Anti-Fraud Measures, Mobile Optimization Are High Priorities
When Larry Flynt launched Hustler back in 1974, paying for erotica was often accomplished with a very simple question: cash or charge? But in the digital age, paying for erotica is much more complex and nuanced. And adult paysites have a lot to consider as 2015 winds down, from geo-targeting to the implementation of chip-and-PIN technology in the U.S.
Mitch Farber, founder and CEO of the payment gateway NETbilling, warned that when chip-and-PIN technology makes credit card fraud more difficult for in-person credit card transactions in the U.S., fraudsters will inevitably shift their focus to online or card-not-present (CNP) transactions — and adult paysites, both membership sites and live webcam sites, will be a likely target.
“All e-commerce merchants need to be concerned about the potential increase in online sales fraud as EMV, the use of chip-and-PIN cards, becomes a standard here in the U.S.,” Farber told XBIZ. “There are many ways fraud can be mitigated through the use of their payment gateway or processor, and merchants should be diligent in utilizing the tools they are provided to do so.”
For adult paysites, Farber noted, one-clicks continue to be an important part of billing.
“A key to driving repeat customer sales is the ability to provide one-click purchases to your customers,” Farber explained. “Without this functionality, a merchant is surely leaving money on the table.”
Farber asserted that with the explosion of smartphones and tablets, mobile optimization has become crucial for paysites. “From 2014 to 2015, mobile commerce jumped 28 percent to $31.6 billion, outpacing desktop purchases — which grew by 13 percent to $236 billion. This trend will continue as mobile commerce continues to explode. Be sure to pay attention to the proportion of visits on mobile devices using site analytics, and make sure site content and performance is optimized for the specific mobile devices your visitors are using.”
Mia Hyun, founder and CEO of Mobius Payments, noted that it is not uncommon for cam sites to lose money to so-called “friendly fraud” — although she considers “institutional fraud” a much more severe problem.
“While a typical paysite has a set monthly rate, cam sites do not,” Hyun told XBIZ. “It is not unusual that a member blows their wad, figuratively and literally, in a day. This scenario could be a reason for their buyer’s remorse and can result in friendly fraud. There is not a lot you can do about this other than flag the account and disallow any further charges. While friendly fraud is an issue, it is part of doing business and rarely is that big of a deal in the grand scheme of things.
“The real problem comes with institutional fraud: someone other than the assigned user gets ahold of a credit card number and begins utilizing it. While the name implies that organized crime is behind it, the fact of the matter is that cam site owners have to deal with fraud coming from various cam studios as well.”
Hyun continued: “A party finds a credit card with a PIN that works, which is verified by making a small purchase that no one would question. Once the card is confirmed as good, they will create a number of accounts on the cam site, preload them with the fraudulent card, then sell these accounts to others. This fraud is a bigger issue and tougher to fight.”
Cathy Beardsley, president and CEO of SegPay, asserted that in the coming months, adult paysites will need to pay close attention to the credit card associations and their anti-fraud measures.
“Visa and MasterCard are increasingly focused on reducing fraudulent transactions in their networks,” Beardsley told XBIZ. “In fact, they are both putting a lot of pressure on acquirers to manage their fraud ratios to acceptable levels. If an acquirer exceeds a certain threshold, penalties are incurred.
“This pressure is passed down to payment facilitators and to those that are managing their processing on a direct relationship with the bank. Both card brands have programs in place to monitor the ratio of transactions which are reported as fraud by a cardholder, regardless of whether or not they result in a chargeback. The biggest challenge we face is getting the data to help merchants manage their fraud ratios.”
Gary Jackson, managing vice president of sales and Internet markets for CCBill, asserted that while billing in multiple countries is certainly doable, it is imperative for adult paysites to work with payment processors who stay on top of the ever-evolving regulations in different parts of the world.
“Regions, countries and cultures all have their own waves of political, financial and buyer changes,” Jackson told XBIZ. “Keeping up with multiple localities and the various legal changes, regulatory changes, payment types per region, payment restrictions and content restrictions — even the differences in Visa on different continents — can require a staff to manage. Partner with resources and providers who manage these things for you.
“On the payment side, working with a payment processor who can instantly offer multiple languages, currencies and payment types to a global audience certainly allows any paysite to immediately expand their global reach with minimal work.”
Karen Campbell, vice president of OrbitalPay, noted that as the adult industry moves into 2016, paysites must have a thorough understanding of the payment preferences in countries they are trying to reach.
“There is always geotargeting,” Campbell told XBIZ. “Offering payment pages in different languages is certainly a plus, and making local payment types available to your international consumers can also be a huge benefit.”
According to Campbell, helping paysites prepare for chip-and-PIN in the U.S. is a high priority for OrbitalPay.
“For merchants and financial institutions alike, the switch to EMV means changes,” Campbell observed. “Whether it’s adding new in-store technology or changing your internal processing systems, everyone must comply with these new liability rules.
“Due to these stricter regulations for card-present transactions, expect fraudsters to focus more intently on the Internet to do their dirty work. All site owners have to set up their fraud tools to combat fraud and protect their business now more than ever.”