opinion

Paysite Power: Take a Look at Your Payment Setup

A.J. Hall

If you’ve been to an industry trade show in the past several years you probably noticed that many of those in attendance and most of the show’s sponsors and exhibitors are either ad networks, dating sites, web hosts or billing companies. All of the above deal in high volume and billing in our industry or any other is big business.

The nice thing about being a billing company is that you’re selling something that everyone needs. And the nice thing about having an adult-based business is that there are more billing options now than ever before and nearly every type of sale is covered.

Billing isn’t a one-size-fits-all type of thing and many sites can benefit from multiple billers, even if it means only using a merchant account for all in-house and non-affiliate generated sales and sticking with a third-party company simply for the benefits of affiliate tracking and payouts.

From third-party all-inclusive services to merchant banking setups to alternative billing, there’s a payment processing setup for just about everything.

When most paysite operators start their businesses they go with the easiest billing setup possible and choose a third-party company that handles billing along with a variety of other services including fraud prevention, customer service, affiliate sale tracking and affiliate payouts. Companies like CCBill, Epoch and SegPay charge a much higher percentage fee (upwards of 14 percent) than merchant service providers but allow a paysite owner to focus entirely on generating sales rather than managing anything payment related. Fees for third-party billing are generally 10 percent higher than a merchant account setup.

With the advent of mobile and the increased globalization of the adult marketplace, a need emerged over the past several years for alternative billing companies capable of properly handling foreign language and non-credit card based sales.

Once a paysite is established and a site manager becomes aware of significant foreign traffic levels it’s not uncommon for them to add an alternative biller like 2000Charge to their payment scheme. Alt billing companies handle a variety of services ranging from acceptance of various payment methods to country and language specific payment setups. Regardless of which vendor is used for this, alternative billing can be a nice low-cost addition to any paysite’s join process,

With primary billing, whether you’re processing with a third-party biller or a direct merchant account the Visa/MasterCard high-risk registration fees are the same: $1,000/yearly. The cost for direct merchant accounts/gateway processing, however, are far less expensive.

Once a site is up and running and starts making sales, those who didn’t go with a merchant setup often begin to notice how much money they’re paying in processing fees. When a site is new (or small), that 14 percent doesn’t seem like much. But as a site grows and that percentage changes from tens of dollars per month to hundreds and then to thousands, many site owners are faced with a major dilemma.

Whether to stay with third-party billing companies or switch to (or add) a direct merchant account is one of the biggest decisions a paysite owner will ever make and one that leaves many site owners paralyzed with fear. It’s so scary and seems like such a big move that surprisingly, even some very large companies and major brands are still using cascading billing schemes comprised of multiple third-party billers ... to the tune of tens of thousands of dollars per year in fees. Translation: Lots of wasted money.

Billing isn’t a one-size-fits-all type of thing and many sites can benefit from multiple billers, even if it means only using a merchant account for all in-house and non-affiliate generated sales and sticking with a third-party company simply for the benefits of affiliate tracking and payouts.

Elevated X was a sponsor at this year’s Phoenix Forum, and for three days we shared a poolside cabana with Mobius Payments. What better way to learn more about billing than to spend three days with one of the industry’s most well respected merchant billing providers? What I learned from many hours of day drinking, eavesdropping and candid discussion is that the major barrier to cost saving on the part of paysite owners is ignorance.

Like many industry figureheads and successful business owners, many of my interactions occur over meals at high end establishments.

In this case, much of the education I received in Phoenix happened at Hooters, where I spent some quality time with Matt Mund of Mobius Payments. Between enjoying the scenery and gnawing on hot wings, Matt dropped a bomb.

He said, “Most merchants are totally unaware of how little fraud prevention and customer service actually goes on in relation to their accounts.”

He went on to explain that many site owners fear moving away from third-party billing due to not wanting to handle customer service, but that most of that service is either automated, self-serve or provided by the merchant account vendor and in some cases a paysite owner might only end up handling a few emails a month were they to switch to doing this in-house.

In summation and to quote Matt, “Most site owners have no idea what their third-party biller is actually doing work-wise for that extra 10-11 percent in fees they’re paying on every transaction.”

At the Phoenix Forum I also had a casual lunch with OrbitalPay’s Karen Campbell and this was the topic of conversation. I explained that I see so many companies either using one third-party biller or multiple when they could be keeping 10 percent more of their revenue if they considered making a change. Having known Karen for several years I was comfortable being blunt and started our convo by asking her flat out, “What are the biggest misconceptions that prevent site owners from using merchant setups?”

She said, “Some of the myths and fallacies we hear are that it is difficult to get approved for a merchant account, tough to integrate, and that you have to provide your own customer service. That couldn’t be further from the truth. At OrbitalPay we have the capability to provide the customer service on behalf of our merchants, our integration is seamless, and we have our own team of underwriters focused on approving accounts.”

Hmm. Two of the industry’s major merchant players said almost the exact same thing about customer service ... but what about fraud? According to Karen, one of the biggest advantages to having a direct merchant account versus using a third-party biller is the increase in control you have over your fraud settings.

Matt and Karen both also independently admitted that lower processing fees in addition to being able to host your own payment page with a merchant account setup (which will increase your approval ratios) can often result in as much as 20 percent more revenue for a lot of sites.

It seems that when the myths and misconceptions are set aside, what it really boils down to is that having to handle affiliate tracking and payouts in-house unless you use a third-party biller is the only major obstacle and the only reason for most site owners not to make the change.

What this means to me and what it should mean for Elevated X CMS software users and any paysite owner is that if you’re processing any significant amount of non-affiliate based sales, you should look into a merchant account. It also means that if you’re using an affiliate tracking software program like NATS, you should have a merchant account as at least one of your backup billers, if not as your primary biller.

My hope is that more of my CMS customers and more paysite owners take the time to talk to reps from trusted companies like Mobius, OrbitalPay and a handful of others. The education they’ll give you is free and it’s a good idea to learn about the pros and cons of various setups in addition to adding alternative billing to your payment setup.

Being up to date and well informed about payment processing options is one of the best ways to ensure you’re holding onto as much money as possible from every sale.

AJ Hall is a 14-year adult industry veteran and CEO of Elevated X Inc., a provider of popular adult site CMS software. Hall has spoken at industry trade shows and written for several trade publications. Elevated X software powers more than 2,000 leading adult sites, has been nominated for more than a dozen industry awards and won the 2012, 2014 and 2015 XBIZ Award for Software Company of the Year.

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