The Changing State of Chargebacks in the Game Industry

With the move to the digital model of game distribution has given plenty of new developers the power to put their games in player’s hands without the need of a publisher. But as more developers take matters into their own hands, they will need to worry about new issues. Today’s post examines the rising cases of chargeback and how Xsolla can help you with the matter.

DigitaltrendsCreditcards

Chargeback Clarity

A chargeback for those who aren’t familiar with the term is when someone requests a refund for a purchase made with a card from a financial institution such as a credit card or a card from a bank. There are three popular reasons why someone would want a refund:

  • They didn’t receive the goods that they requested
  • They didn’t like the goods that they received
  • They were charged for something that they didn’t buy

As you can see, chargeback is a way for the consumer to be protected against fraudulent stores or sites that refuse or cannot provide the consumer with what they wanted or a full refund. For the consumer, after they receive the refund from the bank or credit card company the story is done, but the merchant or store in question is still on the hook.

If the merchant has too many chargebacks over the course of a single month, it will raise red flags and the merchant could be fined, have their sales monitored and more. The standard at the moment from most financial institutions is if the merchant goes over 1% of their sales being chargeback within a single month. Visa, MasterCard and other companies each have their own chargeback policies in place, but one thing is certain: high chargeback rate never benefits a merchant.

SteamEarlyAccess

Early Access may get people to buy your game earlier, but also leaves you vulnerable to unhappy customers.

Game developers didn’t have to worry about this too much over the last few decades as most designers left the selling of the game to the publishers and stores. That way, any disputes regarding returns or exchanges were never seen by the developers themselves. But with the changes in the game market, designers have another issue to deal with.

Transparent Transactions

The rise of digital distribution has led to many game designers opening up their own store fronts or turning to a middleman like Steam to sell their games. And this means that many indie developers don’t have a publisher to handle situations like this and now must handle issues of upset customers.

Over the last two years there has been another major change that has increased not only the risk of chargebacks but of disgruntled customers and that is the rise of crowdfunding and early access. Developers who go the route of putting a game on kickstarter or going the Steam Early Access and Greenlight route provide transparent view of their game in progress.

And when a game takes too long or doesn’t come out as expected, the people who supported the project feel burned. With kickstarter, once the project has reached its goal and the campaign is over, the developer receives the money (minus kickstarter’s fee) and the contributors are left to see if their investment bears fruit.

DoomKickstarter

While Kickstarter has led to many successful projects being fund. Some still end up failing leaving people with wasted money.

And if it doesn’t, the contributors are left with either a product they didn’t want or no product at all. At that point their only option to recover the money they feel they are owed is through doing a chargeback with the respective payment option. To make matters worse the level of transparency given by these programs lets the general public see your game at its most undeveloped form.

If you’re not careful, you could have customers rushing for refunds if they see or hear something about your development that they don’t like. And as we’ve talked about, too many chargebacks can come back to hurt your future profits and is not something you want to be worrying about while designing (then selling) your game.

This is why we here at Xsolla can help you out with handling these issues.

Managing Chargeback

One of the many services that we provide at Xsolla is handling fraud and chargeback related issues. Instead of you or the financial institution getting involved with these cases, we have a specialized team that can handle it for you.

The advantage of using Xsolla as opposed to handling it yourself is that we can handle the issues as opposed to the consumer getting their financial institution involved. We can provide the necessary refunds and keep the consumer happy without the consumer having to chargeback their purchase and you having to worry about any fines.

Xsolla

We can assist you with handling refunds and avoiding chargebacks

As more developers take it upon themselves to sell their titles, issues like chargebacks are yet another element that they will have to deal with now that they are not backed by a publisher. And if you’re not sure of how to handle these issues, it’s better to get someone who knows what to do as opposed to having it come back to you with chargebacks.

 

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