Esports has settled into its mainstream media headline beat. A spectacular amount of zeros included in tournament prize pools, investments and acquisitions announcements. But behind the clinking of crystal, finance departments are hard at work figuring out how these payments are going to go off without a hitch.
So many different parties at work in such a young industry; getting everyone paid correctly has long been a documented smirch on the industry’s reputation. But where there are challenges, there is opportunity. Plenty of companies are involved to ease these pain points. Thanks to fintech, passing a friend a digital fiver has become as easy as it should be — at least in the same currency and region.
While the world was catching COVID, contactless merchant and peer-to-peer payments caught fire across Western nations. Solutions like Venmo, PayPal and ApplePay finally found mainstream traction on the path that the WeChats, Alipays, Kakao Pays of the East have had a headstart on for years. However, no one solution works across every market; and the larger payments get, the more checkpoints need passing during processing. More zeros, more problems.
Payment solutions specifically focused on esports’ payout problems have been around for a while, at least according to the industry’s concept of time. PayPal acquired global payout provider HyperWallet in 2018. Prize Payments was founded in 2019, specifically focused on the namesake’s solution. Global payment provider Nuvei has long had a seat at the party.
Dan Houl, Head of Esports & Gaming – Digital Payments at Nuvei, told The Esports Journal that the question isn’t how fintech will solve the industry’s issues. That’s far too broad. Rather, solutions come down to what each individual company needs help solving. One by one, case by case. Companies might have similar challenges, but the fintech solutions are going to vary. There are so many unknowns to take into account before a solution can even begin to be dreamed up.
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“I think that my job in my role today is to uncover new problems,” Houl said. “So I can actually go back to my team and say, ‘Guys, this is the problem in MENA: how do we deal with it? This is the problem in Dallas: how do we deal with this? This is the situation in Macau: how do we deal with this?’”
The resounding answer the team comes back with is: “It depends*.”
*It depends on where the players’ bank accounts are based.
*It depends on which currencies payouts need to be in.
*It depends if the payment goes through the org first (the case for most top-tier orgs).
*It depends on where the tournament was operated out of.
*It depends on how quickly individual payments can be processed.
*It depends if all the required information provided by participants is completely correct.
Each payout must solve for these X factors. Tournament organisers are more than happy to partner with payment providers for expertise. Before a solution can be offered, processes like Know Your Customer (KYC) — a type of screening often required for payment providers to partner with banks — need to be fully approved. Certain approvals can be required at the district, state and national level; meaning nothing ‘passes go’ until that official rubber stamp has been given. In the US, it can take up to a year to get the necessary approvals for just one state. “We might be grandparents by the time everything gets approved.” Houl said.
In professional esports, prize winnings are considered as wages. Professional players are employed by organisations to win tournaments, as dictated by contracts. Organisations take an industry standard 10 percent of tournament winnings, paying out the rest to the winning roster. This practice classifies these payouts differently than a lottery or gambling payout, especially when it comes to taxes.
Before you take to Twitter — decentralisation isn’t the answer, at least not yet. Blockchain-based, volatile, peer-to-peer payment options soared into mainstream attention last year, but the problem decentralisation threatens to solve — recognised cross-border payments — is realistically still very far-and-away. A payout in a highly-fluctuating token isn’t attractive to everyone, not to mention the looming though yet-to-be-seen taxation regulations across markets.
The overlap of regions supporting esports and those supporting cryptocurrencies is moving closer together, but there are staunch and prominent outliers. It’s impossible to overstate China’s massive influence in esports’ ecosystem and last year the nation joined seven other countries in outright banning cryptocurrencies. Forty-two other countries either heavily restricted banks’ ability to deal with crypto or prohibited cryptocurrency exchanges, according to a 2021 summary report by the Law Library of Congress published last November. Crypto payouts aren’t going to work for those winners, and they win a lot.
Nuvei is, nonetheless, testing solutions for new markets. Via its subsidiary, Simplex, Nuvei is piloting a crypto-enabled Visa debit card programme in the EU & UK. The pilot aims to allow cardholders’ cryptocurrencies to be spent wherever Visa is accepted and simplify the fiat-to-crypto on-ramp and off-ramp process. In order for this to work, the operation relies on Visa’s long established merchant ecosystem, and even Visa isn’t accepted everywhere given the nature of nation-specific centralised economies.
Paying out a Korean player, for example, with a pre-paid debit or digital card could be next to useless for them when they go back to Korea, Houl explained. “They player will go to pay for something and the merchant will ask: ‘where’s the QR code?’”
For those unaware, many Asian countries have long integrated QR code utility as de facto peer-to-peer and merchant payments. The speed and ease in which scanning payment QR codes with the local fintech smartphone app (in Korea’s case, KakaoPay) has made the by comparison sluggish use of conventional credit cards as old fashioned as paying by cheque.
Online everything store Amazon currently operates in 13 countries, offering only its own checkout system for major credit cards, Paypal, and — in some countries — instalment payment options. Even the go-to internet store for many western markets is limited by payment options, despite being around for more than 25 years. Chinese equivalent Alibaba introduced its own payment solution, Alipay, in 2004 and is widely accepted as a payment option in both physical and online stores across the Asian continent, also utilising QR codes.
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Tournaments, esports’ premier consumer product, must ensure that the jurisdictions where tournaments take place and the payment processes are all in line. Riot’s convention of shifting the host nation for its LoL World Championships each year, depends on Nuvei’s infrastructure to process the payouts wherever that might be. To ensure that the best teams keep attending tournaments, payment solutions need to be dependable. The more payment options a fintech partner can provide signifies an exponential amount of internal work that’s been done to make sure the option is viable.
It’s always been important to follow the money. For Houl, his entire operation relies on trust and clarity all the way down the line. Nuvei’s decades of payment infrastructure operating in-and-out of esports ensures that when Houl tells partners what is and is not possible: it’s the truth.
There is no magic bullet to such a complex problem. But Houl said, as his boss puts it, Nuvei is constantly working out the fintech version of the ‘Coca-Cola recipe’ to make the firm the go-to solution for its client’s pay-in and pay-out needs. Regardless of the twists in the road that lay ahead, Nuvei is building the future-facing bridges and detours to ensure that money that needs to go from A to B will reliably make the journey and arrive on time.