Times are tough. The industry, and the universe it seems, is in flux. The U.S. is suffering from a confused economy, a weakened dollar, failing banks, bad mortgages, wage stagnation, record gas prices, and a stock market that is draining 401k’s across the nation. There are few bright spots. Even within our own industry, which normally would be virtually immune to economic conditions, there are indications that things are starting to go south, or at least that they might.The economy is playing a role. Because things are tough, consumers are relying on their credit cards as never before. Cards are reaching their limits and cardholders are scrutinizing their bills more carefully. This is leading to a slight increase in bank-declined sales and a decrease in retention, respectively. No one is proclaiming a major impact… yet, but the signs are there. In response, many industry programs are looking for other ways to boost their revenue. Some have adopted a regional pricing model, which enables merchants to charge an adjusted price based on the location of the customer. This is done to counteract the weak U.S. dollar and charge region-adjusted prices. The overall results and impact are not always clearly apparent. However, some programs can realize a boost in revenue from regional pricing if there is little realized competition for their product.
Established IPSP’s are in a unique position to see market trends due to their years of analysis and processing volume. They are also able to act very quickly to identify fraud and react to it, thereby protecting the numerous companies that they process transactions for. It is a case where the industry benefits from the combined data of thousands of sites simply by using an IPSP. The filtering processes, also referred to as “the scrub,” are highly complex and designed to maintain the delicate balance of through-put (sales) and risk management (fraud). Those processes have become more and more sophisticated and in many cases tweaks to the filtering process actually increase sales. Combined with multilingual payment forms, acceptance of multiple currencies and the multiple international card types, IPSP’s continue to do all that they can to maximize sales while protecting businesses from fraud and ultimately chargebacks.
But in addition to economic factors, there are also troubling trends within the industry which will undoubtedly have an effect on consumer confidence. A relatively small number of companies can cause problems that might very well impact the entire industry. Billing schemes reminiscent of the late 90’s hey-day of wild west billing models have started to resurface among a few merchants utilizing their own merchant accounts. These are billing practices that would never be allowed under the careful management of an Internet Payment Service Provider (IPSP). Easy to miss pre-checked cross sales, additional offers under the submit button, and hard to find cancellation procedures are just a few of the unscrupulous practices that are cropping up.
If these billing practices and resulting problems had no resonance with the industry as a whole, perhaps no one would care. But there are subtle indications that consumer confidence is waning and that repeat customers are shrinking in numbers. Unfortunately, many of the programs which successfully manage their own merchant account solutions and have long term business plans may be affected too. Of the few banks willing and qualified to work with the online entertainment industry, that number is shrinking. As this happens the remaining banks are free to charge even higher processing fees. And worse, because of the climate of today’s mortgage mess, banks are re-evaluating the level of risk they are willing to manage. As consumer complaints rise, banks will become more and more reluctant to work with high risk companies.
Some factors which affect your businesses can be controlled, or at least influenced. Others cannot. Focus on the areas where you can make a difference. Find a reputable gateway or IPSP that can help you manage your business so that you may focus on marketing your product and building your wealth. Even in today’s economic climate, it’s not impossible to continue to grow if you watch your business carefully and treat your customers right.
