One thing every pay site needs is a way to collect money from surfers. Billing and processing are complicated topics; Visa’s rules and conditions seem to be constantly changing, and no one wants to lose their credit and/or their good name over a few too many chargebacks.Everyone’s favorite subject: money!
One thing every pay site needs is a way to collect money from surfers. Billing and processing are complicated topics; Visa’s rules and conditions seem to be constantly changing, and no one wants to lose their credit and/or their good name over a few too many chargebacks. The Billing and Processing seminar at this year’s Internext Expo convention was a way for site owners to get valuable information on the different options available to them, as well as have their questions answered by a panel of experts on the subject.
Moderated by Katie Smith of www.3ob.com, the panel was comprised of: Chris Mallick from EPOCH/Paycom, Ron Cadwell of ccBill/DRM Networks, Mitch Farber of Netbilling and Johnny V. from PornPosse.
Johnny V. opened the seminar with a short, thorough and lightning-speed slide-show presentation that touched on most of the basic points regarding billing and processing. “It’s not the fun part of the industry,” he quipped. “It’s where the rubber hits the road.”
Anyone who wants to accept credit cards on their site needs a way to accept that money from the surfer, either through their own hybrid merchant account or through a third party processor. Although getting a merchant account for an adult business directly with a bank is usually out of the question, there are many alternatives for site owners to choose from for credit card transactions. Companies like ccBill and Epoch offer third-party processing, whereas NetBilling offers a third-party merchant account hybrid.
Deciding on the right billing company is one thing, but qualifying for their approval is yet another. Your business history and credit line will be examined, and having a history of reckless or abusive business practices, or poor credit, will certainly not play in your favor.
Why it’s difficult in our industry
As Johnny V. pointed out, “It all comes down to trust and risk.” Due to the nature of online transactions, there is no card or signature required to make purchases, which means there’s ultimately no proof that said person actually used said card to make said purchase. Hence, there are chargebacks.
In the adult online industry, the vast majority of content that is being sold is digital content. Again, Visa has no proof that the content was actually delivered and viewed by the card holder, which means more possibilities of chargebacks.
Another reason that billing and credit card processing is difficult for the adult industry is that Visa is lagging behind the industry and only slowly catching up – in terms of the volume of transactions being made. As Johnny V put it, “Visa hasn’t seen anything like our industry before. The adult industry [is] the pioneer of digital content and online banking.”
Third-party or hybrid?
If you want to accept credit cards on your site, there are two basic options to consider: a third-party processor, or a third-party merchant account hybrid. Both of these options require a clean business and credit history for approval.
Getting a hybrid merchant account requires a fair amount of paperwork: bank application, visa application, tax returns, business history, credit score, etc. An overall risk assessment is calculated to determine whether the applicant is a viable candidate. Having said all that, the benefit in having your own merchant account is that it should save you money because of the lower transaction fees (compared to 3rd party processor fees).
Third-party processors offer a long-term strategy for site owners, with relative safety and security from fraud. The third-party processor should have a synonymous financial ideology as your own business – they are in the adult business and they understand the needs and requirements of adult businesses. Having a third-party processor handle the credit card transactions allows the site owner to focus on other aspects of the business, rather than having to manage customer service, and do the accounting, etc. The biggest drawback is the higher fees associated with these processors.
Although the specific numbers vary, typically a third-party processor charges about 15% per transaction, whereas a hybrid merchant account has transaction fees of about 4%, although there are other fees that should be added onto that number, including extra costs in manpower. Before making a decision, the panellists advised weighing all the elements, all the different aspects, costs, maintenance, etc, to determine which option is best-suited for your particular business model.
Each of the panellists offered some words of advice before the seminar rounded up.
Ron Cadwell: “Look at the larger sites and see what they’re doing. Find a business model similar to yours and see what they’re using.”
Chris Mallick: “If you’re new, go for a third-party processor, and be careful who you do business with. Look at similar sites and do your homework.”
Mitch Farber: “Everyone is here to learn. Do as much homework as you can. The more successful you are, the more money we make. We’re here to help you.”
Johnny V.: “Keep in mind that we will be here for a long long time – we’re in the infancy. Be careful, go slow, and treat your business like a business. We’re all in this together.”
Johnny V also offered a prediction. “As long as there are men with access to the internet and payment vehicles, there will be online porn.”
For more information on Internext Expo, please visit www.internext-expo.com.
SexyScribe is an Assistant Editor with YNOT. She can be reached at cyn@ynot.com.
