Payment Strategies To Maximize Profits

Stephen Yagielowicz

Long-established billing mechanisms are proving inadequate in the face of evolving consumer needs, causing a growing number of adult website operators to embrace alternative billing and payment means in ways that are not “typical.”

One of the first things to get out of the way is a definition of what constitutes “alternative billing,” which in our case entails an alternative to credit cards such as Visa, which is by far the most dominant online billing platform for adult related websites. MasterCard, among other credit cards, is also popular — but the extension of consumer choice goes far beyond these U.S.-centric options.

We’re now at an inflection point, as recent global economic woes have combined with the continued rise of alternative payment methods to finally mount a serious threat to the traditional credit card. -Bill Zielke, PayPal

For example, mobile billing services (covered elsewhere in this special section of XBIZ World) are better suited to the needs of consumers on the go, while direct debit billing is a hit with Europeans.

According to GXBill (www.gxbill.com), adding alternative payment capabilities to a website is the fastest and easiest way to increase its online sales revenue. The company has provided international alternative payment solutions since 2002, in more than 35 languages and in more than 200 countries, with offerings that include landline, mobile, text message, and WAP phone-based billing, plus European Direct Debit, Bankpay and localized bankbacked billing systems.

Despite the depth of its services, GXBill notes that while more than half of online consumers want to use alternative payment options, less than 30 percent of online merchants offer these payment choices.

Taking these figures at face value reveals that seven out of 10 of you are leaving money on the table.

According to PayPal’s Bill Zielke, although the credit card has become entrenched in countries across the globe, consumer behavior is rapidly changing when it comes to making purchases, especially online.

“We’re now at an inflection point, as recent global economic woes have combined with the continued rise of alternative payment methods to finally mount a serious threat to the traditional credit card,” Zielke stated, citing a report by Javelin Strategy & Research that notes a continuing decline in the use of credit cards, which fell to around 40 percent in 2010. “Today’s savvy consumer expects a different experience, and the bottom line is the credit card wasn’t designed with the Internet (and certainly not with an Internet-connected mobile device) in mind.”

The Javelin report finds online alternative payments reached $43 billion in 2010, and predicts that they will exceed $86 billion by 2015. Other findings include the revelation that approximately half of all online consumers used alternative payment methods within the past year, with a significant portion of them claiming to base their choice on “greater protection from fraud or other misuse of information.”

While PayPal has a mixed history with the adult market space, the company believes credit cards are riddled with functional deficiencies when it comes to completing online transactions — and expects the mobile wallet to become the billing method of the future — providing strategic insights to merchants.

“The mobile device holds the key to the future of payments, for both consumers and merchants, because it blurs the lines between online and offline,” Zielke concluded. “I predict it won’t be long before the credit card will be the alternative payment method and services that were designed for the online experience from the start will become the norm.”

The lesson is clear: Sales come much more readily when you allow customers to use their preferred payment platform, while automated cascading billing systems, such as MPA3 and NATS, make adding different billing options easy — but there is much more to the story than these well provisioned tools.

As for true alternatives in billing strategies, a wide range of viable options exist, especially when the concept of “billing” is extended into the realm of “monetization,” which eliminates the burden of direct sales efforts — replacing consumer payments, such as a pay site’s subscription fee, with other means of harnessing a website or mobile app’s profit stream. This includes free, advertising-supported access.

For example, “freemium” offers and exchanges in-kind where content is obtainable by performing a specific task, such as filling out a survey — the results of which are marketable data — are intriguing for forward-looking promoters, but obviously not the best choice for all applications, especially in adult.

Creative, out-of-the-box thinking may pay dividends, however.

“Alternative billing” in context of companies wishing to maintain profitability while providing more service options for customers, is vital when trying to stand out from the crowd, as a variety of industries seek to unlock new ways of better serving their markets.

Pre-paid legal fees fall into this category, providing better budgeting and enhanced services that are suitable for many clients who may want to offset a potential risk of enormous, unplanned legal expenses in a way not unlike the purchasing of insurance.

Colin Cameron, a management consultant focusing on optimizing the revenue streams of legal firms, emphasizes the need for all companies to offer a unique value proposition, reminding his clients to ask, “What do you offer that no one else offers for the same value as you do?” along with “Why should I use you instead of your competitors?”

“You will need a unique value proposition in order to succeed with alternative billing,” Cameron explains. “If you don’t, it’s just about price, and that’s a losing game in the end.”