Editor’s Note: One of the benefits of participating in the XBiz community is the wide variety of relevant information contained in both our articles and news pieces, as well as on our industry-leading message boards. One example is this excerpt from an ongoing thread on alternatives to PayPal: a popular payment processor no longer serving the adult industry. ~ Stephen
Many of the current problems in the payment processing arena are not just faced by the adult industry; since similar (and greater) problems are being faced by Internet gaming operators.
It’s not just in the U.S. that Visa and MasterCard (M/C) are tightening their grip, new regulations also apply to Europe, Asia-Pacific and all other countries, as they are now enforcing their cross-border regulations.
To comply with the Patriot Act, and other anti-money laundering legislation, plus the various acquiring bank procedures, Webmasters are now required to supply lengthy personal details; because both the banks and PSP's are subject to new GKC (get to know your customer) requirements.
If a Payment Service Provider (PSP) is not asking for this, I would be immediately suspect of their long-term viability.
Merchant Accounts for Everybody
Almost everyone who wants to accept credit cards is going to be forced into having their own merchant account for several reasons:
1. Third-party processing will no longer be permitted.
2. Sometime during the 2nd quarter of this year, both Visa and M/C will be enforcing VBV (Verified by Visa) and SecureCode (M/C).
3. Visa and M/C are requiring the acquiring banks to have a legal entity that is responsible for a website’s debts (chargebacks).
4. Visa and M/C are planning on reducing the chargeback ratio to 0.75 percent.
5. Webmasters will no longer be allowed to store credit card details on their servers, unless they have been accredited and approved by both Visa and M/C – an expensive process which means that recurring charges can only be processed by an accredited PSP or the acquiring bank itself.
Other Payment Options
Debit cards are a payment option; but a lot of payment gateways don't support them, and you still have the same processing and discount rate charges as if the debit card was a credit card from the bank. Almost the same rules apply for credit cards; and M/C (as anyone with some experience in this industry knows), has a very low tolerance of the M/C brand being associated with anything 'adult.' While the M/C logo is not supposed to be used on any adult websites, either showing debit or credit cards, they seem to be allowing this to happen, for now.
Pre-paid ATM cards that were developed mainly for Internet gaming operators are another alternative that should be looked at. The big advantage they have for the Webmaster is that the issuer of the pre-paid card can guarantee the purchaser‘s age, and the processing rates are much cheaper.
The major disadvantage is that you lose the paying 'instant gratification' surfer, since the card holder has to go through the registration process. This is not as simple as registering online. The the card holder still has to meet the same requirements as opening a normal bank account.
Webmasters should also be looking at Western Union and other options, but this can end up being quite time consuming. A good PSP should be able to help do this for you. Online checks have some issues concerning the time delays and risks associated with clearing them, and have by far the highest fraud rate. Other options such as dialers and new variants of them, plus SMS and other technologies, will become more commonplace and accepted as time goes on.
Tangible Products = Low Risk?
For single-person sites who have products for sale, a good PSP like Secureas can provide a small bit of code rather than a shopping cart for those personalized panties. These should be considered a tangible product and not in the ‘high risk’ area, although they might send the sniffer dogs into a frenzy and cause problems with International transport laws.
Just because your offering is “a product” does not mean that it is exempt from the ‘high risk’ category. Visa and M/C are both seriously looking at websites that are exclusively selling adult ‘lifestyle’ products, such as Viagra, penis enlargements, etc., and talking about including them in the high risk merchant category. It appears that even pharmacy-only sites that sell over 50 percent of their total turnover per month in what Visa and M/C term adult lifestyle products will also fall under the high risk umbrella.
Getting Started With Pre-Paid Cards
Secureas Limited is a payment service provider who is listening to the problems and concerns of this industry very closely, and they have developed a Pre-Paid ATM Card that provides a stable payment option for adult Webmasters. Getting set up to use it is a straightforward process:
1. The Webmaster signs up as a Secureas Card merchant. There are two interfaces: one is a simple redirect, the second is a secure SSL socket connection.
2. If the card holder already has a card with funds available they can now use their card on that Webmaster’s site. If the user wants to apply for the Secureas prepaid card, the Website can make it easy by having a link directing the applicant to the online application form. The applicant can fill out the form online, then fund their card via credit card, wire transfer, Western Union or Travellex. If using a credit card, the funds are immediately available on the prepaid Secureas card. If funded by other methods, the normal transfer time has to be allowed.
3. The Webmaster is paid a small fee for the customer’s sign-up, and as the card can be used at any other site that accepts it, the original referring Webmaster receives a transaction fee each time the card is used on another site.
That’s it – a simple and profitable way to increase the available ways that your site can turn a prospect into a paying customer, and reduce your reliance on the uncertain future of Visa / MasterCard in the adult arena!