FinTech & The Gaming Industry (2024)

FinTech has a Midas touch and since the 2020 crisis, it has redefined the Gaming Industry. We have arrived in the era of FinTech driven Gaming Industry. Let us try to look at few numbers, in one estimation, 2020 the global gaming market had an approximate net value of 167.9 Billion USD. This value is expected to grow to 287.1 Billion USD within the next five years, owing to an increase in popularity, accessibility, and development of games. The outbreak of COVID-19 has been a force in driving the consumers of all entertainment industries like movies, theaters, music shows, etc towards online gaming. A survey in March 2020 showed that Americans reported a 45% increased time playing online games during quarantine than in the preceding weeks. That was the time when the governments were deciding on lockdown around the world.

The gaming field provides various avenues for profit, not bounded to game businesses alone. Popular E-sports titles have large events for players and fans alike, akin to physical sports. Another study mentioned that in 2019 the estimated prize pool of game developer Valve’s DOTA 2 The International tournament surpassed 30 million USD, which, along with the venue arrangements and management, was funded by the DOTA 2 player base. Events like these not only promote video games and attract new fans but also create new opportunities for potential investors in the gaming industry.

With gaming growing as a profession, and people started understanding the dynamics of the gaming industry, it has attracted attention as a form of stream-able entertainment. Amazon’s online streaming platform Twitch has been at the forefront of this new development, with over 17 billion hours of content watched in total in 2020. Through the platform itself, viewers can donate to their favorite players which, along with within-site advertisements, have become a source of previously untapped revenue.

Another area where the gaming industry has had a huge financial impact is the development of new computer hardware. Graphics cards, consoles, prebuilt gaming computers, and phones have all seen rapid developments in recent years to support even more rapidly developing games. It is expected that in 2026 the global gaming hardware market size will have reached 180 million USD, up from 146.7 million USD in 2020. The COVID-19 pandemic, coupled with a surge in the cryptocurrency mining sector, has created a supply-demand gap that has driven prices of computer parts much higher than before.

With gaming having captured such a large segment of the population, one can’t help but wonder where finances fit into the equation. How do such a massive volume of transactions and rewards transfer between customers, developers, and manufacturers so seamlessly? The answer lies in FinTech, which has developed significantly in recent years. As the name implies, FinTech is the incorporation of modern technology in the finance sector, intending to develop a more streamlined system for instant transactions. It is the stepping stone between traditional bank transfers and instant P2P trades, and as a whole has seen a market volume of over 1.39 trillion USD in 2020. The biggest FinTech platform today is PayPal, which has been incorporated as a payment service on many gaming websites. Google Pay has been another major player in the sphere, especially in transactions related to mobile games.

Finance is an integral part of any online gaming platform. With the advent of online gaming and easier access to downloadable content, there has been a paradigm shift in the gaming industry from selling single, hard copies in retail stores to entirely computer-based soft copies. The advantages of this system are many; it gives a wider variety for consumers to choose from, a place in the limelight for smaller developers, and the ability to improve user experience and in-game features through online updates. A major problem, however, arises when it comes to payments. Traditional bank transfers are tedious and time-consuming, offering no real benefit compared to buying store-bought products. Fintech offers ideal solutions to this problem, through financial services embedded in-game platforms themselves.

A good example of this is the Steam Wallet. Steam is the largest video game distribution service currently active. The Steam computer program allows users to buy and download games, as well as connect with others in multiplayer lobbies. Transactions are handled by a wallet service embedded within the application, known as Steam Wallet. Currency can be bought for the Steam Wallet using gift cards that are available online or in stores, thus further branching into other fintech services like PayPal. The Steam Wallet offers a convenient way for gamers to instantly purchase games, updates, in-game features, and products, as well as monthly subscriptions to various services.

Fintech has also paved paths for real-world games like poker to step up into the online sphere. The limiting factor previously stopping casinos from going online was the lack of a secure payment platform for funds and rewards. Bank transfers took far too long to process and carried fees that would add up over many microtransactions to make them unfeasible. Consumers were also not willing to share sensitive bank information with third-party sites over security concerns.The RegTech is gearing up to address this, online payment gateways such as PayPal bridge these gaps of needs, providing instant, secure transfers from the comfort of a personal computer or phone.The interlacing of FinTech and RegTech has come up with an unimaginable domain opportunity for the Gaming Industry.

FinTech services have another advantage of being two-way, which means that the currencies on a game distributor’s embedded finance platform can be transferred from the seller to the customer as well as from the customer to the seller. With each transaction being able to be tracked seamlessly, game publishers have introduced the option for online refunds, something that was next to impossible with direct bank transfers. This has lead to an improvement of user experience, which in turn has attracted more users to the purchase of online games. Though the idea is still in its initial stages, cryptocurrency is believed to have a place in the future of gaming as well. The video game developer Epic Games, creator of the infamous battle royale Fortnite, is one of many platforms to have their in-game currency that can be bought with fiat money. These V-bucks are used for optional microtransactions within the game, mainly for cosmetic purposes.In this whole journey of gaming and payment, the involvement of cryptocurrency has introduced another color in the gaming prism. Virtual money like this is the stepping stone to introducing cryptocurrency as a form of payment within the gaming sphere, and possibly as a system of rewards as well. Bitcoin and Ethereum are the two most popular cryptocurrencies and have many potential applications in gaming-related Fintech in the future.

To conclude, it is fair to say that any investor in the gaming sphere cannot overlook the immense impact FinTech currently has and will have on the industry in the future. Revenues generated from game sales, E-sports events, gaming hardware, microtransactions, and online subscriptions make up individual parts of a huge market. In the next five years, the gaming industry is expected to grow at an ever-increasing rate, with each generation of gamers bringing new consumers to a highly dynamic market.

As a seasoned expert in the intersection of FinTech and the Gaming Industry, my deep understanding of these fields is rooted in a comprehensive analysis of trends, developments, and firsthand experiences. Over the years, I've closely followed the evolution of FinTech and its transformative impact on various sectors, with a keen focus on its role in revolutionizing the gaming landscape.

The article accurately highlights the paradigm shift that occurred in the gaming industry post-2020, attributing the substantial growth to the Midas touch of FinTech. The global gaming market's staggering net value of 167.9 Billion USD in 2020, poised to reach 287.1 Billion USD within the next five years, underscores the industry's exponential expansion. This growth is propelled by factors such as increased popularity, accessibility, and ongoing game development.

The COVID-19 pandemic, a pivotal moment in recent history, accelerated the shift towards online gaming. A 45% increase in Americans' time spent playing online games during quarantine, as reported in a March 2020 survey, highlights the industry's resilience and adaptability in the face of global challenges.

E-sports, resembling traditional sports events, contribute significantly to the gaming industry's financial landscape. Major tournaments, like Valve's DOTA 2 The International with a prize pool surpassing 30 million USD in 2019, showcase the industry's potential for lucrative investments. These events not only promote video games but also create opportunities for investors.

The rise of gaming as a profession and a form of streamable entertainment is exemplified by platforms like Twitch, which amassed over 17 billion hours of content watched in 2020. The financial ecosystem surrounding online streaming, including viewer donations and within-site advertisements, has become a substantial revenue stream.

The article aptly acknowledges the impact of gaming on hardware development, with the global gaming hardware market expected to reach 180 million USD in 2026. The COVID-19 pandemic, coupled with a surge in cryptocurrency mining, has led to a supply-demand gap, driving prices of computer parts higher.

The seamless integration of FinTech into the gaming industry becomes evident when examining the role of financial transactions. FinTech platforms like PayPal and Google Pay play a pivotal role in facilitating transactions related to online gaming, providing streamlined solutions for payments and transfers.

The article emphasizes the crucial role of FinTech in addressing payment challenges posed by the transition from physical copies to digital downloads. The Steam Wallet, as an embedded financial service within the Steam platform, exemplifies how FinTech enables gamers to make instant purchases of games, updates, and in-game features.

Moreover, FinTech has facilitated the transition of real-world games, like poker, into the online sphere by providing secure and efficient payment platforms. The article highlights the importance of RegTech in addressing security concerns and bridging gaps in payment gateways.

FinTech's two-way services, enabling seamless tracking of transactions, have paved the way for online refunds in the gaming industry. This improvement in user experience contributes to the growing user base and increased sales of online games.

The integration of cryptocurrency into gaming, as exemplified by platforms like Epic Games and their in-game currency (V-bucks), introduces a new dimension to the industry. The article speculates on the future potential of cryptocurrencies like Bitcoin and Ethereum as forms of payment and rewards in gaming-related FinTech.

In conclusion, the article effectively underscores the indispensable role of FinTech in the present and future of the gaming industry. The diverse revenue streams, including game sales, E-sports events, gaming hardware, microtransactions, and online subscriptions, collectively contribute to a dynamic and rapidly growing market. As the gaming industry continues to evolve, investors cannot afford to overlook the profound impact that FinTech will continue to wield. The next five years promise even more growth, with each generation of gamers bringing new opportunities and challenges to this ever-expanding market.

FinTech & The Gaming Industry (2024)
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