The seeds were sown long ago for Chris Faught, CEO of Neon, to create a direct-to-consumer (D2C) platform for the gaming industry in 2022.
He had been a gamer for his whole life and had been fascinated by the business and developer angles. And through a long stint building out payment products and services at the likes of Affirm, Apple Pay, Walmart and others, Faught said he became “irrationally obsessed with the concept of building payment networks” observing the rise of digital wallets and buy buttons.
The gaming industry, he said, “If you pull back the onion a bit and you see how large it is and how globally pervasive it is,” the vertical beckons for a D2C model that lets game studios connect seamlessly with gamers, which would shift power away from the oligopoly of gaming platforms that have dominated the industry for years.
“There’s a payments network opportunity in games,” he remembers thinking back in 2021, as Faught told Webster, “but where does one start?”
Well, earlier this month news broke that Neon had raised $14 million in a funding round from Thrive, Renegade Partners, a16z Speedrun, SciFi VC, and Ribbit Capital. And he also got a good starting point from the longstanding legal battle between Epic Games and Apple. For Faught, the class action settlement in 2021 cemented Apple’s commitment to game developers that they’d be allowed to garner off-platform sales has set the stage for Neon to disrupt gaming.
The guiding principle, as Faught said, is to build up both sides of the network:
“If we were to become the Shopify for games and allow a studio to send their paying users ‘out’ of a game or compliment their in-app distribution with something on the web — and to save money [by not paying commissions to the platform], wouldn’t that be interesting?” Faught said.
Neon does so by helping those studios set up their own eCommerce storefronts, in addition to handling global payments coverage, across 45 markets, and ensuring compliance with tax and other regulations.
Faught noted that he remains a “big believer in going B2B2C [business-to-business-to-consumer] to build a payment network — and you start by solving the seller problem” and helping them acquire customers. The model is a white label one, as Neon operates in the background and consumers are already familiar with the gaming studio.
“We’re allowing not only the brand to come through, we’re also helping those studios become brands,” said Faught, who added that Neon’s client firms can step out from behind, say, Apple’s platform, and link directly with customers.
By acting as the merchant of record, he said that Neon builds trust at the checkout level, taking a cue from Faught’s experience with Affirm.
Gaming, like buy now, pay later, is a “considered purchase,” driven by research and thoughtfulness, which in turn demands that the payment flows themselves be simple and intuitive, lest the gaming studio risk losing customers.
The user experience has to be strong, but it’s also key to be consistent, onboarding the right payment methods and wallets that consumers want to use, without overloading them with options at checkout. The fact that the consumers are part of larger communities online, across all manner of apps and social media, means that the D2C platform also has room to scale globally.
“It’s not only interesting,” Faught said of the B2B2C endeavor, where the average consumer purchase is $85. “It’s working. … If you take the 30% of players of your in-app purchase volumes and move that to the web, that’s enormously valuable.”
Looking ahead, there are several questions that are yet to be answered, on the regulatory front, for developers. Though they are now allowed to have an out-of-app payments channel on the web, the jury’s still out as to whether they will be allowed to steer people from within their app to a payments channel with links, or link to ads, or offer alternative payment methods in their apps. If in-app payments were to “open up,” Faught said, we might see the eventual rollout of Neon Pay, housed in a Neon wallet.
There’s also a place for web exclusives, Faught said, and loyalty programs, tied to dedicated Neon accounts. Neon is also eyeing an additional security layer to help alleviate any fraud concerns, which he termed a FinTech problem, not necessarily a gaming industry issue.
As he said to Webster, “The name of the game … and going ‘out of the game’ to the web and back, is about being frictionless, and building trust and value.”
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