Is tighter regulation required in the gaming industry?

In a world littered with microtransactions, we're seeing more and more stories of children racking up huge debt on their parents' credit cards. So is regulation required to stem the flow?

The modern era of gaming is littered with microtransactions and a ‘pay-to-win’ philosophy that has led to many children using their parents’ cards to buy in-game items.

Realistically, the opening of in-game packs to obtain items is fundamentally no different than 90s kids buying Pokémon and Yu-Gi-Oh cards from their local shop.

However, buying packs of cards in a local shop requires parental consent, as it will usually be the parents who give their children the money to buy the packs. In a digitised world though, card details can be saved onto console devices to be used by anyone who has access to the console, and children can easily buy things without their parents knowing.

This premise has led to a lot of parents only realising when they look at their credit card statement that their children have been spending money on the likes of FIFA, Fortnite, and Apex Legends.

This is highly problematic for several reasons. Firstly, it begs the question: is tighter regulation required in the gaming industry? Secondly, is the purchasing of packs with a finite chance of obtaining rare items akin to gambling? And thirdly, is it the fault of the child, the parents, or the game developer?

Finally, if we were to see cryptocurrency payments implemented in mainstream games, how would micotransactions be affected?

Is tighter regulation required in the gaming industry?

A recent article by the BBC collected several stories of distraught parents who discovered they were several thousands of pounds out of pocket because of in-game purchases.

One such story centred on a parent whose 22-year-old child has cerebral palsy, complex epilepsy autism, learning difficulties, and “the approximate cognitive ability of a seven-year-old”.

Due to his learning difficulties, he often uses his iPad and PlayStation for entertainment and educational activities. He ended up playing one game called ‘Hidden Artifacts’ and racked up a bill of £3160.58 between February 18 and May 30 2019.

The parent contacted iTunes who were helpful but unable to provide a refund. The company instead directed them to Blastworks Ltd, the app developer and game provider. The parent has since had no luck recouping their child’s savings.

Another story brought to light by the BBC revolves around a 16-year-old boy who had spent nearly £2,000 on one of EA’s NBA basketball games. The parent did not realise until they had a payment declined that the child had been spending the money.

The child was able to spend his parents’ money through Google Play. EA gave no response and Google Play has a disclaimer about children using their parents’ bank details without their permission. The daughter of the family has reportedly had to use her university savings to cover the bill.

These two stories alone immediately highlight a key point of failure within the microtransaction infrastructure. Often in these scenarios, the card details have been saved on the device, so the person simply just needs to click ‘Buy’ for the transaction to take place.

There are usually no additional security measures in place to determine whether the person who is about to make a purchase is able or old enough to do so. Furthermore, there are often no limits set on how much can be spent.

Tighter regulations could help remedy these situations. For instance, a ‘Know-Your-Customer’ check could help eliminate this issue, though this could be a cumbersome method and ultimately not a perfect solution if Google Play can be used to obtain card details.

One method that could at least help mitigate the overall cost is a payment limit. If parents had the ability to establish a £50-per-year limit, then children would no longer be able to rack up more than £50 worth of spending throughout a year.

This would come at some detriment to game developers, who rake in a serious amount of money through microtransactions. But it would at least protect children and families from the pack-opening craze.

Is it akin to gambling?

The financial aspect is just one area that presents obvious problems within microtransactions. Another key area for discussion is whether or not microtransactions enforce bad behavioural habits on children.

Sports games are typically always at the forefront of a microtransaction discussion because paying often presents a significant competitive advantage.

For example, the NBA and FIFA games have online modes where you can open packs to obtain players and build your own squad. In sports games, players are ranked with certain stats. The idea is the more money you spend on packs, the greater your chances are of finding a highly-ranked player.

However, customers were initially not told what the odds were of finding the top-ranked players in these paid-for packs. FIFA 19 marked the first time odds were presented to players, and they are shockingly bad. At one point there was less than a 1% chance to obtain a ‘one-to-watch’ card, and even then that is still ambiguous as the odds could be 0.01% for all players know.

Prior to FIFA 19, children and adults alike could spend thousands of pounds blindly hoping to find a player worth a ton of in-game currency. These are the types of microtransactions that enforce bad behaviour.

Meanwhile, Grand Theft Auto: Online has recently announced its plan to release an online casino. To enter, players need to spend real money to buy ‘shark cards’ to obtain in-game currency, which can then be used in the casino and only ever used in-game.

While it is true GTA is an 18+ game, many teenagers play the franchise religiously. This isn’t at the fault of Rockstar (the developer behind GTA) because the game is clearly labelled 18.

In theory, it should only be adults spending money on the game, which isn’t as bad because people are allowed to make their own financial decisions. But it isn’t always adults, and offering the function to use real money to then go into a casino in-game can be seen as an issue if children get a hold of the game.

How could crypto change this dynamic?

Implementing crypto payments into mainstream games and microtransactions could alter the present dynamic, but will not necessarily solve any issues.

It could arguably be more problematic because crypto payments are meant to be immutable, and while it is difficult to get a refund on a microtransaction in fiat, trying to get a refund in crypto would be impossible.

Non-fungible tokens (NFTs) could also change the dynamic because in-game items can be owned indefinitely and monetised.

You could spend real money to obtain rare or legendary in-game items and then sell them on for profit. This dynamic would cause a shift to a more speculative route, which could then pave the way for tighter regulation such as KYC – at least with crypto payments. This added layer of security could then prevent further spending.

For crypto payments to become a reality, tighter regulation would have to be mandatory. However, we are a while away from this becoming a reality.

As the stories of children racking up huge bills on their parents’ credit cards continue to mount up, it is becoming more and more apparent that microtransactions have harboured a toxic environment for children to grow up in.

Equally, with microtransactions being such a big revenue stream for game developers, they aren’t going to disappear. There needs to be some form of regulatory oversight that can enforce a solution and prevent children from developing bad habits such as spending thousands of pounds on a video game.

Interested in reading more gaming-related stories? Discover more about the gaming Multiverse and how in-game items can be used across multiple games.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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