Selecting the Right Billing Company

Stewart Tongue

When adult online first began, there was a dearth of processing solutions available and early pioneers of digital porn scrambled to find ways to help willing consumers to become paying customers.

Over the years the proliferation of processing alternatives has continued to expand, and many of the best ideas became standardized from one billing platform to another.

Choosing the right processor makes a big difference. The payments industry is actually going through a tremendous period of change and innovation. — Harmik Gharapetian,

That path toward homogenization has lead some novices to believe that processing is now a fungible utility with several different companies all offering much the same services and competing solely on pricing or fee structure. However, after speaking with experts in the industry, it now appears the differences matter more now than ever before.

“Choosing the right processor makes a big difference,” Harmik Gharapetian,’s vice president of sales and marketing, told XBIZ. “The payments industry is actually going through a tremendous period of change and innovation and, as always, Epoch is ahead of the pack. We stand apart because we bring value to our clients that others cannot match, like offering over 40 international payment types, some of which are exclusive to Epoch.

“When you combine that with our leading-edge technology and nearly 20-year track record of sustained performance, you can see why our clients tell us that they make more money with Epoch. ”

As anyone paying attention is already aware, Epoch managed to arrange for an exclusive form of payment for adult sites in Europe, and was also able to leverage the success of that pilot program to enable U.S. transactions to be processed through it as well — an important coup for a company that has consistently innovated over a period of many years.

Gharapetian highlighted the importance of overall value.

“There may be some processors that try to compete by offering a cheap service,” he said. “But a cheap service that does not convert your traffic into sales can cost you considerably more in lost sales than it saves you in fees. If that processor cannot maintain your performance within the card associations’ standards, or if it is a fly-by-night operation that disappears, the results can be disastrous.”

“Everybody wants to save money, which is to be expected. What is important for merchants to take in to consideration is what you get in exchange for that money” explained Jordan Stewart, vice president of OrbitalPay. “There are many other important factors when it comes to processing such as, the speed at which an account gets approved, reasonableness when it comes to issues such as chargebacks, the level of customer service you receive, just to name a few.

“At OrbitalPay we have our own team of in-house underwriters that work hand-in-hand with our direct banking relationship to allow for expedited merchant account approval,” Stewart told XBIZ. “Our customer service team and Risk Analysis department are multilingual, have over a decade of experience, and are extremely passionate about what they do.

“This is a huge benefit to our current, and future, merchants as it helps to make them feel secure when processing with us, knowing that our in-house team has their back and wants to help them succeed. We are a boutique processor and we show that in the level of service we provide, we find that the things I’ve just mentioned carry as much weight as pricing, if not more.”

Mitch Farber of NETbilling agreed that processors and payment gateways vary considerably in features, functionality, flexibility and pricing.

Farber told XBIZ: “NETbilling has served the merchant industry since 1998. We offer merchant accounts from dozens of different banks, have an in house customer service care center for our merchants and their customers, along with myself who works every day as an integral part of the daily operations here along with 50 other employees at NETbilling, pride ourselves in offering extended services that no others in this industry can.”

Another key element of selecting the right billing companies is a strong reputation and high degree of credibility within the banking industry.

“Each payment processor works with different acquiring banks,” Cathy Beardsley, CEO of SegPay, told XBIZ. “Believe it or not, acquiring banks earn a reputation with issuers based on the type of risk they are willing to take. Those banks that abuse the system will have a higher decline rate than others.”

That dynamic should lead business owners to consider several key questions before deciding if any particular processor belongs in a website billing cascade, according to Beardsley.

“How many acquiring relationships does your processor have?” she asked. “While most of our clients have redundant processors, does your payment service provider have redundant acquirers so that they are bullet proof to withstand a bank exiting the space?

“Is your processor investing in the infrastructure of their payment system? There is constant maintenance and upgrades required to make sure throughput and conversions are optimized. Your processor should be testing to make sure payment pages are responsive to all different types of devices and that the pay pages optimize throughput. Is your processor staying up to date with new regulatory requirements?”

Perhaps even more important, is the significance of having a proactive processor willing and able to evolve with the flow of constant regulator changes.

“Every year there seems to be new legislation whether in the U.S. or abroad that we need to comply with in order to process transactions,” Beardsley said. “In addition to governmental requirements, the card schemes also tend to make changes to stay ahead of fraud curves and to provide more transparency into the payment network.

“Is your processor a leader or are they playing the waiting game and the last to implement new requirements? Your processors willingness to comply can directly impact your business.

“We feel that online processing is still far from being commoditized. There is much more to a merchant’s relationship with their processor than the fees they pay or the products they use.”

“SegPay has always felt that customer intimacy is a key differentiator when it comes to the many online processors out there” Beardsley said. “At some point every merchant will come across a processing issue they need resolved.

“Whether it is a critical issue related to not accepting transactions or service customizations to meet specific needs, there will always be a need for quality and individualized customer service. So the question becomes, who will best be there to meet the merchant’s needs?

“We pride ourselves on building enduring relationships with all our merchants. Personalized service, one-to-one relationships and tailored solutions to meet the merchant’s needs are the foundations of our philosophy at SegPay. This is what has, and will continue to differentiate us from other processors.”

Another point worth considering is the notion that the pricing differences some merchants believe to be of paramount importance may actually be much smaller than they seem.

“While pricing should be a key factor when choosing a processor, understanding the various pricing models of each processor may be misunderstood by some merchants,” Lane Farinacci, the chief risk officer of Processing Partners Inc., told XBIZ. “Less experienced merchants commonly base decisions on a processor’s advertised discount rate, while not realizing that tiered pricing may apply, as well as various transaction fees determined by issuing cardholders across different regions.

“Furthermore, gateway fees are rarely discussed when providing merchants their pricing offers. Analyzing a wide variety of processing statements daily, it’s quite common for me to see discount rates displayed at 4-5 percent and yet the total fees calculate at 10-12 percent respectfully.

“More established merchants better understand pricing on a whole and can see through these various sales strategies more clearly. Additionally, more experienced merchants take into account a processor’s level of offered service, trust, products and solutions to include it’s gateway capability, scalability, available banks, offered payment methods, reporting, security and compliance implications, underwriting and risk management and customer support.”

Adam McDonald, president of Humboldt Merchant Services, echoed the sentiment that processors are unique in many important ways.

“While the processing landscape for adult merchants has been relatively stable over the past few years, lessons of the past show how quickly that can change,” McDonald told XBIZ. “Adult merchants need to look at how established an ISO (merchant account) is in the adult space (the longer the better), the reputation and capitalization of their sponsor bank, and the service levels provided.

“While processing might be commoditized for the brick-and-mortar merchants of the world, it is not for adult merchants, and likely never will be.”

Looking into the billing market segment from the outside things may appear to be converging, but as you step deeper into that space and speak with industry insiders, the differences that emerge are important and the fractured way that banks and card associations continue to make exclusive arrangements is enough to create a playing field that is unlikely to become uniform anytime soon.

Perhaps Stewart of OrbitalPay summed it up best when he added: “Pricing has been the only thing that really matters in the retail space for some time, companies compete with one another by giving away free equipment and reducing rates as low as they possibly can to secure business.

“I think the high-risk space is, or at least was, a little different; there is a genuine value in the services being offered. The quality of staff representing the companies in our industry is elevated, the level of service being provided within our industry is heightened, the positive affect that the companies within our industry can have on a merchant’s business is astronomical.

“I think the things I mentioned have to this point always been recognized and appreciated by merchants, it would be extremely disappointing and worrisome if our industry (billing specifically) had to now start competing based on price alone when there are so many more things a company like ours, and many others, offer,” he said.


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