One thing is for certain in today’s uncertain world of third-party adult Web site membership transaction processing: the rules will change, the players will change, and the playing field itself will change; and it will continue to change more and more as time goes on. The latest changes hit today in a letter from iBill.
Sent out to merchants who process transactions through their system, the superficially benign statement masked troubling developments with a matter of fact approach. Here’s the email I received from them today:
“At iBill, we are committed to providing our merchants with superior processing services at a competitive value. In a constantly changing environment, we are sometimes required to re-examine our increasing cost infrastructure and adjust our client service fees accordingly. This notification outlines the application of chargeback fees, adjustments to client service fees and the migration to an electronic payout process for our clients.
iBill believes it is important to work with each and every merchant to monitor and minimize chargeback and refund activity within mandated association compliance guidelines. We do this in a number of ways including fraud protection mechanisms, automated email receipts, online customer service, reporting and 24*7 billing customer service.
At this time, we are implementing a new fee structure allows[SIC] iBill to more accurately apply chargeback and refund related costs at the merchant level. As an iBill merchant, you benefit from a fee structure that reflects your individual processing costs rather than a fee structure which subsidizes overall chargeback and refund costs across the entire iBill merchant base.
The following fees will apply to all clients of iBill: A $15.00 flat fee for all credit card chargeback transactions presented against your account for all credit card types (Visa, Master Card, American Express, Discover and JCB). The excess chargeback fee of 2.5% of total credit card sale transaction volume threshold will no longer apply. The collection of fees will appear on your CMI statement in the first payout following May 15th.
Effective May 15, 2003 iBill service fees will be adjusted by 19 basis points or 0.19%. This increase is strictly a pass-through cost and reflects the rate increase imposed on iBill by our processor…”
A Closer Look
After having read this far through their latest letter, I became ever more concerned by what I perceived to be said between the lines. Whether my perceptions are correct or not may be a matter of debate, but what is not debatable is the increased costs merchants (many of whom are already reeling from the ‘new’ annual VISA / domestic IPSP fees) will be required to pay to use the iBill service, from a high of 15.19% of gross sales for ‘low volume’ (under $10,000 per billing cycle) merchants to a low of 12.19% for their highest tier merchants (those who process over $50,000 per billing cycle).
While the wording of this letter was carefully crafted to make merchant’s feel they were getting a bargain, the increase in processing costs wiml further erode Webmaster’s bottom lines – a situation which will worsen for many due to the newly imposed chargeback fees the processor is implementing. While it is easy enough to blame chargebacks on ‘shady’ merchants, I answered enough customer service calls for a respectable pay site program to know the truth about chargebacks and the outright fraud perpetrated against Webmasters by consumers who use this banking tool to commit theft of service. The additional burden of an extra $15 per occurrence fee will be an unwelcome (and potentially bankrupting) kick in the nuts for many operations.
Spiraling costs, lower payouts, tightening regulations, and an increasingly competitive, legislatively hostile marketspace are affecting customers of this service, and their Webmaster peers who use other IPSPs may soon be feeling this growing pinch as well, since the same forces afflicting iBill are at work against other IPSPs, and they too will be forced to act, some more drastically than others, but the writing is on the wall. There was more to this letter, however, with the announcement of a system-wide migration to ACH payouts, ostensibly for the benefit of Webmasters:
“iBill understands the importance of accurate and timely payouts to our merchants. In an effort to lead the industry and continue to improve our payout process, iBill is migrating to an electronic payout process. As a leader in the processing industry, iBill will now offer its clients payment by ACH at no charge. Electronic payments eliminate the risks associated with paper-based payments such as lost checks, postal delays and check clearing issues. You will benefit from expedited funds availability and the option to receive payout in your preferred currency. … clients will not be charged for ACH payout, wire payout will incur a $20 wire fee. Clients will be responsible for additional fees if electronic payments are rejected by their financial institution. iBill clients who prefer to continue receiving a manual check will incur a $5 fee per check.”
While I am generally a fan of ACH payments and the instant capital exchanges and international currency conversions that they allow, recent comments about IPSPs who tried to access client accounts directly for the withdrawal of VISA processing fees make me a wee bit leery of providing them with the level of access to my business account that they are requesting.
Maybe I just don’t like change and the instability it brings to business planning and revenue forecasting, but the continual uncertainty in the processing arena is a cause of concern to all adult Webmasters, and a topic to keep your eyes on. Now if I could only find out what Lee Noga heard about AVS’s closing down… Stay flexible and roll with the punches! ~ Stephen