Prepaid card companies are promoting their products as payment tools for online video games.
Coinstar Inc. announced Wednesday that it would allow users of its coin exchange kiosks to add funds to their Rixty Inc. cards, which can be used for online game purchases. It is also selling other game cards on in-store racks.
And on Thursday, a game payment start-up company called CyKash Inc. announced a prepaid card that can be used to pay user fees for online games from multiple publishers. Such cards are typically restricted to one game, publisher or hardware platform.
"The online gaming market is a high-growth category," Wayne Waxman, the marketing manager for Coinstar E-Payment Services, wrote in an e-mail Thursday.
Coinstar, of Bellevue, Wash., hopes to reach a younger audience through these services, he said, and the banks that work with Coinstar can offer the cards to attract younger consumers before they have bank accounts.
"Today, youth and young adults who grew up online typically do their banking online, and rarely go into a bank branch," Waxman wrote. "In addition, youth often don't have bank accounts. So this type of product … has the potential to attract a new youth audience and build customers for the future."
CyKash's card is meant to provide flexibility to younger users who may not be able to transact in online games that typically accept supported credit cards and eBay Inc.'s PayPal.
"The younger users don't have access to those payment methods," Don Lee, CyKash's vice president of business development, said in an interview. And buying a card for a specific game, as is typical now, is too rigid for them, he said.
"A lot of the gamers play multiple games," he said, and "right now there are individual game publishers that have their own card, but the gamer is restricted to play those one or two games."
CyKash, of Santa Clara, Calif., began operations in March of last year. It is focusing on free games with microtransaction systems that enable players to buy digital items for use within the games. Currently only 10% to 20% of players spend any money in these games, Lee said, but CyKash hopes its cards can expand that audience.
CyKash launched its card nationwide this week after a two-month test in California, Lee said. He said it is too early to gauge the success of the card, but prepaid cards have proven popular among game enthusiasts in Asia, and CyKash hopes to duplicate that success in the United States.
In February, Capcom Co. Ltd. of Japan launched a prepaid card bearing the images of characters from its games. An attached rewards program provides discounts for purchases made from Capcom's online store.
Brian Riley, a research director in the bank cards practice at TowerGroup, the independent research firm owned by MasterCard Inc., said prepaid cards dominate the video game world. "When you're talking about digital content, it's a really good place to use prepaid," he said.
One driver is that games largely target kids, and prepaid cards can help parents track kids' spending.
Coinstar's move with the Rixty card is especially wise, Riley said, because it could tap into a new source of funding. "If you have kids and they look at your junk-change drawer and they want to take it, I've never said no to that request," he said. "To monetize all that junk change into a card that can be used for gaming, to me, that was just really clever."
Coinstar is also an investor in Redbox Automated Retail LLC, which offers movie rentals through kiosks. Riley said Redbox may be gearing up to rent video games through its machines, providing further revenue. "It falls under the general rubric of digital content, so that is definitely a high-growth area."
