Online Games Reap Big Profits in China

The online game market in China increased 8.3% during the first quarter of 2009 compared to the fourth quarter of 2008. First quarter revenues soared to CNY5.514 billion. Market research firm Analysys International reports the, the market scale growth during the first three months of 2009 is due to the increase in online game players.

Chinese online game companies Shanda , Tencent and NetEase led the market by revenues. Shanda was in first place with revenue of CNY1.08 billion and 19.6% market share. Tenmcent was second with revenues of CNY910 million and 16.5% share. NetEase came in third with revenues of CNY710 million and 12.9% market share.

In fifth place was The 9 . The9 revenues decreased 6% from the previous quarter, pushing down its ranking from its previous fourth place. Taking over fouth place was Changyou with revenues of CNY420 million. Changyou is a subsidiary of Suku

In 2008, total revenues for China’s game industry was CNY54 million, accourding to the Game Software Department of the China Software Industry Association Chinese-made animation games represent about a 70% share of the Chinese game market.

The best payment options for online game publishers hoping to reap profits from the Chinese market are mobile payments and Chinese debit cards. Credit cards are not widely used in China.

Chinese Ecommerce Payment Processing

Most Chinese shoppers use a Chinese debit cards when shopping online. Credit cards, used primarily by non-Chinese citizens, make up only about 5% of online purchases. Low cost digital entertainment and purchases of virtual goods are often paid for by mobile phone.

Chinese debit cards are similar to cash payments. Online, Chinese debit cards function as a push payment whereby merchants are paid directly from the consumer’s bank account. Therefore, once payment has been authorized, the consumer cannot repudiate the payment unless proof of fraud can be demonstrated.

Prepaid cards are used often as a payment option. Prepaid mobile phone charge cards are particular popular. Close to 500 million Chinese have cell phones. Prepaid card mobile payment is hugely popular for purchasing digital content and low-ticket digital goods and services.

Recurring billing models are not common in China. Rather, merchants email customers notifying them that payment is due. The customer then uses a push payment through their bank to remit payment.

Chinese banks do not assist Chinese customers with payment disputes. Even if a credit card is used for payment, the banks have no chargeback provisions and there is no recourse for chargebacks on the part of the consumer. However, chargeback rights are available to buyers whose are not Chinese and who have cards not issued by Chinese banks.

If your business has presence in China, you must transact, settle and receive funds in Yuan (CNY). If you do not have a presence in China, you can only accept and receive payment in a currency other than CNY.

Pre-Paid Payroll Cards Fall Flat in the EU

Pre-paid cards issued by banks (“open loop cards”) have experienced some success in the US markets. But, as US margins are getting squeezed, pre-paid card programs are looking to expand to international markets. Is that a good idea?
According to research from Mercator Advisory Group card programs will find the global market place difficult to successfully penetrate. Pre-paid card programs should not make the assumption that the rest of the world has the same opportunities as the US market.
The research points out that different legal and regulatory environments, business models, industry infrastructures, market readiness and product and market segmentation create part of the problem. Programs that have had some success in the US with particular market segments will find those markets cannot be replicated globally.
For example, the most profitable open-loop pre-pad card programs in the US are for payroll and government entitlement programs. In these applications, cards are reloaded on a regular basis, assuring continuing usage which generates associated fees. Cards are targeted to those who do not have direct deposit accounts or the “unbanked”, which constitute large numbers of people in the the US.
But in Europe, the unbanked make up a much samller part of the population. More people have direct deposit accounts at banks, along with debit cards associated with the account. Therefore, a large enough market to make pre-paid cards profitable doesn’t exist.

Mobile Carriers Face Powerful Competitors

According to CTIA, one trillion text messages were sent in the U.S. in 2008, triple the number sent in 2007. In Australia, 6.9 billion text messages were sent by Telstra Telstra users alone during financial year 07-08, a 42.2 percent increase from the year before. The same dramatic growth in text messaging is occurring throughout the world.

Needless to say, SMS is a big money maker for mobile carriers. But, mobile carriers face increasing competition for the hearts and fingertips of text message users.

According to Liz Tay of IT News IT News the following are some competitors that are nipping at the heals of mobile carriers:

1. Skype Skype users incur on data access charges to send and receive messages from 400 million Skype users. The company free application already resides on the iPhone, Blackberry, and WindowsMobile.
2. Talki Any Java-enabled phone with an Internet connection can use Talki. Messages between Talki users are free. Text or picture messages to non-Talki users anywhere in the world cost five Euro cents
3. Meebo is used by 40 million people. As an ad-funded system, it is free to users

Gravy Train Over for US Issuing Banks

The new Credit Card Accountability, Responsibility, and Disclosure Act (http://www.govtrack.us/congress/bill.xpd?bill=s111-414 ) goes into effect March 2010. Opponents to the law say credit card issuers will be forced to raise rates and add new fees to make up for revenues lost. Expect to see issuers impose annual fees and fees as well as charging fees to apply for a card.

Highlights of the bill include:

1. Restrictions on penalizing individual cardholders for missing or being late on payments and exceeding credit limits.
2. Banning of universal default
3. Prohibits anyone under age 21 from applying for a credit card without a cosigner

US credit card issuers mailed 372.4 million card offers during the first quarter 2009. This was a decrease of 67% compared to first quarter 2008.

Tips for Selling in the EU

The EU has a population of more than 500 million people, (http://www.internetworldstats.com/europa.htm ) many of whom are reasonably affluent. This vast market represents a great opportunity for you. But, if you are going to sell to the Europeans, some common sense advice is worth heeding.

You must do more than simply use the same website and offer “translation” into local languages in order to get more sales from the EU. Take time to study the cultural nuances and target your message to your buyers. Yes, the EU is a unified economic area. But each country is unique and special unto itself.

Translate your sites into local language. While it’s true that many Europeans are fluent in English, displaying in a native language helps build trust. It demonstrates you are an international merchant. It the height of conceit to believe English is the preferred language throughout the world.

There are 23 languages spoken throughout the EU. If translating into all 23 is too much to undertake, start with German, Spanish, French, Italian, Russian, and Swedish. Remember to have a native speaker review the translations for you. A native speaker will proof-read for grammar, phrasing, and correct usage of words.

There’s nothing worse than going to a site and seeing mistakes in language. It makes the site appear poorly planned and shoddily executed. Crisp, correct language usage is crucial if you expect to maximize sales from natives of particular country.

Use geo-optimization to automatically display your site in the language of the visitor. Offer payment options preferred by buyers in a particular country.. Direct debit, local bank transfers, and phone billing are some alternatives which are often preferred over credit card payments in the EU. But, it’s not a general rule since UK buyers like to use credit cards, whereas German buyers do not. Alternative billing solutions also help capture sales in countries that may be blocked from credit card usage.

Card Breaches Expensive for Banks

Security breaches involving credit and debit cards happen all the time. Every day one sees in the news another story about stolen card numbers, often involving millions of potential victims.

Banks and merchants are on the line for monetary losses from fraud. Yet, one seldom considers how expensive it is for a bank to re-issue cards. Estimates are that it costs a bank $30 to reissue a card. It is more than sending out a piece of plastic to the customer. It takes time to uncover the fraud, notify customers, handle customer inquires. Not to mention that mailing costs are getting higher all the time.

This last week alone, I received 4 replacement cards from my banks. Multiply that times the number of card-holders and it’s easy to see how draining the problem is to the banks.

Credit card processing breaches continue to take a big financial toll on the banks. A single security breach at retailer TJX compromised between 40 and 100 million cards. Payment processor Heartland, who processed for 1 out of 3 restaurants in the US, was compromised as was Royal Bank of Scotland. The number of cards that will be replaced by banks is staggering.

Many banks are still stuck in the dark ages, using legacy computer systems that are years old. Banking systems are stressed to the limit and are scrambling to keep up with the ever escalating demands of responding to breaches.

One more burning room in the banking melt-down. With Congress cracking down on bank card fees, the ever-escalating increases in fraud, and the expense of dealing with security breaches, expect to see more banks moving away from card processing.