A Kick in the Nuts Can Be A Good Thing: 1

Stephen Yagielowicz

Wednesday, October 2nd, 2002 was a day that changed the face of the adult Internet forever: The first indication of what was soon to come came in the form of a simple e-mail from Rand at Paycom / Epoch: This brief letter, sent on the behalf of Epoch, CCBill, and iBill, et al., was a joint statement from the top 3d- party transaction processors describing VISA's new set of mandatory operating guidelines. If you currently operate a pay site, or ever plan on doing so in the future, then you must not ignore this series!

For those who have not yet seen the announcement, it is reprinted here below:

Dear Webmasters,

CCBill, EPOCH / Paycom and iBill would like to jointly inform and update you on several new Visa regulation that will affect the way we, as Internet Payment Service Providers (IPSP's) and our clients conduct business. Visa has mandated that a new, unique set of operating guidelines will be implemented by November 1st. These rules are worldwide, not just in the USA.

Under the new Visa rules, iBill, CCBill, and EPOCH / Paycom along with other providers in our market space will be considered IPSP's. An IPSP is a company that provides a broad array of services and has financial responsibility and liability for merchant accounts whereby you, our clients (Sponsored Merchants) are allowed to process and settle Internet transactions. It is our mutual responsibility to ensure that we fully comply with all regulations implemented by the card associations. We are committed to seamlessly implementing the new regulations while retaining a business model that is good for the industry. Below is a summary of the requirements for Visa that we must implement by November 1st:

VISA Requirements

• Each Sponsored Merchant must complete a registration form that we will submit to Visa on your behalf. A form will be provided to you by each of us, electronically, as soon as possible. Some of the data elements required are: company name, address, transaction counts, dollar volumes, URL's, etc.

• An initial registration fee of $750.00 per company (not per url) will be charged to register each Sponsored Merchant. $500.00 of this fee is payable by the Acquiring Banks to Visa, the balance are administrative fees to the banks and processors. These fees are due November 15th.

• An ongoing annual registration fee of $375.00 will be charged. $250.00 of this fee is payable by the Acquiring Banks to Visa, the balance are administrative fees to the banks and processors.

• Sponsored Merchants must be approved by Visa for processing Visa transactions under the new rules, and will be checked against Visa's TMF list (Terminated Merchant File) and the MATCH File, a joint Visa / MasterCard database. You are obviously processing now, so that service will not be interrupted if you have paid your registration fee and completed your registration form.

• IPSP's can only register Sponsored Merchants in the country where the Sponsored Merchant has a presence.

• IPSP's are required to provide Visa with monthly sales, chargeback and credit data for their review, by Sponsored Merchant and down to the URL of each Sponsored Merchant site. Sponsored Merchants who are out of compliance on chargeback and / or credit ratios may be terminated at Visa's discretion. Please Note: Your ratios at all IPSP's will be evaluated by Visa.

• The credit card descriptor on the cardholder's statement must be the IPSP's name, as well as the Sponsored Merchant's identifier, such as your company code.

• The IPSP's Join Form must disclose the IPSP's name and the fact that the billing descriptor will be the name of the IPSP and the Sponsored Merchant's identifier.

• IPSP's will display, on the Join Form, their Privacy Policy along with Terms and Conditions. Several other rules will be changed and we will advise you as soon as these are solidified. October is the month to implement these changes.

MasterCard Requirements

• The MasterCard logo cannot be displayed on the client's sites.

Several other rules will be changed and we will advise you as soon as these are solidified. October is the month to implement these changes. We expect the transition should be a relatively smooth process. The following is a timetable for preparing for the November 1st deadline:

• By October 8th, we will begin the Visa registration process. We will email you a form, which must be completed immediately.

• By October 15th, we will have a Privacy Policy up on our Join Pages.

• By October 15th you must have all MasterCard logos removed from your sites.

We will provide you with additional updates on these initiatives throughout the month. Thank you in advance for helping us to ensure the successful implementation of these new regulations. Please be assured that we, as IPSP's are working together to provide a more robust industry environment and to attempt to have our client's voices heard at the card associations. We have many common goals and interests. Maintaining the viability of the adult Webmaster business model, by keeping you informed, is our primary focus.


iBill, CCBill, and EPOCH / Paycom


The implications of this decree are staggering, and in my opinion the tip of a melting iceberg. Stay tuned for Part 2 to find out what if any silver lining is contained within what many will doubtless see as storm clouds gathering on the horizon: ~ Stephen