Guest post: The alternative payment scene in Europe – bridging the gap

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This is a guest post by Ingo Lippert founder of MindMatics, operator of the mobile payment solution mopay.

With the recent explosion in popularity of online games, there has been increased interest in globally fostering an immersive experience and economy for online gamers. As most of the virtual content that is purchased in these games are priced lower than $10, consumers are seeking an alternative form of payment that makes more sense than using a credit card for each micro transaction.

This is especially in an international scenario where penetrations of established payment methods – like credit card in the U.S. – are rather low, consumers need alternative forms of payment to make online purchases. In order to offer the optimal payment options mix, social game developers and platform providers have to find the least-common denominator. And more often than not, mobile payments are one valuable component since they provide unprecedented reach to teens and other unbanked communities of gamers. This results in an increased ability to bill consumers on a global scale and increased conversions over other payment methods.

Origins

As the technology originated in progressive Asian markets like South Korea, few were optimistic that it would flourish or catch on globally at all. But there are many indicators that mobile payments are not just a flash in the pan; consider the significant rise in popularity of online games like FarmVille, CafeWorld and a slew of others that require payment in small amounts. Furthermore, there are roughly 4.6 billion mobile phone users around the world, compared to 1.6 billion global bank accounts. Since the vast majority of those playing these games are mobile phone-touting teens without banks accounts, taking advantage of mobile payments on an international scale is a natural next step.

In Europe, many mobile payment providers launched when browser games gained in popularity in the European gaming community. Since then, mobile payments have evolved as the third most popular payment method among young online gamers (according to a recent research by SuperData Research Inc.) and, just like the online and browser gaming industry itself, are now far more evolved technologically than in countries like the U.S. where the mobile payments market is still in its infancy. In Europe, it has been red-hot for the last 5 years. By now, while mobile payments are quite popular in this specific market, browser games themselves are still considered a niche market in the gaming industry.

The New Frontier

This isn’t the case in Social Games. Gaming applications on social networks are booming right now – mainly due to the big social networks rapid growth. And since mobile payments have a proven track record in gaming, developers and platform providers as well as consumers instantly embrace the payment method. The global success of mobile payments is no longer just mere speculation. In a study from Juniper Research, mobile payments are expected to exceed $200 billion by 2012.

But this growth can not be accomplished by only gaining regional users. Finding their local markets reaching high saturation levels, social network operators and social game developers from the U.S. and Asia set their sights on markets in other regions only to learn that those markets are considerably smaller (on a national level) and considerably more heterogeneous.

While the U.S. and China take only one currency, one to three languages and around four payment methods (including mobile payments via the main nationwide carriers), in Europe for example, every country has its own language, its own four to five carriers, and outside the Euro-Zone, even its own currencies. At this point, social network providers might run into unexpected trouble and considerably more implementation effort than expected.

All eyes on Europe

In his Keynote at GDC Online 2010 in Austin, “Europe: The next big thing in gaming,” Heiko Hubertz stated that social game developers and platforms alike have to look to Europe as the next big market and adjust their offers accordingly. Of course this includes monetization strategies and therefore payment services. As U.S. and Asian social game developers and platform providers continue to gain popularity outside their respective countries, not only will those companies have to adapt to foreign users’ playing habits but also to their paying habits.

What a blessing that in one of the most attractive markets for social game developers and social platform providers – Europe – the long-established payment service providers have invested years and years of development in bridging the national gaps to bring a unified payment experience to this heterogeneous market. This holds especially true for mobile payments, since there are usually four to five mobile network providers compared to one or two specific payment services.

European mobile payment service providers have had over 10 years to solidify the technology and optimize their portfolios of mobile payment processes suitable for European consumers, country legislations and carrier policies alike. From a mobile payment provider’s point of view, if you have seen the European scenario, you have seen them all. This could also be the reason why European mobile payment providers seem to be keen on and good at rolling its services out to other regions.

New world order

What it boils down to in the end is that European payment providers already have the optimal payments solutions reaching the entire European gaming community right at hand. Given the progressive state of the European payment provider market, what we are about to witness in the coming months and years could be a market anomaly: the opportunity for U.S. and Asian corporations to profit from European knowledge and technology leadership instead of vice versa. Now it’s time for us to teach the U.S. and Asia how to effectively leverage the technologies in the European market.

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