Choosing A Billing Mechanism: Part 2

Stephen Yagielowicz
In the first installment of this series, we looked at using your own merchant account as well as third party companies to process credit card transactions. Today, we'll discuss cascading systems, alternative billing mechanisms, and the use of age verification systems as a billing mechanism:

Cascading Billing Systems
We left off our discussion of IPSPs by examining some of the differences between the two biggest players in the US market, Epoch and CCBill. Both of these companies provide basically the same "bottom line" service: they allow you to accept VISA and Master Card from your site's visitors. This, however, doesn't mean that they are "the same," and the practical differences go beyond Epoch's offering of ePassporte and CCBill's strength in Digital Rights Management.

To understand where I'm going with this, it's important for you to recall what I said about "scrubbing." Scrubbing doesn't simply help to eliminate fraud, it can also prevent legitimate, but perhaps "questionable," transactions from being processed. This means that a surfer, with credit card in hand, is trying to join your site – but can't – because the IPSP's scrubbing mechanism is declining the transaction. There are many reasons that this can happen; such as the prospect may have done a chargeback on another site the IPSP processes for.

The proprietary algorithms that each IPSP uses for scrubbing are their's alone, and federal anti-trust laws (or so I am told) prevent IPSPs from sharing a common "black list." The practical effect of this situation is that a legitimate transaction that is declined by one processor may be accepted by another, and if you had a way to "shop" the transaction from IPSP to IPSP until someone accepted it, you would increase sales from existing traffic. This process is known as "cascading."

Once the province of tedious hours of high-level, in-house programming, Mansion Productions' MPA2 program allows operations of nearly any size to enjoy the benefits of a cascading billing system, and allows you to use both Epoch and CCBill (among others), passing ("cascading") the pending sales transaction from one IPSP to another until it's accepted - giving you the best of all worlds.

While this system is more complex and expensive than using one IPSP or another, the increase in revenue and ease at which an affiliate program may be run, makes this a "must have" option for serious paysite owners.

Alternative Billing Systems
"Alternative Billing." For the purposes of this discussion, the term is meant to denote "accepting anything other than VISA or Master Card for payment." While a great many operations might find that 80% or more of their transaction volume comes from VISA/MC, there are also a great number of prospects who either do not have a VISA (or Master Card), or who are unwilling to use them for the purchase of online porn – either out of fear of fraud, identity theft, or "mom" seeing the bill...

Although some operators seem satisfied with reaching 80% or so of their prospects, most folks I know would really love to have "a 20% raise" – the net effect of reaching the non-VISA/MC market.

Alternative billing mechanisms run across a broad spectrum, including online checks, checks and money orders in the mail, non-VISA/MC credit cards, debit cards, pre-paid cards, token systems, phone billing, SMS billing, dialers – the list goes on and on. While a detailed look at each of these mechanisms is well beyond the scope of this article, there are a few important factors to consider:

First, anytime a prospect is required to "pre-fund" one of these vehicles using his VISA/MC, you are introducing the problems and objections associated with him or her using his VISA/MC directly, as well as a whole new layer of complexity and uncertainty resulting from the use of this intermediary processing method; and because porn is an impulse – and usually "time sensitive" – purchase, this can cause your prospect to look elsewhere.

Secondly, you should embrace a "the more the merrier" attitude towards alternative billing. Use as many methods and systems as possible, and practical, in order to make it as easy as possible for the prospect to join your site. Too many billing options are never enough...

Finally, don't focus on alternative billing as an alternative to accepting VISA/MC, but as an enhancement to it. Offering options, rather than hiding limitations, should be your goal.

Access Verification Systems
Long the friend of "the little guy," the use of an "Age," "Adult" or "Access" Verification System (AVS) such as Pro Adult as a billing mechanism offers the advantages of cascading billing and an easy to administer affiliate program, without requiring an up front investment, or the payment of VISA fees.

While the "cost" of going this route includes limitations on the amount, type and quality of your content, as well as a potentially lower payout per sale, this can be more than made up for by the increased number of sales, and extraordinary retention, that leveraging the AVS' own content base offers. For example, smaller sites with only a couple hundred photos can promote all of the additional content the AVS offers as part of their tour, providing prospects with additional incentives to join. Whereas a member could easily see your few hundred images in a day, it would take him months to go through all the content the AVS offers – meaning long-term recurring payouts for you.

Depending on how you work it, smaller paysite owners might also use an AVS as an alternative billing mechanism, popping a "bonus" offer off of their standard join page. For example, a small amateur site that uses CCBill might not offer enough content to convince a prospect to join, even at a low monthly rate. A typical method of handling exit traffic would be to fire a console that features a "friends" page. But imagine the possibilities of instead of (or before) your friends page, you had a combination mini-tour / join page using the AVS: now you can hit prospects with something like "So my offer wasn't good enough? How about I give you my site PLUS all of this bonus material for this price?"

While there are pros and cons to all billing mechanisms, there is one thing to keep in mind: Billing is one of the most vital and challenging aspects of running a paysite, with an endless series of tweaks ands nuances required to "get it right." In today's market, it is wise not to focus solely on one method of retrieving revenue from your site, but on as many as possible. Give the people what they want – especially in the choice of how they want to pay for it.

Stay flexible! ~ Stephen