As NETbilling looks back fondly on that fateful summer of ’98, when Mitch Farber founded what would become one of the longest-lived payment processors in the biz, the company shows no signs of resting on its laurels.
If anything, Farber is as laser-focused and ambitious as ever, with an unquenchable thirst for industry knowledge. And he prides himself on staying ahead of the curve, having resisted the temptation to go public with his rapidly expanding company in its early days and becoming an expert in adult merchant processing early on.
We work hard and want happy employees, because happiness means more productivity. And when a business is more productive, that means it is working faster; and when it works faster, it can get a leg up on the competition. So it’s worth the investment for companies to build and nourish their culture.
Along the way, NETbilling cultivated partnerships with more than 20 banks to help retail and e-commerce clients of every stripe find what they need. Now, they serve a diverse clientele including doctor’s offices and professional sports teams.
Offering a suite of services like tools for up-selling, cross-selling, customer retention and fraud defense, as well as in-house call center services, Farber says that NETbilling has come to rely upon client referrals for much of its new business dealings. Such is their confidence in positive word-of-mouth marketing.
And so, to chronicle two decades of payment processing success, XBIZ sat down with Farber for this exclusive company profile.
XBIZ: Tell us about the genesis of NETbilling and what inspired its founding.
Farber: Originally, back in 1997, I started my own adult sites to supplement my income because a friend of mine was doing well with the same thing by just having some pics and video feeds. We learned to manipulate the “Infoseek” search engine to get front page listings for top porn search keywords and used a company called Lancelot to process our credit card transactions in real-time.
They offered recurring billing, but charged 20 percent, which was crazy, but there were not really many other choices out there at the time. We decided to get our own merchant account, which saved us money, and found a company out there that offered a basic payment gateway we could use our merchant account with — and they did recurring billing too. However, the system was very simple, offered no fraud scrubbing tools and was extremely limited.
They wound up having about 50 adult merchants and we had developed a relationship with the owner. One day, the owner (a devout Mormon) decided that, morally, he could not process for adult companies anymore, so he asked us if we wanted to buy them out. We negotiated a price, we borrowed money from family and we were on our way.
At the time, our adult sites were doing very well, but now our lives were about to change forever as we shifted our focus from content to processing. We wanted to provide a full-service processing system that could still be fully tailored to each particular merchant’s needs. So we assembled a staff, decided to call the company NETbilling, registered the domain name and opened for business in July 1998. This was the beginning of NETbilling and we have been running hard ever since!
XBIZ: How has the billing landscape evolved since those early years, in a nutshell?
Farber: When we started, we did not know what to expect. So even though we had goals, they were really guesses, as we had nothing to compare them to. The internet bubble came and went a year later and while many startups were going public — although we had offers to do the same — we decided not to. We continued to grow and so did our merchants while we were watching these public startups go under left and right. It was really bizarre to learn so much in such a short amount of time while watching so many businesses fail in the internet space, as adult continued to grow and prosper.
At that time, other big companies were doing well as third party processors, but we were really the only processing company who became an expert in adult merchant processing for those companies with their own merchant accounts. Rather than join the third party processing club, we decided to stick to what we were doing, open our call center and provide all of the same as the third party processors, at a fraction of the cost. This is still our business model today, 20 years later. Today, having a merchant account is the norm for the majority of all businesses accepting credit cards; whether it is adult, mainstream or retail.
XBIZ: Speaking of evolution, you recently celebrated your 20th anniversary! What did NETbilling do to mark this historic occasion?
Farber: We are planning a special year-end event for our employees ... we don’t want to ruin a surprise.
XBIZ: How do you cultivate such a winning team at NETbilling, in terms of company culture and employee development?
Farber: I learned a long time ago that employees love pizza! Seriously though, we have been very blessed to have several of our staff members be with us for so many years now. Of course we have turnover, but our key employees are mostly all beyond 10 years of employment at NETbilling.
We work hard and want happy employees, because happiness means more productivity. And when a business is more productive, that means it is working faster; and when it works faster, it can get a leg up on the competition. So it’s worth the investment for companies to build and nourish their culture. We strive for that.
Also, I have been involved in the operation of our company since day one, and continue to be every day. It goes a long way with employees and clients when the owner and founder is involved in the day-to-day operations. I strongly believe it is very important to do so, and a big key to our success. Our employees are winners, and it shows to our clients and business partners.
XBIZ: Talk about the distinct needs of retail merchants vs. e-commerce clients, and how NETbilling fulfills those demands.
Farber: Although NETbilling started as an e-commerce payment gateway processing company, we have grown over the years into servicing many retail clients as well. We have partnered with more than 20 banks to offer both our retail and e-commerce clients a variety of solutions from shopping carts, to phone swipe products, to full blown point of sale retail processing systems.
NETbilling services a variety of clients in retail from doctor’s offices to professional sports teams, and everything in between. Retail clients are often much more price sensitive and less feature sensitive than e-commerce merchants are. They typically require more hand holding as well.
XBIZ: What kinds of customer retention tools do you offer clients to upsell and cross-sell?
Farber: For many years, NETbilling has offered multiple tools for our clients to be able to gain and retain customers. We know that once a client spends money the first time, they are likely to do so again and therefore extremely valuable. Our APIs make upselling, cross-selling and one-click purchases extremely simple. NETbilling handles all card storage on behalf of our clients, while maintaining full PCI compliance.
XBIZ: Discuss how your fraud defense tools and in-house call center services help address chargebacks and transaction fraud.
Farber: The NETbilling payment gateway offers numerous fraud defense tools to help our e-commerce merchants fight online fraud. This is often called “fraud scrubbing.” Your transactions are “scrubbed” based on more than 15 filters that are in place that compare data including credit card numbers, email addresses, street addresses, IP addresses, bank BIN numbers and many other factors.
We have 20 years of data compiled, including information on good and bad cards, as well as customer data that have previously charged back with a merchant in the NETbilling gateway and elsewhere. In the fraud defense setup within the NETbilling administration area, our merchants have the ability to select or unselect any fields that you may want to exclude when we scrub your transactions. The flexibility of our tools and customization ability gives NETbilling merchants an incredible way to combat online fraud.
NETbilling’s in-house call center (located in our Valencia, California facilities) is fully staffed 24 hours a day, 7 days a week, 365 days a year, so you will be able to minimize the risk of chargebacks and increase customer confidence and satisfaction, by allowing your customers to speak to a live person anytime of day or night. Each company is assigned their own customized email address and a set of local and toll free phone numbers. NETbilling enables you to personalize our customer service for your company and customers in many ways. You have the ability to choose your own greeting, include specific policies and procedures for your products and services and dictate how your specific account should be handled by our representatives.
We provide inbound and outbound customer service and order placement/verification for many of our merchants in both the adult and mainstream industries. Our representatives are fully trained and confident in providing the highest standards set forth by our clients. We do understand that many of our merchants use multiple transaction processors and offer the ability for us to handle all of their customer service for all of their processors, not just the transactions that are processed through our payment platform.
XBIZ: What is NETbilling’s approach to marketing and acquiring new clients?
Farber: While we do promotions at various trade shows including adult events and mainly mainstream shows throughout the year, NETbilling thrives on client referrals. We offer a lucrative referring partner program to agents, and several banks and ISOs that we work with refer clients to us as well.
XBIZ: When should a merchant choose to acquire, operate and manage their own merchant account? Discuss the milestones they should have reached, their primary considerations and what they should have in place before approaching you for a merchant account.
Farber: I believe that for mainstream, retail or adult products, a merchant account can be obtained day one. A merchant should have a DBA or business license and a business checking account, as well as good personal credit. For adult subscription, dating or live cam processing, I recommend a merchant get their feet wet using a third party processor as they learn what processing is about for a few months, and focus on content, traffic and marketing. Once the business is generating steady income of at least a few thousand per month and the merchant is ready to take more control and monetize their profits, a merchant account is surely in order.
XBIZ: There must be a difference between a merchant who approaches you for a merchant account and services, and the merchant who approaches you already in possession of merchant accounts, seeking your gateway services and call center. Tell us about the differences you’d expect to see between these two clients.
Farber: As long as a merchant comes to us with a merchant account that is compatible with our NETbilling gateway, there is no difference. We work with many many banks and backends.
However, merchants sometimes come with a merchant account that is improperly coded or not even the proper type of merchant account, because some merchant account reseller who is trying to make a quick buck locks a merchant into a lease or tells them the account is okay for adult when it is not.
We highly recommend that merchants check with us prior to getting a merchant account elsewhere, as we work with so many banks. We can always get rates far lower than a merchant can get on their own.
XBIZ: Can you give us a glimpse of new NETbilling developments on the horizon, either in the form of upgraded systems or enhancements requested by clients?
Farber: NETbilling is constantly adding new hardware and enhancing our software with new features and ways for our merchants to make more money. We have just added two new offshore banks and plan to add several more before the year is over. Mobile payments are where the future is moving quickly and we are focusing efforts there as well, as the entire payments landscape moves to a more “card and customer not present” world of commerce.