Have you ever wondered when payment processing became all about rates? Perhaps it was a few years back when a recession hit the U.S. economy. Perhaps, at some level, it’s always been about rates.
Although, some recent trends we are seeing does make one wonder. Are merchants finding increased value in third-party payment processing providers? What impacts are the new and different ways consumers are buying having on how merchants are incorporating payments into their business either empowering or limiting the growth of the industry? And thirdly, what does all of this mean for the survival of the processing/billing industry moving forward?
As we go into the future of adult online entertainment, we can learn and evolve to embrace the new, the picky, and the erratic consumer to drive new sales and expand the business even more.
Where We’ve Been
As is the case with many things, a bit more light can be shed on the current state of billing by looking back at where we’ve been. During the heydays of the late 1990s and early 2000s, payment processing was starting to get its legs underneath it and taking off with the rest of the online world. There was little doubt that the need was there as consumers were becoming accustomed to making purchases for online content.
And while those early days were not all shiny and pretty as we tend to remember, the relationship between the webmaster and the e-commerce provider was a partnership which provided a significant value to the online business.
That is not to say that the online environment was not fraught with a number of various dangers — Internet security was not what it is today — but for the most part, merchants were being successful selling and payment processors were being successful processing. Sure there were some ups and downs, but generally speaking businesses were achieving positive results and growing.
And then 2008 rolled around and a recession started to hit the U.S. economy, which escalated into a global economic slump. As a natural reaction to tightening sales, businesses started taking a look at any way to keep their incomes stable, with an obvious path being that of reducing the costs of doing business.
During this time period, as consumer wallets were getting tighter, the advertised rates for payment processing became an easy part of their business to look at. Additionally, as we saw in the market during this time, a number of merchants were presented with new options for banking and processing by emerging businesses and banks, which most likely saw the lucrative nature of the adult business as a desired source of revenue.
Presented with the proposition to reduce fees and the perception that they would retain more on each sale — the question of what the difference in rates between an ISO (merchant account) and an IPSP (third-party provider) would mean for their own business was (and is) a reasonable one.
One of my long-time beliefs is that “A good businessperson never settles — and should always seek the best value for their business success.” It’s always a good plan to examine different options when it comes to owning/managing a business. Price is not necessarily cost. But we get to that in a bit.
Cause and Effect?
During this time of tightening, we also saw a change in the overall online commerce business. Consumers got smarter with using online commerce. Think back to how iTunes changed the world of online buying. People got used to one-clicks with Apple and Amazon wallets.
Financial institutions cracked down on deceptive practices and age-old scams in the adult arena, as well as tightening card restrictions on certain types of business models. Global markets and payment options opened up in new corners of the world. Markets for online content expanded exponentially as more consumers in more markets accessed content from any device, anywhere. And this was back as far as 2007.
In hindsight, how did the industry react? By looking how to attract this changing business or by cutting back on the consumer experience? I have to wonder, which was the cause and which was the effect? Did the decline in the adult consumer sales exclusively occur due to the economic decline in the market? Or perhaps the focus on cutting costs, and for some, the reduction in the quality of the checkout, presented a less-than-progressive experience for that new consumer? Was the checkout so basic, that the buyer chose to look for better options to buy online adult entertainment? Looking back — did the sudden proliferation of cheap, featureless processing accounts have an effect, resulting in the market we have today?
As someone who lived and worked through the tough economic times, I have to wonder if the move to cheaper options with fewer features, fueled the move of consumers to a faster, easier and often free experience. Since 2010, looking at the explosion of sales of mainstream content in music, video, media, and other digital online industries — their growth in contrast to what happened in adult is something that cannot be ignored.
Where We’re Going
Any way you look at it, e-commerce has had a meaningful shift in the direction of the consumer experience. And done so quickly. Just in the past few years we have seen the rise of mobile. The addition of tablets and phablets. The burgeoning smart TV devices. Roku and other streaming media players. Gaming consoles. And Apple Pay.
Technology is a driving force, to be sure, but one that is complemented — or maybe even superseded — by consumer purchase behaviors. People are increasingly on the go. They want access to content from where ever they are, on whatever device they happen to have on them at that moment.
And on the product side, for about the past three years at least, we have seen a revival in the subscription model for online content. From Pandora to Netflix to The New York Times, the new consumer is accustomed to the subscription model and now embraces it. And I think that the adult industry is to be thanked for blazing that trail.
But that consumer is different now. And the webmaster is an established business owner now. In order for the adult site to survive today, it requires an all-inclusive checkout, tailored to millions of people in hundreds of countries. A business needs to adapt to short attention spans and multiple devices with a variety of formats.
The business needs to adapt quickly to changing regulatory issues, global fraud trends and data security issues. It is a different world — but not really. The issues are just different, but the online commerce experience is the same as it ever was — the customer buying experience needs to be smooth, secure and rich.
But these services cost. With so many options for accessing content, one corresponding question businesses and merchants should ask themselves is, how am I going to provide payment options that will work for all of them? How am I going to manage all of this myself?
What it All Means for E-Commerce
We have seen significant success from a number of companies who have figured this out. They have acknowledged the new consumer buying habits, technology trends, and even the globalization of e-commerce are having corresponding impacts on how payments are being processed. As recent as a decade ago, the notion of offering consumers in other countries a payment form that includes their native currencies and languages was a stretch.
Fast forward to current day, and “smart” forms have become the norm. Additionally, today, card not present transactions are undergoing quite a change themselves thanks to e-wallet types of applications or technologies that store the respective consumer’s payment info for quick and seamless access. The point here is the view is often murky at best when trying to determine just what the next big thing is going to be in online payments.
So whether you choose a low-cost merchant offering or feature-rich inclusive processing solutions — the consumer has to be the priority in order to continue to reach a saturated market. The good news is, no one has to go at it alone. There are plenty of e-commerce partners ready and willing to help out. And while developing a business plan is something nearly any merchant undertakes, one thing that can sometimes be a bit overlooked, or maybe even taken for granted, is the payment processing system/solution.
Particularly if the only question being asked is, “what are the rates”? You have to look at the consumer experience management and ask the bigger question: “what are the costs?” and “what are the cost to the business if we don’t offer the best consumer experience.”
Two-Way Streets
Transactions, by their nature, are two-way streets. There is a buyer and a seller. That same logic can be applied to e-commerce. There is a merchant/business and a partner/provider. To really succeed into the next decade and beyond, it’s time to invest in the consumer. Partner with your e-commerce provider — whoever it is — to not only learn what’s new, but also to develop strategies.
As we go into the future of adult online entertainment, we can learn and evolve to embrace the new, the picky, and the erratic consumer to drive new sales and expand the business even more.
It is definitely not the same old e-commerce. It’s a new game.
Gary Jackson, managing vice president of sales and Internet markets for CCBill, brings 18 years of experience in the online media and commerce markets to the adult industry. Since joining CCBill in 2006, he has been a champion for expanding business opportunities for the industry, as indicated by CCBill’s diversification into dating and tangible markets, as well as expanding the CCBill billing automation platform to adapt to changing consumer buying habits. Jackson has been honored in online adult industry with the 2011 Cybersocket Business Person of the Year, the 2012 XBIZ Executive Leadership Award – Web, and was instrumental in helping CCBill be recognized in 2014 by XBIZ as the Progressive Web Company of the Year.
