Game on.

Until the 1980s, arcade machines dominated the video game market. Players slipped coins into the slots of large cabinet-sized boxes housing classic offerings such as Space Invaders or Pac-Man, and could play until they were defeated. At its peak in 1982, arcade gaming was generating $27 billion a year in revenue.⁷

But arcades were not the only game in town. Consoles had been in existence since the early 1970s, and as the 1980s drew to a close, a new generation of higher quality devices emerged into the limelight. Microprocessor technology had improved, so businesses could offer arcade-level experiences via a device the size of a shoebox. All the customer had to bring to the party was a television. This expanded gaming audiences significantly—not least among younger players.  

A defining feature of consoles was the ability to buy cartridges containing new games. The range of titles multiplied, and longer-form, more complicated games slowly became the norm. After all, this new era was about ownership rather than access and, particularly with the advent of save points, you could replay to your heart’s content. Arcades quickly seemed decidedly old-fashioned. By 1998, arcade revenues had fallen to  $7 billion a year, while consoles’ had soared to $11 billion.⁸

The humble cartridge engendered a new industry model. Publishers would sell copies of games that were compatible with particular hardware. That range of hardware expanded to include handheld consoles and computers—by the mid-1990s, PCs were rivaling consoles in revenues—and players continuously invested in ever more powerful devices and libraries of games to play on them. Unit sales—whether physical or digital—remain a prominent market today. Console games and hardware alone represent around $50 billion in revenues a year.⁹ 

While the business model itself may be well established, innovations in payments technology are changing how users engage with it. These stand to broaden audiences and, as a result, grow revenues.

Take “buy now, pay later” (BNPL), which has surged in recent years. This lets consumers split payment over a number of months, often with zero interest. It tends to be easier to get approved for BNPL finance compared to a credit card. This has been a boon to manufacturers of gaming devices, as it makes it easier for more consumers to get their hands on big-ticket items, such as consoles. 

Payment orchestration tools are also allowing games retailers to increase their reach. Most e-commerce games stores heavily rely on cards. Digital wallet options like PayPal are limited, as is the ability to pay by mobile app or QR code. These are popular payment methods in many countries around the world, and not harnessing them creates friction in the consumer experience. In addition, online payments are only going to become more important. By 2025, e-commerce will be the leading channel for console sales,¹⁰ while around 90 percent of games are already purchased online.¹¹ The solution potentially comes courtesy of fintech startups that allow games retailers to add hundreds of different payments options to the checkout process, without having to integrate each one individually.  

In the future, we may also see innovation in how unit sales of games are priced. “There will be more dynamic pricing based upon data on who’s playing and who’s spending,” says Duncan Bowring, a Director at Accenture Gaming. “Instead of a regional strategy, pricing could be more personalized. This will allow companies to maximize revenue without impacting engagement.” Modern consoles are internet-enabled, which means user information can easily be collected and analyzed. For a new game launch, a games company could analyze how each player interacts with their titles and what their purchase history is, and provide them with an individual price. Clearly, there are watch-outs here: Retailers will not want to confuse or irritate customers. If pricing seems exploitative or random, they may take their business elsewhere. But get it right, and it could be a way to attract buyers who otherwise wouldn’t be spending on the title at all. 

Right now, a number of companies—some outside the traditional gaming arena—are competing to be the go-to games streamer. Amazon has launched Luna, for instance, a service that offers games for smart TVs, while other firms targeting this space include Sony and NVIDIA. According to Omdia, subscription gaming payments hit approximately $16 billion in 2023 and will grow by 40 percent by 2027.¹⁷

How big will this get? The adoption of games streaming will likely be determined by the extent to which networking technology can keep up with computing. Games that are computationally demanding can suffer from frustrating pauses in play, meaning that these services can’t match the experience of top-flight console games. But they are improving, and future strides in networking speeds and bandwidth may solve the issue. 

If that happens, we could imagine a future in which it’s commonplace for players to buy a subscription and then stream games across any device. “A lot of people can’t afford a $500 console every handful of years,” says Brad Manuel, Founder of game-tech company Livewire. “If cloud-gaming’s successful and internet speeds can keep up, it hypothetically removes the need for consoles. You can play from your Smart TV, your PC, your phone, wherever.” This could broaden player demographics, improve user engagement, and also make it possible for niche titles to find a larger audience. 

If the subscription model becomes more mainstream, gaming companies will increasingly have to tangle with the challenges associated with running a subscription business. Maintaining card-on-file records for a multitude of customers, for example, is a headach

e. Emerging techniques, such as systems that update card details automatically by using data taken straight from Mastercard and Visa, can help with this.  But the games world also has some industry-specific opportunities to solve some of those subscription-related challenges. One issue, for instance, is the need to make it easy for subscribers to voluntarily pause or cancel their subscriptions. Although this can hurt short-term revenues, it builds trust and makes it more likely customers will return in the future. So what if  the game itself could be used as a means to incentivize players to keep up their membership? Perhaps if they maintain a subscription for a set period of time, the subscriber would earn digital goods or currencies that can be spent in the game, or which can be put towards hardware upgrades. Another approach may be to allow gamers to earn digital assets while playing,  which can then be put towards monthly subscription payments, boosting  loyalty while making the offer more affordable.

Adopting cutting edge payments innovations could become a competitive advantage in this space. Take real-time payments, for example, which would appeal to creators because it would allow them to access their funds instantaneously. This is already happening in other media. ByteDance, the parent company of video platform TikTok, allows its creators in the U.S. and Europe to receive instant payments to their bank accounts. 

Getting payments right “can help to open up the accessibility of the creator economy”, says Accenture’s Duncan Bowring. “Along with new technology like generative AI, creators of all sizes, from all parts of the world, will have the tools and platforms at their disposal to bring their visions to life and reach a global audience.” 

Video games are often looked at as a leading playground for innovation. They help audiences escape to and embrace alternative personalities and unimaginable worlds, and they are rapidly bridging the physical and digital divide through immersive experiences. Alongside innovation in games themselves has also come major advances in how we transact. Payments need to act the same way, becoming so seamless and intuitive that they are practically invisible—just another mechanism at the disposal of the gamer.  

By helping players level up, conquer new territories, and better express themselves, payments technology can play a crucial role in enabling the wider industry to innovate further. And Stoner says those innovations are happening faster than ever. “Right now,” he says, “it’s game on.”  

By J.P. Morgan

SOURCES: WWW.JPMORGAN.COM/PAYMENTS-UNBOUND/SOURCES

ILLUSTRATION: RUNE FISKER