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Maximizing Profits Online

Maximizing Profits Online

May 10, 2006
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" A lot has changed in the past few years in the world of third-party billing companies. "

A newcomer to this market needs to consider a few basic questions when it comes to choosing the right cash register for their website.

The first decision would be to determine if using a payment gateway and merchant bank account would be best or if using a third-party billing company is more appropriate. This decision is important and nearly every experienced webmaster and large program working in online adult not only uses third-party billing services but they will tell newcomers that the uninitiated or inexperienced should definitely use a third-party billing solution. Not only are business models somewhat different from mainstream non-adult companies, but managing credit and chargebacks can be challenging. Add to that steep and sometimes exorbitant fines, and the loss of merchant accounts can very quickly result if one is not properly managing credit and chargeback ratios.

However, there are some companies that understand the banking regulations well enough and who properly staff their customer support with people who can effectively manage these issues.

Those who do not wish to manage customer support, keep up with banking rules or risk their ability to acquire a merchant account in the future should use third-party billing services that effectively process transactions on their behalf and provide round-the-clock customer service.

Once you've decided between third-party and gateway services, the next step is choosing the right company to work with.

A lot has changed in the past few years in the world of third-party billing companies. In recent years, domestic Internet payment service providers (IPSPs) have dwindled from a good dozen or so to roughly two or perhaps three proficient solutions. It is largely accepted that the two largest and most successful billing companies in the adult space that have managed growth and vision are Epoch and CCBill. Nearly every sponsored merchant in the adult industry is affiliated with one or both companies either in the U.S. or through their respective EU solutions.

However, there is a newcomer to the third-party billing space. In a recent announcement from the president of 365 Billing, Mark Smith, he was quoted as saying, "Having sound payment alternatives is important for the online subscription industry." 365 Billing marks the third alternative in the U.S. for IPSP services today.

Alternatively, there are two payment gateway services best known for their support of the adult entertainment space. Netbilling and Jettis both provide adult sites with gateway solutions for programs using their own merchant account. For merchants selling shippable goods, Netbilling and Jettis are excellent solutions since third-party billing companies typically only process for digital content. However, both companies also specialize in subscription-based billing for adult content sites.

The companies mentioned above, with the exception of 365 Billing, are well established and experienced companies. Each one has its own methodologies and polices and thus offers slightly different services. If you choose to go the route of third-party processing, you should speak with each company and decide which one best suites your needs. The primary startup costs are the same regardless of which IPSP you choose, therefore start-up cost is not a consideration. IPSP processing rates are competitive and based on volume.

The primary differences will be in the level and quality of service, features and functionality and integration and flexibility.

And finally, once you've selected a billing company and started to build up a substantial amount of business, you'll probably want to look into cascading your transactions. In other words, establish an account with a competing IPSP and send your primary processor's denied transactions to your secondary processor.

This way you also have a backup processor should such a need arise.

Rand Pate is director of communications for Epoch/Paycom/Paycom EU, with corporate headquarters based in Marina del Rey, Calif. He is an eight-year veteran of the third-party billing industry. Pate can be reached at Rand@EpochSystems.com.


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