz in 2011 (
For six years, Los Angeles-based Xsolla has specialized in online games, providing localized in-game payment services. It partners with more than 300 game publishers worldwide, including many of the leading casual and social game companies such as Valve Corp. (Steam), Aeria Games, S2 Games, Gameforge, Bigpoint and Wargaming.net.
Based in San Francisco, ZipZap enables cash transactions by providing the payment network and infrastructure. It receives its revenue from merchants on a per-transaction basis.
The deal gives Xsolla an option for at least two new demographics–teenaged and unbanked consumers–to use, while ZipZap gets access to Xsolla’s game-publisher network.
"This new payment option has the potential to increase conversions at an exceptional rate; we’re estimating the increase in profit will be an additional 20% to 30% on top of the total revenue received through the use of current payment options,” Albert Donahue, Xsolla vice president and co-founder, tells PaymentsSource. “This new well-optimized cash-payment system is attracting new users, who are essentially new payers who previously have not had access to fully participate in the gaming world."
Indeed, the market for in-game payments is developing very quickly and has a long way to go, as evidenced by the recent acquisitions of Plaspan by Visa Inc. (
“Companies like Zynga are relying on in-game payments for revenue and utilizing these types of products to facilitate payments,” he says. “The addition of cash funding is an interesting value-add and appears to make the Xsolla product more valuable.”
ZipZap’s customers tend to be teen gamers, many of whom do not have bank accounts. When users of a game that supports Xsolla purchase game credits, for example, they will see ZipZap as the cash payment option. If they choose ZipZap, its application opens and generates a payment slip for the transaction, which can be printed or sent to the user’s mobile device for showing at the payment center.
The user then visits one of the 700,000 payment centers in the U.S., Brazil and former Soviet states affiliated with ZipZap, where a clerk enters the information from the document or mobile device. ZipZap then pays the merchant, who then authorizes the user to use the credits bought.
“Particularly in Brazil or the former Soviet Union, there are a lot of cash-based consumers,” Scott Holt, ZipZap chief marketing officer, tells PaymentsSource. “It’s a much simpler process than, say, signing up for a prepaid debit card, going out and purchasing it (and) loading funds. The fee structure for the consumer is basically zero; it’s a transaction-based system that the merchant pays for.”
ZipZap hopes the partnership helps in its plan to expand to Southeast Asia and the Middle East, Holt says.
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