A few days ago, the online adult industry was stunned by the announcement of a slate of new VISA / MasterCard regulations that seemed destined to affect most of us to one degree or another. I reprinted the first joint announcement from Epoch / ibill / CC Bill here at XBiz, and felt fairly certain that over the next several days some answers to the many questions this statement raised would be forthcoming. Instead, a wave of accusations against 'The Big 3' processors, as well as a follow-on statement from ibill have raised even more questions, muddying up the waters, and leaving many Webmasters uncertain of where to turn, or of the direction that the future would take them:
When I first read the initial announcement, I mostly welcomed the changes that it would bring to the online adult industry: after all, requiring a 'minimal' fee for the privilege of processing credit card transactions is not an 'unreasonable' demand, and if it helped to curb some of the fraud and abuse within the industry then so much the better. Sure, a $750 fee raises the bar a little bit, providing more of a barrier to entry for many 'mom and pop' operations, but if it forced more people to take their businesses seriously, then perhaps the powers that be have done us all a collective 'favor.'
They Did Us A Favor?!!?
My reasoning is simple: Once upon a time, it was a fairly complicated process for smaller, non 'brick and mortar' merchants to accept credit cards (and other payment options) for their online transactions; a process that was made much easier by the introduction of 3d party payment processors. As competition within this obviously lucrative field increased, the burden upon participating merchants was decreased to the point where virtually anyone could wake up in the morning, decide "Hey, I wannabe an E-commerce merchant" and be accepting credit cards by noon the next day!
Clearly, this was not in anyone's best interest — except perhaps for 'fantasyland' dreamers and scam artists. Over time, it became apparent that many of the new E-commerce wannabes were engaging in fraudulent and deceptive marketing practices; over-promising, under-delivering, and incurring the wrath of merchant banks — while accumulating charge backs and calls to The Better Business Bureau. Granted, I believe most of the 'serious' problems were caused by deliberately fraudulent criminals, but a good percentage of the problems could be laid at the inexperienced feet of those with little to no business acumen, and with nary a business nor marketing plan to guide them along.
While I can easily blame 'The Big 3' for (at least partially) causing many of these problems in the first place, they can also be easily blamed for not taking steps to redress the situation — something that they seem to be doing now, and if the end result is a marketplace populated by 'better' merchants generating less problems, then I'm all for the necessity of change. After all, as a consumer, I'm not entirely comfortable with handing over my personal and billing information to some unknown entity that didn't even think enough of their own business to be able to invest less than a $1,000 in it!
Looking at The Real Cost
And this brings me to the main source of complaints about this issue that I have (at least initially) heard: "$750 is A LOT of money!" and indeed, for many start-ups, it may prove to be a truly insurmountable sum. Consider my previous statement though: if you, as 'a merchant,' expect someone to believe in your offer enough to actually pay for it, shouldn't YOU believe in it that much as well? If the answer is anything other than a confident "YES!" then I contend that you're exactly the kind of person the professionals in our market need to protect themselves against. Sure, $750 is likely more than many of you pay for a month's rent, and for some of you, $750 might as well be 'a million dollars' — so remote is the possibility of you acquiring it for such a sundry purpose...
Sure, $750 is likely more than many of you pay for a month's rent, and for some of you, $750 might as well be 'a million dollars' — so remote is the possibility of you acquiring it for such a sundry purpose; but when you break it down, it is only $62.50 a month. That roughly equates to the payout of 2 sponsor sales from a free adult site, and I will further contend that if you can't make 2 sponsor sales a month, then you don't have ANY business running a 'pay site' — and should perhaps consider the $750 fee as an insurmountable barrier, and go and get a job instead. The issue is really one of investing and re-investing in your business, and taking your business seriously enough to make the effort to do so a priority.
The dollar amount of this fee is quite reasonable, in my opinion, as it is high enough to help prevent the less serious (and some of the more fraudulent) characters from abusing the system, while not being so high as to stifle those who need such services in order for their businesses to survive. After all, it really could have been so much worse (and may yet be), with high bonds and stringent background checks to complicate matters.
Until now, I have focused on the financial impact that these new regulations will have upon 'the little guy' — but what about the more 'established' players who are affected by this situation? While the $750 can be more easily absorbed as yet another cost of doing business, for many it is a harbinger of further problems to come; an uncertain variable inserted into many short-sighted business plans — business plans that will now need to be re-examined, and re-written to mitigate whatever transpires next.
And mitigation is now the key to survival for many in our industry: there are indeed clear alternatives to relying upon 'The Big 3' — alternatives that will make their new requirements moot. For those marketers seeking increased stability in their business plans, and for those who may truly believe in their product or service, but simply cannot afford an additional burden upon their already limited resources, several options DO exist. Stay tuned — there's much more to come as this story unfolds! ~ Stephen