Billing Trends in the E.U.

Alex Henderson

The importance of the European Union to the adult entertainment industry cannot be overstated. From Germany to the U.K. to the Netherlands, the E.U. is both a major consumer and major producer of adult content. But in order to profit online in the E.U., adult companies must understand billing in the E.U. — and in 2013, the E.U. continues to have a diverse billing/payment landscape.

Sascha Winkler, executive director of strategy for the Germany-based Payment Network, AG (known for their popular billing program, stressed that in the E.U., billing and payment preferences still differ quite a bit from country to country. “Every country has its own billing preferences,” Winkler noted. “For example, Germany is more into SEPA direct debit and online bank transfer. The Netherlands is into online bank transfer. The U.K. is more debit card-driven, and France likes its Carte Bleu .... Those payments will not evolve; some of them might consolidate .... For sure, all of them will benefit from SEPA direct debit, as SEPA is (the entrance) to all E.U. countries.”

The U.S. and E.U. account for the strongest markets and highest density with regard to existing electronic payment traffic and sheer volume,” -Mitch Farber, CEO of NETbilling.

Europe has been a leader in mobile/wireless technology for a long time, and that includes the billing realm. In the E.U., more and more adult content is being viewed on smartphones and paid for using smartphones. Asked to identify some important E.U. billing trends that adult companies need to be aware of, Winkler mentioned the mobile payment app qooqo and explained: “The two major trends in 2013 and 2014 are mobile wallets and SEPA direct debit. With mobile wallets like qooqo, programs will get a perfect tool to raise every mobile program’s ARPU. Furthermore, (being) mobile-native, it will perfectly convert mobile traffic. And SEPA direct debit (offers an opportunity to) explore 500 million Europeans with one payment solution.

SEPA direct debit allows you to deduct debits from users’ checking accounts in the E.U.. If you run a program in an E.U. country, where the user has to wire the money for the usage, you can easily deduct the money tomorrow from his checking account. It is just as easy as this.”

Mitch Farber, CEO of NETbilling, described the E.U. as a group of countries that remain on the cutting edge of electronic payments.

“Over the years, electronic payments have evolved immensely,” Farber explained. “Whether it is traditional retail or e-commerce payments, paying by card and other forms of electronic payments has taken over. More than any other region in the world, the U.S. has been in the forefront of this revolution. However, Europe has also been a leader in electronic payments and continues to do so. The U.S. and E.U. account for the strongest markets and highest density with regard to existing electronic payment traffic and sheer volume.”

Although the E.U. on the whole is still less credit cardcentric than the U.S. when it comes to payments, the amount of credit card penetration can vary considerably from one E.U. country to another. The U.K., for example, has one of Western Europe’s higher rates of credit card penetration.

“Debit and credit are the most popular forms of payment in Europe, with mobile payments being swiftly on the rise,” Farber observed. “Prepaid credit cards have gained popularity and are being issued and promoted by the card associations increasingly throughout the world, especially in the E.U. and U.S.”

Farber added: “Europeans rely largely on debit — much more so than in the U.S. However, especially since the worldwide ‘recession’ and the popularity of rewards-based credit cards, E.U. credit card use is on the rise. Offering geo-targeted payment firms can be beneficial. Consumers also know that with credit cards, they have chargeback protection for unauthorized purchases. This is extremely important to consumers shopping online. In my opinion, offering too many methods of payment often confuses the consumer. Simplicity is key.”

In 2013, Germany remains the largest economy in the E.U., with the U.K. in second place and Italy in third place — and the euro is still the E.U.’s most widespread currency even though some E.U. countries have other currencies. 2013 marks the 11th anniversary of the Single Euro Payment Area, and Farber said that SEPA remains a work in progress. “SEPA, the Single Euro Payment Area, was initiated in 2002 by the European Central Bank and is a complex, long-term project bringing (together many E.U. countries) and involving over 9000 banks. The goal is for consumers to use ‘any card, any country, any terminal.’ This project is still in development.”

As SEPA continues to develop, Winkler said, U.S.-based adult companies must continue to remember how much North America and the E.U. differ when it comes to billing needs. “U.S. and E.U. payment habits are different,” Winkler said. “Whereas U.S. citizens are raised with credit card and check payments, E.U. citizens are raised with SEPA direct debit, online bank transfer solutions, debit cards, cash on delivery, invoice, mobile billing and many more (options). With all those different possibilities in the E.U., you can imagine that it will be fatal just to ‘copy’ U.S. business to the E.U. Germany’s credit card coverage is less than 25%. And half of the cards are issued to companies for covering sales people’s expenses. With all that, it is important to have a payment partner who knows all the differences and is able to consult you. Also, not every available payment fits with programs’ calculation. I can’t imagine that carrier billing like premium SMS, where the fees are plus-50 percent, usually fits with live cam models where programs have to pay webmasters and models.”

Asked to reflect on the effects that recessions in parts of the E.U. are having on adult billing, Winkler replied: “Userwise, it is easy to answer: if you have the money, you will spend it. This question for me is more interesting with regard to the payment partner you are looking to work with, company setup, bank relations, etc. Companies which are around more than a decade usually have a stronger reputation and relationship with banks.”