E-Billing 2016: Trends in Alternative Billing
There is a wide world of opportunity for online merchants beyond the borders of the U.S. and other countries where credit and debit cards are the primary payment mechanism. To provide a way for these vast numbers of consumers to pay for products and services online, a wide range of “alternative” billing methods have emerged — each of which offers varying degrees of profitability and usefulness for adult business owners.
To discover the latest adult-friendly options and the current market trends impacting alternative billing, XBIZ World sought out the expert opinions of the best billers in adult. Here’s what they had to say:
Mobius Payments CEO Mia Hyun told XBIZ that rapid technological innovation is one of the biggest factors impacting all aspects of the billing process — including the development of alternative billing methods and payment practices.
“Contactless payments, electronic wallets, apps, and cryptocurrencies have been topics of conversation in billing for the last few years,” Hyun says. “Being able to accept payments as simply and effortlessly as possible has been tantamount to most of the merchants we serve.”
According to NETbilling President Mitch Farber, “alternative payments” can include one-click purchases and cross sells between merchants, both of which can have an enormous impact on online merchant’s bottom lines — regardless of the payment method.
This opens up the topic to become one of creativity, and not just one of transaction technology.
The world of alternative payments is also benefiting from continued growth in European e-commerce spending and increasing cross border transactions, says 2000Charge Vice President Ines Kring.
“Simply put, Europeans are spending more online than ever before,” Kring told XBIZ. “Also the most available method of payment in the E.U. is direct debit. We saw the SEPA regulations bring that process tighter together for all Europe and they’ve now announced a target date to make those transactions instant. The impact on merchants smart enough to open their doors to this market is increased revenue opportunities.”
A major component of the alternative payment scene is the use of localized methods such as debit cards that target users in specific regions or those using specific languages, with Epoch Vice President Harmik Gharapetian telling XBIZ that “it’s good for the industry that there is competition and choice.”
Gharapetian says that although Epoch leads the adult entertainment industry by offering its merchants the most diverse payment options — including the ability to process transactions in 59 currencies and through 40 payment types, the company continues to expand its local payment options and to refine the processes that lead to the best results for its clients.
“These types of payment choices increase sales in areas where more traditional payment types aren’t as widely used,” Gharapetian explains, noting that “[Epoch’s] LogoGPS feature ensures that these payment options are offered only in the most ideal scenarios.”
Calling diversification 2016’s top trend, SegPay CEO Cathy Beardsley told XBIZ that merchants want new ways to accept payments that will help them to grow their business.
“Alternative payments will continue to grow as merchants reach into the untapped markets of Latin America, Asia, Africa and the Middle East,” Beardsley says. “While credit card penetration will continue to grow in these areas, I see greater growth coming from alternative billing options that capture these emerging markets.”
From newfound affluence to broader technological access, emerging nations have become a profitable audience for adult content companies and other sexy sectors seeking to expand their market share — the historical problem for merchants being the need to profitably bill these customers, many of whom are among the unbanked.
“The consumer demand for content continues to grow,” Beardsley notes. “I see alternative billing being the best option for the adult market to tap into these emerging markets as many of them do not rely on traditional credit card processing for payments.”
Bridging the gap between credit cards and phone billing, DialXS says it supplies payment solutions for every situation in which payment by cash is physically impossible, simply because the customer is not in the same place as the merchant.
One intriguing DialXS service is its Virtual Account System (VAS), which enables customers to buy credits, using credit cards or iDEAL — credits that can then be used to pay for products and services, offering an easy intermediary between cash and micro-payments.
This seems like an ideal solution for adult content sales, and indeed, wallet-based systems are used on a range of popular adult sites, such as cam communities and clip stores — but this is not as widespread as one might imagine.
According to Vendo Managing Director Thierry Arrondo, alternative billing methods represent a small portion of online payments. As such, the company believes that the common practice of merchants just adding as many payment options as possible is a risky approach to take.
“You should only work with billing methods that increase your profit. This statement may seem obvious but it is not,” Arrondo explains. “Back in 2011 we decided to start offering SEPA (similar to ACH in the U.S.) to all of the E.U. countries. The result? An insane increase in returned transactions from customers that were not familiar with this new payment method.”
Arrondo notes that in other cases a risk may arise from attractive but potentially non-compliant models.
“This is the case of the return of PayPal to adult under a model that [may not comply] with VISA and MasterCard rules,” Arrondo says. “Our recommendation is to let the data talk, test, and incorporate only those alternative billing options that will help you increase your profit.”
Alternative adult billing is a specialized arena with a high demand from merchants and customers alike, but does this mean that billers will offer ever more payment options, or has the diversification slowed?
“Working with some of the largest sponsor banks in the United States and globally, the current trends and economic climate do not appear to be shifting in favor of alternative payment solutions,” Hyun says. “It’s likely that these niche payment providers will continue to remain fragmented until the time comes for a higher demand in the diversity of payment options currently being offered.”
NETbilling President Mitch Farber told XBIZ that the use of alternative billing options should be tailored to specific offers and markets, as more profitable methods (such as credit card billing) may be available.
Beardsley agrees, saying that billing is complicated and specialized, so she sees alternative payments continuing to flourish, but believes that “these billing solutions are best used for payments in markets that do not rely on traditional credit and debit card processing.”
“While traditional credit card billing accounts for the vast majority of purchases,” Farber explains, “many billers offer support for more alternative methods such as multiple debit solutions, micro payments and ACH processing.”
This support for additional payment options is often provided by partnerships with third-parties, however, and may not be the best fit for a billing company that is unfamiliar with the billing method or the requirements of delivering support for it.
“Although, OrbitalPay often gets approached by alternative billing companies to be a reseller,” Orbital Pay Vice President Karen Campbell explains, “we choose to focus on what we specialize in, which allows us to provide premiere processing services at an extremely high level, and unsurpassed support to our merchants.”
For its part, Kring told XBIZ that 2000Charge, a company that has successfully partnered with other payment providers to offer alternative billing options, reinvested in its infrastructure and architecture, with 2016 marking the launch of the company’s completely rebuilt platform.
“Our focus has been to simplify merchant on-boarding, offer eased compliance processing, and a redefined admin user experience, and we worked on improvements that would add to our merchants’ bottom line with a platform offering upgraded transaction efficiency and speed,” Kring says. “Technically most of this is under the hood, so our merchants are likely only going to notice our new efforts as the start receiving more European sales.”
While more changes in the makeup of the global audience and new payment platforms are sure to arise, Gharapetian notes that other billing methods have been tried before — with new ideas for payment and billing systems nearly every year — but they have not measured up to tried-and-true credit card services in established markets.
“While Apple Pay, Google Wallet, and Android Pay attempt to rally their way in the brick and mortar world,” Gharapetian says, “the online world will likely continue to be dominated by the major card associations and PayPal.”
It is a stance that lays an additional challenge before the promoters of alternative billing systems and the merchants that rely upon them in 2016 and beyond — but if there is one thing that history has repeatedly shown us, it’s that merchants will always find a way to separate customers from their cash — and in today’s online world, easy and profitable transaction processing is the way they do it.