The Xsolla Report: State of Play, Volume 1

The fall edition of the industry report by Xsolla & 80 Level follows this introduction as a treasure trove of insights, trends, and analyses that mirror the industry. It outlines the market dynamics in Payments, Mobile Gaming, and Product Development, offering you a clear view of the landscape we're operatin

WHAT’S RELEVANT IN PAYMENTS AND FINTECH NOW?

• Despite recent expansion in console- and mobile-based subscription growth, the sector could grow much larger. For example, market leader Microsoft is committed to putting blockbuster content on Game Pass to attract new users; September’s release of Starfield will be the biggest litmus test for this strategy to date. The pending Activision Blizzard acquisition is also part of this growth.

• State institutions have started to pay more attention to the video game sector and its regulations, which includes the rise of scrutiny and limitations presenting challenges to those in the industry. The gaming market in China is a key example of this.
• Most major markets either already have real-time payment systems in place or are in development as local governments seek to unlock the economic benefits of more efficient payments, and the growth of real-time payments is accelerating across the globe. Real-time transaction volumes around the world are forecasted to reach 511.7B by 2027, according to ACI Worldwide, representing a compound annual growth rate of 21.3%.
• There’s an increase in the video game user market across new territories in developing countries (e.g. MEA and LATAM regions) and growing demand from foreign companies and emerging markets’ game developers to add local payment methods to their games and find solutions that can help them expand globally. 

REVOLUTIONIZING GAMING TRANSACTIONS: The Global Surge of Real-Time Payments

Real-time payments have emerged as a transformative force in global electronic payments, with nearly 28% of all electronic payments worldwide projected to be real-time by 2027 — a remarkable year-on-year growth rate of 63%. This shift is captivating users with its advanced user-friendly features.

The growth of real-time payments can be attributed to many factors, with success stories in multiple geographies. One example is Brazil's introduction of PIX in 2020, a digital, low-cost, QR-code-based payment method. Since then, PIX has swiftly gained traction with 131 million users actively transacting through the platform. As a result, Brazil has emerged as the third fastest-growing real-time payments market, achieving a year-over-year growth rate of 228.9%.

India, on the other hand, has long aspired to claim the top spot in the real-time payments market. The introduction of the Unified Payments Interface (UPI) by the National Payments Corporation of India (NPCI) in 2016 was a significant step towards this goal. UPI aimed to reduce cash-based payments in the country and extend digital payment accessibility to the unbanked population. In August 2023, UPI reached a historic milestone by crossing the 10 billion transactions mark, accounting for 46% of all real-time transactions worldwide in 2022.

With the introduction of FedNow, real-time payments in the United States are projected to capture 11.4 billion transactions by 2027. This marks a significant leap from the 2.8 billion transactions facilitated solely through platforms like Zelle and real-time payments from the Clearing House, which, unlike FedNow, are not operated by the central bank of the United States. By 2027, electronic payment transactions in the United States are estimated to grow 12.6%.

The success of real-time payments in Brazil, India, and the United States serve as illustrations of the evolution of transaction opportunities. 

GOING INTERNATIONAL — Real-time payments have gained widespread usage and adoption, with over 70 countries supporting this payment method across 6 continents. The reach extends beyond domestic transactions.

FINANCIAL INCLUSION — Instant payments offer more than just speed, convenience, and confidence. They also promote financial inclusion, particularly for the unbanked population.

NEW WAYS TO PAY: The Rise of Buy Now, Pay Later Transactions

Payment convenience has become important for players and merchants alike. Buy Now, Pay Later (BNPL) solutions have emerged as a game-changer in this arena, not only offering financial flexibility but also enabling businesses to expand their user base while simultaneously increasing the average transaction value.

The global Buy Now, Pay Later (BNPL) market has witnessed remarkable growth, valued at over $309 billion globally in 2023. Market analysts project a compound annual growth rate (CAGR) of 25% by 2030, underlining the sector's robust potential. BNPL users are anticipated to surge from 360 million to 900 million by 2027.

BNPL represents a form of short-term financing empowering users to make purchases and spread their payments over time, often without incurring interest charges. Research conducted by Bain & Co has revealed that BNPL has experienced widespread adoption across various age groups, particularly among Gen-Z and millennials. It's also not confined to substantial expenditures like education, automobiles, high ticket user goods like televisions or real estate. Currently, BNPL options extend across a broad spectrum of purchases, from fashion and meal delivery to digital goods, video games, and more.

Additionally, nearly 60% of consumers, regardless of their generational cohort, prefer BNPL over traditional credit cards. This preference is rooted in the convenience of setting up payments, a streamlined approval process, the absence of interest charges, transparent information regarding repayment timelines, and the ability to incorporate higher-ticket purchases into their budget through the flexible pay-over-time feature.

As BNPL continues to gain momentum as a payment method, its impact on the gaming sector is set to grow, providing a seamless and flexible checkout experience for players and developers alike.

WHAT DOES IT MEAN FOR THE GAME INDUSTRY?

There will be a growing trend of companies expanding into the Buy Now, Pay Later (BNPL) market in new regions. Some are even integrating real-time payments with installment plans. One example of this is Brazil’s PIX, which will experience continued enhancements.

Leading BNPL providers will be aiming to develop super apps beyond just BNPL services. They will be diversifying their offerings to include rewards programs, physical cards, non-installment payment options, and price trackers. By becoming a comprehensive destination for shopping and financial management, these providers can enhance engagement and create new sources of revenue for developers.

Combining different offerings will allow BNPL providers to extend their reach and improve their overall suite of services. 

The growth of Buy Now, Pay Later (BNPL) solutions is reshaping the gaming industry's payment landscape, giving users more repayment leeway and offering a quicker and easier application process. According to market leader, Klarna, consumers spend 45% more when they use BNPL. And about the same percentage of people will make a purchase using BNPL that they otherwise would have delayed, which directly translates to increased transactions – making BNPL a win for game developers. This benefits gamers and offers game creators a powerful tool to attract a wider audience and enhance transaction values.