You hate Gold Farmers? Here come the Gold Frauders

Looking Back

In the old days, a gold farmer would purchase a legitimate copy of a game, play in an "economically optimal fashion" and sell their gains. This annoyed game play idealists and, as the gold farming industry grew and got more competitive, gold farmers disrupted game play for others by monopolizing game resources and by clogging public game communications and forums with marketing spam.

The game companies responded. They hunted down and banned gold farmers. Seized their gold and otherwise made their lives as miserable as possible.

They increased costs of operations.

If you are a gold farmer, what do you do? quit? or do you embrace the dark side?

At the same time, the online game industry has faced a parallel problem. Criminals, recognizing the value of game accounts even if game companies don't, grew the theft of game accounts and passwords into a major IT security problem. These criminals use phishing techniques and malicious code (trojans and worms) to steal account information so that they can loot a game account on the black market.

A Bad Day Today

The Register is reporting that the UK Bank Halifax is no longer processing payments for Blizzard's World of Warcraft (via GamePolitics). Meanwhile, Sony Online Entertainment is outsourcing its game commerce service, Station Exchange, to Live Gamer and SOE's CEO, John Smedley stated that payment fraud and chargebacks were two of the main reasons that they cared about gold farming.

It is likely this is only the beginning of payment processing problems for the online game industry.

Gold Farmers Retaliate

So, the first thing a gold farmer might do is reduce its costs would, logically, not pay for its game accounts. After all, you're being banned for providing a valuable service to thousands of game players. You're angry. You can't get out of paying your staff... but why PAY for game accounts if they are going to ban you all the time.... why not get a stolen credit card to buy your accounts?

Rationalization

It doesn't cost the card holder anything. After all, you are not hitting them for a lot of money, you're not stealing the card yourself. The game company was screwing you anyway by repeatedly banning your accounts - no sympathy there.

Sure, get some stolen credit cards and use them to buy accounts until they are banned - what's the harm?

Oh, of course, this also reduces your operating costs nicely and probably helps extend the period that you are not detected for as your credit card gives the illusion of a "suitable" person and address.

Enter the Gold Frauders

Of course, why steal accounts and do all of that hacking? After all, credit cards numbers are widely available at nominal cost.

Hey, let's go to the next step - why even bother farming? After all, those computers and people all cost money. Farming takes time: people don't call it "the grind" for nothing.

Why not use fraudulent accounts to buy gold and then sell it? Sure, you're hurting gold farmers and other players who wanted to make "just a bit of money". But, nothing here is "real" right? gold and accounts don't have any "real value".

Heck, if you bid up the price for gold (that you buy with a stolen credit card), you may make even more on the subsequent sale - SWEET!

Now we have a problem. And it is not gold farmers.

Banks don't like chargebacks. High risk/ high fraud markets (the adult industry and gambling) pay a substantial premium for payment processing. If fraud gets too bad, payment processors will simply refuse to service companies. The also will impose additional procedures to combat fraud - all of which cost money.

The first consequence for the entire game industry will be a broad increase in payment processing fees. New game providers will face difficulty entering the market as most payment processors will refuse to work with them.

Subscription gaming is in trouble. While the free-to-play business model has been pitched by many as a good strategy, it is going to become necessary in a higher payment processing world.

Games will increasingly move to debit payment systems. These are more workable for smaller purchases and, in the US, have substantially fewer protections.

Prepaid cards will become dominant. This also is a problem for subscriptions. There is a psychological barrier to buying a really big prepaid card... hence, fewer subscriptions and more micro-transactions.

Virtual currencies are going to be critical. Someone needs to break the single vendor/service virtual currency problem... and still deal with fraud (I have some thoughts here).

So, gold farming may go away or the price of items on secondary markets may explode as gold farmers have to manage their own fraud risks from gold frauders.

Oh, and if this all gets too messy, don't be surprised if the government shows up to "help".

See also MMO Mafia article.