By Bhavesh Joshi, Founder and CEO, MovieMe
India’s online gaming industry has become a perfect blend of entertainment, engagement, and innovation. With a projected market share of US$8.92 billion in the next five years, the sector is clearly playing a crucial role in boosting the digital economy. A major growth driver for this is the real money gaming (RMG) segment, which accounted for 82.8% in 2023. Simply put, RMG allows players to wager money or digital assets in games, potentially earning more than their initial investment.
Once predominantly popular in metro cities, it is now expanding into new regions, with nearly 43% of real-money gamers coming from non-metro areas. This widespread growth brings exciting opportunities for further expansion and highlights the need for improved cybersecurity and technology integration. With its cutting-edge features and immersive experiences, the RMG sector is flourishing, and the rise of fintech is helping meet this growing demand, driving the industry to new heights. The integration of fintech and RMG enhances the user experience and builds trust in more than one way.
To begin with, fintech has made digital payment a lot easier for gamers. Innovations such as UPI integration and 1-minute withdrawals have been made possible through advanced payment technologies. Previously, withdrawals from various platforms could take days, but now, fintech solutions like digital wallets and mobile payment ensure swift transactions. Moreover, by incorporating these advancements into their infrastructure, gaming platforms allow users to make quick in-game purchases and buy virtual items with a single click. This enhances the convenience for players and aligns with the broader digital evolution of the gaming industry.
Two-fold benefits of RMG and fintech collaboration
Both sectors have more in common than one might expect, especially when managing strict regulations and focusing on data privacy, cybersecurity, and compliance. To address these challenges, fintech has stepped up by introducing advanced technologies like artificial intelligence (AI), machine learning (ML), and blockchain. AI, in particular, is effective in fraud prevention and cybersecurity. It can analyze trends and historical data to predict potential fraud, allowing businesses to anticipate risks and act before they escalate. Meanwhile, ML algorithms can sift through vast data sets to detect patterns indicative of fraudulent behavior – even complex schemes that might be missed through manual analysis.
Additionally, blockchain’s decentralized structure offers strong security measures, reducing fraud risk while creating a transparent, traceable asset ownership history. This instills confidence in players, knowing their digital assets are safe and all transactions are verifiable. However, navigating these technological advancements and regulatory requirements can be challenging. This is where collaboration between RMG and fintech becomes imperative. By partnering with fintech, gaming platforms can implement blockchain solutions effectively while staying compliant with evolving regulations. With over 1,400 gaming start-ups, fintechs can develop customized financial products like subscription-based services and micro-loans customized to the unique needs of players and gaming platforms. Moreover, fintechs gain access to a wide and diverse user base, including players from non-metro areas, allowing them to broaden their reach and attract new customers.
Additionally, staying on top of regulatory changes allows gaming platforms to align legal standards with technological innovations. This pushes India closer to global standards for a secure and regulated gaming environment. While online gaming regulations can be complex, they are essential for operators to understand and follow. For instance, in the UK, regulators encourage using AI tools for compliance, such as verifying age. However, non-compliance—whether through illegal advertisements or failure to verify age properly—can result in severe penalties for gaming companies. Recognizing this as an opportunity, fintech players are increasingly integrating AI-driven fraud detection and real-time monitoring systems to help gaming platforms comply with regulations while safeguarding their financial operations. This partnership helps both sectors navigate the evolving regulatory landscape, ensuring compliance and security are top priorities.
Taxation rates for online gaming are another crucial area where collaboration between RMG entities and fintech companies is important. These vary significantly across countries and even within states, particularly in the US. Even in India, implementing a 28% Goods and Services Tax (GST) on online gaming has been controversial, with industry pushback. Despite this, collections have surged, rising fivefold to Rs. 6,909 crore in just six months, compared to Rs. 1,349 crore in the previous six months. To adapt, fintech companies are integrating automated tax calculation and filing features into their platforms, simplifying the process for gaming companies to manage their tax obligations and ensuring smoother compliance with the new regulations.
Leveling up the future of real money gaming
The future of an RMG sector powered by fintech collaboration holds great potential. The rapid growth of the sector presents fintech companies with new frontiers for expansion. The continuous stream of in-game transactions facilitated by these platforms can lead to increased transaction volumes, offering fintech firms significant opportunities to enhance revenue through processing fees, payment services, and value-added services. As RMG platforms scale and attract larger user bases, the demand for secure, fast, and seamless payment systems will intensify, creating a symbiotic relationship that drives innovation in both industries. Fintech companies have the unique chance to tap emerging segments like entertainment gaming to build strong and thriving ecosystems within the Indian RMG market.
Successful collaboration between both sectors depends on a strategic approach prioritizing security and compliance. By addressing the challenges proactively, fintech and RMG can support each other’s growth while ensuring a protected space for all stakeholders.
