Play it safe: The Appcharge Approach to Risk Mitigation

As game developers, we pour our hearts and souls into creating captivating experiences, while the risk of fraud and fraudulent chargebacks is always lurking in the shadows. The need for a robust risk mitigation strategy has never been more crucial.

In this article, we’ll delve into why risk mitigation is paramount for mobile game developers and explore how the Appcharge platform empowers you to safeguard your transactions effectively.

At the heart of Appcharge’s risk mitigation strategy lies the Fraud Score. Every transaction passing through our platform is meticulously evaluated and assigned a fraud score. This score serves as an initial assessment of the transaction’s risk level.

But how is this score calculated? It’s a blend of cutting-edge algorithms and historical data analysis. We consider various factors, such as transaction history, user behavior, and payment method, to assign a score that reflects the likelihood of fraudulent activity.

Transactions with high fraud scores aren’t dismissed outright. Instead, they are flagged for further review. We understand that false positives can be costly, so our approach is not overly cautious. Instead, it’s calculated and precise.

In our commitment to excellence, Appcharge collaborates with third-party anti-fraud software of the highest standards. This partnership ensures that our fraud detection capabilities are at the forefront of industry security. Your peace of mind is our priority.

Blacklisting Serial Fraudsters

At Appcharge, we have zero tolerance for serial fraudsters. Our platform blacklists individuals with a history of fraudulent activities across all games, creating a robust shield against repeat offenders.

Machine Learning Customization

Our machine learning capabilities allow you to define custom rules based on your unique business goals. Alternatively, you can opt for our recommended optimal settings, harnessing the power of AI to protect your transactions.

Optimized Manual Review

Appcharge streamlines the manual review process. We provide a centralized view of all flagged transactions, accompanied by rich contextual data explaining why each transaction was flagged for review. This ensures that your team can efficiently evaluate and address any concerns.

Extra Authentication for High-Risk Transactions

We understand the delicate balance between security and user experience. Appcharge applies extra authentication measures to high-risk transactions, without compromising your conversion rates. This targeted approach ensures that only transactions with elevated risk receive additional scrutiny.

Multiple Payment Methods

Offering multiple payment methods minimizes risk by adding layers of security and verification, making it harder for fraudsters to exploit vulnerabilities. Digital wallets require extra customer verification, such as biometrics or passcodes, while bank debits add an additional layer of security by verifying account ownership. By providing these secure payment options, Appcharge ensures not only a smooth user experience but also a significant reduction in the risk of fraud, safeguarding both your revenue and player trust.

Google Play Proposes Third-Party Payments in the UK – But is it a Good Deal for Developers?

Google has proposed opening up the Google Play store to third-party payment systems in the UK in a move that would see it take a reduced revenue share. But all is not as it seems.

The proposal, if enacted, would enable developers who provide options for both Google Pay and alternative billing to have Google’s revenue cut reduced by 4% to a 26% share (or 11% on their first $1 million)—if users pay through a different payment service provider (PSP). However, if developers do not offer Google Pay as an option, they will be penalised and the standard platform fee would only be cut by 3% to 27% (or 12% on their first $1 million). 

Should users choose to pay with Google Pay, the revenue share will remain at a 70/30 split.

The changes would be rolled out for non-gaming apps first, before eventually allowing games developers to be eligible for the new billing rates and options “no later than October 2023”.

Google claims this would help ensure a “smooth transition for developers and to allow for the necessary changes to be made to our systems”. For context: In Q1 2023, data.ai estimates a large majority of worldwide consumer spending on Google Play came from the games category. It’s effectively a cash cow that is often treated differently by mobile platform holders than other categories.

The proposed changes would only impact in-app purchases in the UK, though similar actions have been taken in other countries.

Why Proposes Third-Party Payments Now?

Google’s announcement comes in response to an investigation by the UK’s Competition and Markets Authority (CMA), which began in June 2022, to look into “suspected anti-competitive conduct” by the tech giant. A particular focus of the ongoing investigation concerns Google Play’s rules which “oblige app developers offering digital content to use Google Play’s own billing system for in-app purchases”.

In response, on April 19, 2023, Google outlined the above changes to its rules and the CMA has now opened a call for feedback on the proposals. Public consultation on the new commitments will run until May 19, 2023. Following the end of the investigation and feedback from the public, the CMA will decide whether to accept or reject the changes.

At present, the CMA’s position is that it believes the new commitments from Google are “sufficient to address the competition concerns”. While no final decision has been made, pending consultation, the CMA has proposed to accept the changes.

What Do the Changes Really Mean?

Any climbdown from the standard 30% revenue share should be considered significant, as Apple and Google fight tooth and nail to retain the status quo. This latest proposal is another example of platform holders making as small a concession as possible to retain their lucrative cash cows.

But while it may seem like a concession, for developers, the reality is that it will not make a notable difference to their businesses on the current terms. A reduction of 3% to 4% will not cover the costs of using an alternative billing system, where the revenue share is often 5% or more (AppCharge takes a 5% cut per transaction).

PSPs charge such fees to cover the costs of billing, invoicing, fraud, chargeback cover, etc. Such a small reduction in Google’s share means that, should customers use another payment system, it would actually cost developers a greater share of their revenue, not reduce it.

Google has claimed that such a reduction is enough to cover developers’ “average payment processing costs” while also leaving a margin for customer support and other payment processing services. 

These terms mean that Google Pay keeps its position as the preferential payment method, while creating a challenging environment for alternative options. And of course, in any event, Google will continue to maintain its standard 30% share on all Google Pay transactions, thus effectively retaining the status quo. Of course, if you’d like to discuss potential alternative PSPs for an both in-app and out-of-app solution, you can speak to the AppCharge team.

Rick VanMeter, executive director of advocacy group The Coalition for App Fairness, which champions app store reform, told TechCrunch he believes the proposals would enable Google to “continue taking a massive cut on services they do not even provide”. He added: “This solution will not create meaningful competition and is a bad deal for developers and consumers.”

It remains to be seen whether the CMA will ultimately accept or reject Google’s proposals, and what the future of third-party payments will look like on the marketplace in the UK.

Regulatory Pressure

Apple and Google have both come under increasing pressure around the world over concerns about anti-competitive practices, namely over the exclusive use of their own payment systems in their app stores. 

Google was hit with a $162 million fine by the Competition Commission of India over anti-competitive practices in October 2022. Following this, as part of efforts to appease the regulator, Google announced in February 2023 that it would support third-party billing systems on Google Play in the country, reducing its fee by 4% for transactions made through alternative payment services.

It had previously introduced a similar measure in South Korea, following strong regulatory pressure and criticism. A smaller reduction of 3% in its fees for purchases made through other PSPs has also been enacted in the European Economic Area (EEA).

The UK proposal is now following suit with its previous successful negotiations with regulators.

Out-of-App Solutions

While it’s a positive step for Google to introduce alternative billing systems on its UK Play store, the current proposals aren’t a particularly attractive proposition. For developers really looking to take advantage of the $30 billion opportunity in the mobile games market – which is the amount of revenue the App Store and Google Play took last year from in-app purchases – the best solution still remains in utilising web stores.

By bringing your community of players to a web store, developers can offer better deals to players, all while retaining a higher share of revenue. Regulators continue to chip away at the app store monopolies, but the industry is a long way off from a fairer deal for all.

The Rise and Relevance of Webstores

The gaming industry is facing tough times ahead, as the pandemic-induced surge in growth has come to a halt. Companies are now prioritizing profits over growth, and finding funding has become a major challenge. The collapse of Silicon Valley Bank, which was known for providing financing to technology companies, has only added to the industry’s uncertainty.

One of the biggest challenges facing gaming companies is the increasing competition for user acquisition, which has resulted in skyrocketing marketing costs. The cost per install (CPI) has continued to climb, leading to a flat ad spend trendline in 2022. Marketers increased their budgets to capture the attention of gamers during the New Year and regional holiday seasons, resulting in a bump in app install ad spend for both Android and iOS gaming apps. Although paid installs dropped due to seasonal trends, CPI continued to rise. Android saw a modest 2% YoY increase in spending due to a steadier CPI, while iOS witnessed a significant 20% YoY growth in spending due to higher CPIs. The average cost per install on the iOS platform reached $3.8 in Q4 2022, an 88% increase from $2 in Q1 2021 and a 35% YoY increase. Despite these rising costs, marketers remain invested in iOS games due to the high lifetime value (LTV) of their users. (AppsFlyer, The state of gaming app marketing 2023 edition)

“[The impending recession] is a big challenge for all gaming companies, especially those with an IAP-based business model. Gaming companies will need to reduce cost even more, including marketing spend and hiring, improve their advertising and operations efficiency, and strictly control marketing budgets based on ROAS performance.” Vickie Chen, CEO, Avia Games

The gaming industry faced numerous obstacles in 2022, yet there was still a glimmer of hope for iOS paid installs, which saw a 10% YoY growth. Marketers adapted to the changing landscape by maximizing the potential of SKAN 3, while IDFA matching rates rose to 26%. These developments offered some relief to the industry’s ongoing struggles, demonstrating that companies that can adapt to new technologies and strategies have a better chance of thriving.

The Power of Webstores: A New Revenue Stream for Mobile Game Developers

Gaming companies can also consider utilizing a webstore platform as a new revenue stream. These platforms offer all the necessary modules and features needed to launch a branded webstore for your community, without the need for in-house development. By leveraging a webstore platform, gaming companies can save on the costs and resources associated with building and maintaining their own webstore, while still being able to offer promotions, discounts, and direct relationships with customers. This approach provides a cost-effective, and proven successful from the leading gaming studios that have all built their own internally, alternative to monetizing through app stores and allows mobile game developers to increase their margins and diversify their revenue streams. In addition to cost savings and increased revenue, utilizing a webstore platform also offers benefits such as privacy and optimization features that are already built into the platform.

Privacy and Optimization: Navigating the Challenges of iOS 15 and SKAN 4.0

The enforcement of privacy guidelines across platforms continues to present significant challenges for gaming marketers in 2023. With restrictions limiting the ability of marketers to access user-level data on their own, many are turning to MMPs and privacy-enhancing technology to facilitate the utilization of user-level data in a privacy-compliant way. At the same time, iOS measurement and optimization in the age of privacy continues to present significant challenges for gaming marketers. The upgraded SKAN 4.0 offers significant improvements, but it remains to be seen whether it will effectively address these challenges this year.

Surviving and Thriving: The Gaming Industry’s Path Forward in 2023

To succeed in the long run, gaming companies need to focus on optimizing their operations, cutting costs, and embracing new revenue streams. Utilizing an off-the-shelf mobile webstore platform can be a cost-effective way to diversify revenue streams without in-house development. In addition to this, gaming companies should also adopt privacy-compliant practices to build trust with their customers and maintain compliance with regulations. Ultimately, the key to success in the gaming industry is to stay ahead of the curve and adapt to changing market conditions. By embracing innovation, thinking outside the box, and leveraging new technologies and revenue streams, gaming companies can position themselves for success in 2023 and beyond. As the gaming industry navigates the challenges of the year ahead, those who focus on levelling up and emerging stronger will be the ones to come out on top.