Banks to battle for orcs' gold?

Once thought of as an escape from real world hassles such as money, virtual worlds - such as World of Warcraft (WoW) and Second Life - are beginning to operate just like real-world economies.

These virtual worlds have enough members spending enough real and virtual money to have the same financial muscle as many small countries - a fact not overlooked by banks which are looking at this area with increasing interest.

Perhaps inevitably, trading game items and characters for real money has sprung up in many games already, often to the dismay of the developers.

Characters in virtual worlds will own things like swords, houses or magic wands. And some players assume that if the character 'owns' something in the game, then the player owns it - which means they can also sell it. A quick look at any auction site will bring up listings of virtual characters and magic items for sale.

Richard Bartle, visiting professor in computer game design at the University of Essex, said: "Somebody is going to pay for that character with real money."

You can also buy in-game currency on auction sites, which means, as Bartle points out: "People are paying real money to buy imaginary money."

According to one estimate the value of the market for virtual assets in massively multiplayer online games hit $900m last year. Companies such as IGE have sprung up to capitalise on the demand for trading in virtual currencies and other items.

For example the site is currently offering 250 WoW gold for £5.95, and IGE notes on its site: "This secondary market represents one of the most successful forms of emergent behaviour ever seen in entertainment."

But many games ban real money trading, Bartle said, because if players are allowed to buy things which other players can only get hold of through hours of gaming, their feeling of achievement is undermined.

Not all games are opposed to bringing real money into the equation. For example gaming company MindArk recently unveiled a cash card for gamers to withdraw money they earn in the Entropia Universe virtual world from bricks-and-mortar cash machines.

Some other virtual worlds, such as Second Life, allow real money transactions, and new businesses are developing as a result of this phenomenon.

Last year Wells Fargo Bank launched the pilot of an online multiplayer video game built entirely inside Second Life, known as Stagecoach Island.

The game is intended to help young people learn financial responsibility. Dave Birch, director of consultancy Consult Hyperion, said it could also act as "an interesting and experimental customer acquisition strategy".

Birch sees great potential in the development of the economies of virtual worlds. "The real digital divide could end up being between people that have an economic involvement in these types of virtual worlds and those that don't," he said.

Already, he points out, some virtual currencies are becoming big business: "There's more World of Warcraft gold traded than some exotic currencies."

But it's not all plain sailing, said the University of Essex's Bartle.

Many gamers don't think that buying items with real money is fair, he said: "In most games, less than 10 per cent of the player base will have tried real money trading, another 10 per cent won't see anything wrong with it and the remaining 80 per cent will be rabidly opposed."

Banks, he warned, might be cautious about getting involved with 10 per cent of the players of a game when the vast majority view what they are doing as cheating.

So while banks might look with interest on virtual worlds it might be too early for any deep engagement, according to Bartle.

He said: "There would need to be a good deal of legislation in place before the banks would look seriously at operating in even real money transaction-friendly worlds such as Second Life; if the developers aren't happy with real money transactions in their world, then any sane bank would stay clear."

But he added: "That said, in my most pessimistic moments I can see real money trading chipping away at virtual worlds until gradually it becomes accepted, and then legislation being enacted that gives it a sound legal footing, and then it'll be endemic."

Consult Hyperion's Birch is more upbeat: "Banks want to see a more secure legal framework before they start working [in virtual worlds] but such a framework might not be as far away as you might think. You build a branch where the customers are."

The main business of banks is lending money, he argues, and that's how they will probably try to make money in virtual worlds.

For now, it may be a little far off to expect your character to go to the local virtual bank when they want to buy a new sword, or castle or spacestation. But you might just find yourself queuing up behind a couple of elves and a wizard to pay in your cheques sooner than you think.