Video Gaming ChargebackTop 10 Chargeback Tips for the Video Game Industry

It’s Time to Press “Pause” on Video Gaming Chargebacks

Chargebacks, or forced payment reversals resulting from a customer dispute, are becoming an epidemic within the video game industry. Part of the problem is the overall upward trend in chargeback issuances as a whole. There are key aspects of gaming that make it particularly susceptible to disputes.

Video game companies prioritize a seamless experience for their players. To allow gamers to return to the action promptly after purchase, companies strive to make the transaction process as swift and straightforward as possible. 

Naturally, this payment structure can lead to big problems for gaming companies later on, including chargebacks. 

This can create substantial challenges for operators. So, how do video gaming chargebacks work? And how can the gaming industry prevent them? Let’s take a look.

Video Gaming Chargebacks: At a Glance

Frankly, video games are extremely popular. In fact, according to Statista, nearly 40% of the global population plays video games. By 2027, the industry value should reach around $533 billion. Clearly, if you’re a game publisher or platform, your profits may be increasing year after year. 

At the same time, though, we’re seeing a dramatic rise in chargeback issuances in this industry. These disputes are sapping publishers and other parties in the gaming industry of much-needed revenue.

Before allowing a chargeback, banks are expected to verify that a cardholder attempted to work an issue out with the merchant first. Also, buyers are meant to receive a chargeback only if the customer has a valid reason to reverse the charge (i.e., billing errors, unauthorized payments, or merchant abuse). As we’ll see below, players (and their banks) do not always follow these requirements.

Why Do Video Gaming Chargebacks Happen?

Digital games are often monetized using microtransactions. This causes issues; players are enticed to make microtransactions that promise to help them navigate the game more effectively. However, once the thrill of victory fades, and the credit card bill shows up, players may quickly come to regret their purchases. 

Additionally, some video games are crafted in a way that can tap into addictive tendencies. This can lead players to make excessive in-app purchases, often more than their budget permits.

When the reality of their spending hits, players might feel embarrassed or ashamed. Rather than asking for a refund, they may simply choose to request a chargeback instead.

Here are four leading sources of video gaming chargebacks of which you should be aware:

Buyer’s Remorse

The structure and evolving business models of digital games can unintentionally promote chargeback abuse.

These games often incentivize players with rewards for achieving difficult objectives. However, buyer's remorse can kick in once the objective is reached and the excitement subsides. The customer has to wrangle with how much they might’ve spent to unlock achievements, special items, etc. When looking at the bill, the play may ignore the fact that simply regretting a purchase isn’t a valid reason to dispute a charge. 

We also have to acknowledge that some developers exploit the situation by designing their games to fuel addictive behaviors. They encourage players to continuously make unplanned in-app purchases. Once the game ends and the regret surfaces, players may opt for a chargeback instead of a refund.

Family Fraud

Family fraud occurs when a family member or relative makes an unauthorized purchase. When the credit card owner becomes aware of this, they may file a chargeback. A classic example might involve a child using their parent's phone (or their own phone linked to their parent's payment details) to make in-app purchases. 

When a parent spots these unfamiliar charges on their bill, they might file a chargeback. A notable case involved an 11-year-old girl making over 300 in-app purchases on the gaming platform Roblox, leaving her mother with a £2,400 bill. Such instances highlight the need for game developers to remain vigilant about family fraud.

“Cyber Shoplifting”

Online shoplifting happens when a user makes a purchase (like buying items, boosts, or unlocking ad-free play) with the intention of filing a chargeback to avoid paying. Unlike family fraud or buyer’s remorse, online shoplifting is premeditated and deliberate from the get-go.

It's a calculated move to get something without paying; no different from walking into a brick-and-mortar store and walking out with stolen merchandise. This is a growing problem, and unless the platform blocks the offender, as Sony did back in 2015, industry data suggest they'll likely repeat their fraudulent behavior at least three more times.

Poor Customer Service

Some games lack robust customer service. When users encounter problems and can't get the support they need, their fallback is often to file a chargeback. Poor customer service can also prompt chargebacks due to changes to a customer’s subscription or service terms without sufficient notification. 

Since many games operate on a subscription model, users often forget about these recurring payments. If customer service fails to send reminders about upcoming charges, players may be surprised by the deductions and choose to file a chargeback.

How Do Chargebacks Impact the Video Gaming Industry?

Video gaming chargebacks can deeply disrupt your daily operations. Each dispute translates to revenue loss and increased administrative expenses.

You may be able to challenge the customer’s claim through representment. Even if you win, you will be assessed a chargeback fee and take a hit to your chargeback ratio. This will lead to increased costs and more complications in the future.

These disputes hurt the industry as a whole. The more disputes that are filed, the more risky the video gaming business appears. That leads to higher processing fees, stricter operating limitations, and more.

Chargebacks lead to:

Learn more about chargeback costs

Overall, chargebacks have far-reaching impacts. They affect your reputation, customer relationships, operational efficiency, and compliance standing. 

10 Best Practices to Prevent Video Gaming Chargebacks

You must proactively address chargeback issues. The keys to this are improved communication, enhanced customer satisfaction measures, and effective dispute resolution when necessary.

You need to embrace a customer-centric approach focused on transparency and satisfaction. This proactive approach fosters trust, prevents misunderstandings, and ensures customers make informed decisions about purchases.

To that end, we recommend ten chargeback prevention best practices to decrease your overall chargeback issuances:

1 |  Communicate Clearly

Ensure that all terms, requirements, and other crucial information is clearly communicated to customers. Using plain language and avoiding industry jargon that may confuse or mislead customers is crucial. Providing comprehensive documentation and offering opportunities for customers to ask questions can enhance their understanding and reduce the likelihood of chargebacks due to misunderstanding.

2 |  Educate Customers

Educating customers is essential. You should offer resources like user-friendly guides, online portals, dedicated customer support, etc., to help customers. Regular communication, reminders, and updates about any changes to service or upcoming renewal dates can also minimize confusion and prevent disputes.

3 |  Clarify Billing Practices

Accurate billing practices are critical to prevent billing disputes and chargebacks. You should ensure that invoices and statements are error-free, clearly indicating the services provided, associated costs, and any adjustments or refunds. Billing transparency and easy-to-understand itemization can help customers recognize and validate charges, reducing the chances of chargebacks.

4 |  ProvideTraining

Conducting comprehensive training for sales representatives who engage with customers is crucial. This training should emphasize accurate representation of terms and ensure that sales agents thoroughly understand the products and can effectively communicate them to potential customers.

5 |  Prioritize Customers

Maintaining strong customer service is vital for addressing customer concerns and resolving issues promptly. By offering accessible channels of communication, such as phone, email, or live chat, you can proactively assist customers, clarify uncertainties, and address complaints before they escalate to chargebacks. Timely and empathetic customer support can go a long way in preventing disputes.

6 |  Ensure Compliance

Staying up-to-date with industry regulations and adhering to best practices for data security and privacy can minimize potential compliance issues. Complying with regulatory requirements can reduce the risk of penalties, legal disputes, and subsequent chargebacks.

7 |  Automate Reminders

Using automated payment reminders can help customers stay informed about upcoming due dates and avoid missed payments. Sending timely notifications through email, text messages, or mobile apps can prevent accidental lapses in service.

8 |  Improve Documentation

You should ensure that any policy documentation is comprehensive, easily accessible, and written in customer-friendly language. Clear and detailed terms, service limitations, exclusions, and procedures can minimize misunderstandings and disputes.

9 |  Enhance Verification

Implementing thorough verification processes during a transaction can help confirm your customers’ identities, intentions, and understanding of the service. This can include additional authentication measures or validation checks to mitigate instances of fraudulent or unauthorized transactions.

10 |  Seek Feedback

Regularly seeking customer feedback through surveys, satisfaction ratings, or online reviews can provide valuable insights into which improvement may be necessary. Addressing customer concerns promptly can help prevent frustrations from escalating into chargebacks and demonstrate a commitment to customer satisfaction.

Learn more about chargeback prevention

Chargebacks Require a Better Solution

Any combination of the best practices outlined above can help you create a solid framework to minimize video gaming chargebacks. You can also enhance customer satisfaction and ensure a smooth and secure experience for your customers in the process.

All that said, a piecemeal strategy won’t be effective. True fraud prevention and risk mitigation require a more comprehensive approach. Fortunately, we can help.

Chargebacks911® offers a true end-to-end technology platform that prevents more disputes, wins more reversals, and maximizes your ROI. Contact us today for more information on how to improve customer service to prevent chargebacks.