While this article was born out of a recent increase in message board posts by folks looking for "the right" billing solution, and is mainly targeted towards aspiring pay site owners and other online merchants, Webmaster affiliates should also read it to have a basic understanding of this complex and evolving subject area, as a little insight can help you choose those sponsors that are "doing it right."
At the outset, I will tell you now that I'm not claiming to be "an expert" in this field, and frankly, with the rapid changes taking place, there are few folks who can legitimately claim that status (and I know most of them). I will tell you however, that I have, and do, spend quite a bit of time looking at various billing options, and have personally used (or administered sites that use) most of the major players in the domestic (US) market, and will make my comments based on this (as well as my wife's) experience.
I make this distinction since billing for the US market, especially with the most recent changes in VISA and Master Card policy, is a different beast altogether than what is workable in pretty much the rest of the world, and wholeheartedly welcome any articles on global billing solutions that my readers care to submit.
With all of that out of the way, let's take a look at some of the various options:
Your Own Merchant Account
This is an area where my opinion - and the market realities - have changed dramatically over the years. When Dawn started her site, she already had a merchant account for accepting credit cards at her antique furniture business, and so, processing membership transactions through it seemed to be the logical thing to do. Likewise, I had an account for my import business, and thought "I can run memberships through the terminal daily, and cancel accounts that don't go through." Setup for "real world" sales in the early to mid '90s, we had no tools for working with our merchant accounts in an online environment, and hadn't yet heard of NetBilling.
With a low transaction volume, and a simple JavaScript or CGI-based "subscription form," it was a bit of scribbling dates on a calendar to remember when to cancel a monthly membership, and then send an e-mail reminder to the customer to "sign up again" – recurring transactions and member management being unheard of subjects at the time. Ahhh, the "bad" old days...
It was Oz who explained to me the folly of such things way back when, and introduced me to the subject of "chargebacks" – a reality in his much, much, higher volume operation. Excessive chargebacks would lead to canceling of your merchant account, and once you were on the banned merchants list, you would never get off of it. This was a serious issue, and one that led to us dropping the use of our own merchant accounts for adult transactions in favor of 3rd party billing companies – even though neither Dawn or I had ever had a chargeback. It just "wasn't worth it" to take a chance of losing our merchant status simply for the sake of running a porn site.
Apparently, with the news VISA regulations, however, this situation has changed, and "sheltering" yourself behind the shield of a 3rd party processor will no longer protect your ability to hold a merchant account, which once again makes the prospect of using your own account (and the control this approach allows) an attractive one for many operators – especially given the suite of enabling tools and services that a company like NetBilling provides.
3rd Party Billing Systems
The backbone of recurring adult site subscription sales transaction processing, 3rd party processors, known as Internet Payment Processing Providers (IPSPs), have long been the vehicle of choice for paysite operators, partly because of the "shielding" effect they once had, and partly because of the ease of (their often "free") system setup, along with the membership management tools and customer service options they provided, all without requiring you to have your own merchant account.
More than just companies that facilitate your acceptance of credit cards, today's IPSPs provide a wide variety of services, including sales tools like the ability to cross-sell subscriptions with other sites and merchants, and integrated affiliate programs that allow varying levels of payouts to referring Webmasters.
While getting started with these services is no longer "free" for those who wish to accept VISA/MC, the setup and annual fees are relatively nominal, and the transaction percentages they charge (typically around 15% for "smaller" operations), reasonable. While there are several IPSPs, for this discussion we'll focus on your ability to accept VISA/MC, and leave the other methods for later.
There are two major players remaining in the US market, Epoch, and CCBill. IBill, once a very prominent player, and an IPSP that I have personally used, is in tough shape these days, reeling from the changes sweeping the industry, and no longer a company that I would feel comfortable processing with – for a variety of reasons. For many folks then, the choice will boil down to Epoch or CCBill.
Each IPSP has unique features and services, although they tend to be quite competitive. Some distinctions are the level at which they "scrub" transactions – or in other words, decline for cause, including various levels of checking to see if the card is stolen, the transaction authorized, and the user liable to chargeback his purchase – and your control over the degree to which this scrubbing process takes place.
Another distinction is "personality." Dawn *loves* CCBill - they're still very strong in the "real" amateur site market, she has friends there, and used to use them for all of her processing - I was the one who got her to switch to IBill a few years ago, since I liked some of their features better, but in retrospect, this proved to be a mistake... CCBill has a "family" feel to it, and enjoys a loyal following among many of its users, partly because of the ease of use and widespread acceptance of their affiliate program, which has long let even the smallest of sites become "a sponsor program."
Epoch, on the other hand, has always had a "big boy" feel to it. Pick any of the top sites and sponsor programs, and you'd find Epoch as their processor of choice. Pioneers of the cross-sell and other innovative offerings such as the ePassporte Virtual Visa, they are as strong as any company in this challenging arena can be, and I tend to believe that they will be the last company allowing a VISA/MC processing solution.
In my own personal opinion, the IPSP model (at least as far as processing VISA in the adult space) has a limited life span, since I believe that it's only a matter of time until they decide (like AMEX before them) that they no longer wish to work in adult. While there will always be a way for adult merchants to accept payment for porn, the real problem is that every time you're forced to switch your primary processors, you stand a chance of losing your re-bills (at the very least).
This disruption of business is why I simply can't recommend jumping from processor to processor - or trying every new startup processor – something that many folks seemed inclined to do, especially if they're trying to avoid paying VISA fees. With something as important as getting paid for the products and services you provide, going with anyone other than the industry leaders can be a serious mistake.
Of course, there are ways in which you can have your cake and eat it too – including ways of using both CCBill and Epoch, as well as other top-notch IPSPs, to not only increase sales, but to spread the risk should the processing situation worsen, and take another company with it.
But that's a story for tomorrow. Stay Tuned! ~ Stephen
