Adult web site credit card processing
A friend of mine is catching a lot of grief from online credit card processors. First Paypal said they are not accepting payments for adult web sites, and now probilling is giving the whole credit card processing service the heave-ho.
Any ideas on how to handle credit cards - or is she going back into the cash based business?
Re:Adult web site credit card processing
You would be best to take this to forums and places on the internet the cater to the online adult business world.... there are plenty of places.
Here are a few links:
http://www.adultchamber.com/members/interact.htm
http://www.cozyacademy.com/resources...es/general.asp
http://www.cozyfrog.com/listings/res.../resources.asp
Re:Adult web site credit card processing
After the Patriot Act was passed about 2 years ago, one of the anti-money laundering requirements was that online credit card processors perform a 100% investigation and verification of each of the business persons they were performing credit card transactions for. The major credit card companies themselves (MasterCard and Visa) then chose to institute new requirements for the credit card processing services such that the services could not appear as a "front" for their business clients, but that they must pass on individual identity and transaction information for each and every client (which had not been the case prior to the Patriot Act).
These ponderous reporting requirements basically drove a number of "second tier" processing services out of adult business clients altogether, i.e. GloBill, ProBilling, since they couldn't or wouldn't meet the strict investigation and transaction reporting requirements set down by the Patriot Act and by MasterCard and Visa.
The "first tier" processing services like IBill and CCBill do still offer credit card processing for adult businesses, however it is conducted under very strict new rules....
#1 - they charge a $750 annual fee up front
#2 - they then investigate the adult business itself as well as the person operating the adult business in terms of verified identity, criminal record, credit rating etc.
#3 - if the adult business passes the verified identity (legal US citizen with an actual permanent address), a clean criminal record and a good credit rating tests, they then investigate the legality of any website content that the adult business is offering
#4 - if the website is 100% legal, they will then agree to process credit card charges on behalf of that adult business in exchange for a 20% processing fee.
#5 - every month, the processing services forward a summary of all transactions made on behalf of each adult business to MasterCard and Visa, along with statistics such as cancellations, chargebacks, refunds, and complaints
#6 - if MasterCard or Visa deems that a particular adult business is incurring an excessive amount of cancellations, chargebacks, refunds or complaints they will instruct the processing services to immediately stop processing additional credit card charges on behalf of that adult business (and the processing services will not refund any of the annual fee).
Where PayPal is concerned, the reason they chose to stop processing for adult businesses was not related to the Patriot Act (since every person using PayPal has basically already been investigated at the time they were issued a credit card). Instead it was a corporate policy directive issued to PayPal when they were bought out by their new parent company EBay, who wants to avoid its reputation being too closely associated with adult themes.
I paid my $750 annual fee to IBill last year, but it is coming up for renewal next month. I am giving some long and hard thought as to whether it's really worth it to continue operating my pay website under current business conditions ...
A) having to pay a $750 annual fee +
B) having to pay 20% of every credit card dollar in processing fees to IBill +
C) having to pay about $300 a month in bandwidth charges to my web host +
D) running the risk of a hacker posting a members area password which could create a $3,000 bandwidth bill for me overnight +
E) losing more and more membership signups to "corporate multi-girl websites"
The trend toward "corporate multi-girl websites" is driven by the fact that if a business is willing to spend $25,000 or so they can set up their own web servers, their own secure transaction servers, and they can obtain their own credit card "merchant account" with a commercial bank based on the fact that they have a brick and mortar business facility with actual assets (thus avoiding having to use processing services since they are now able to directly process online credit card transactions themselves). This gives the "corporate multi-girl websites" a cost structure that is at the very least 20% cheaper than an individual website. These "corporate multi-girl websites" also work on the business model of paying cash to models for "one time" photo sessions (thus they don't have to continue paying the models anything beyond the one time modeling fee) and keeping 100% of the website proceeds for themselves. Also, these multi-girl websites can offer a large amount of varied content to would-be paying members, which is difficult and expensive for an individual girl's website to do (since transportation costs and modeling fees for other girls are still involved).
Obviously going with a cash based business, which involves snail mailing of order forms with checks or money orders, gets around the online credit card processing problem. However, these days it also creates new legal problems i.e. an adult business being required by law to verify the age of would-be customers. This is legally assumed to be automatically accomplished if the customer is using a credit card. However, any 12 year old kid can walk into a post office and purchase a money order. To avoid legal exposure this then leads to a syndrome of having to e-mail customers (or include as part of the order form) a request that they photocopy and send some document which is accepted as legal proof of age i.e. their driver's license. Between the hassle of a would-be customer having to use snail mail and also having to provide some legal form of proof of age with his order, most potential customers simply blow off such cash businesses in favor of a different business offering a similar product but with online credit card processing.
Also if the cash business is lax with keeping customers satisfied, or is lax with maintaining records of customer proof of age, they may face potential felony charges of mail fraud, corruption of minors etc. if a customer (or his parents) complain to authorities. If a cash business does perform the required functions of verifying the age of customers and keeping records to that effect, keeping the customers happy via prompt resolution of complaints, and also manually managing a paying member/password security system, the hours required for some person to perform these functions gets pretty ponderous.
To summarize, the credit card companies have seized upon the Patriot Act as a justified means of reducing their chargeback/refund losses to adult businesses, which had statistically been the most problematic segment for them prior to the Patriot Act. By enacting new strict reporting requirements under the auspices of the Patriot Act, the credit card companies have managed to put in place new additional costs and conditions which allow them to throw overboard the majority of adult businesses which had previously been costing the credit card companies lots of money in chargeback/refund losses. These new costs and conditions have lowered the profit margin of small "individual" adult pay websites to the point where their future profitability is questionable at best. At the same time, these new costs and requirements have been circumvented by "big businesses", who can afford to establish a brick and mortar physical business location, allowing them to obtain credit card "merchant accounts" of their own from local commercial banks, which in turn allows them to directly process online credit card charges using their own secure transaction servers at a small fraction of the costs incurred by small "individual" adult businesses. This competitive advantage has then been used to "underprice" the offerings of small "individual" adult businesses, further reducing their business and profit levels.
Re:Adult web site credit card processing
Check out ibill.com and ccbill.com. Those are cc processors that specialize in adult web businesses.
Re:Adult web site credit card processing
Quote:
Originally Posted by Bridgette link=board=6;threadid=5906;start=msg64362#msg64362 date=1074490128
Check out ibill.com and ccbill.com. Those are cc processors that specialize in adult web businesses.
These two "first tier" processors will indeed process online credit card charges as I stated above, but only AFTER you pay a $750.00 initial sign up fee up front, only AFTER you pass an identity, criminal record, and credit rating check, and only AFTER you agree to pay them 20 cents of every dollar as a processing fee.
Re: Adult web site credit card processing
WOW! Thanks for that wonderful information Melonie. I too am having a problem finding a company that will do merchant online accounts for adult products. Every company that I have checked so far will either charge too much! or just wont do adult sites at all. I sell adult toys on-line and do parties. If it weren't for the parties I wouldn't be able to keep my head above water. I'm relying on the web to do well so that when my baby comes in March I can stay home and just do that. So far I might just have to go without a merchant account company.
Re: Adult web site credit card processing
Vixie, I hear you there. If you're very careful about the way you "frame" your party business, it is possible that you might be considered a "straight" business rather than an "adult business" thus you might be able to obtain your own credit card merchant account from a commercial bank. This would eliminate the huge (like $750) annual fees and huge (like 20%) percentages charged to adult businesses who don't have/can't get their own merchant accounts by the online processors.
Also, to make matters worse, last February or so IBill was purchased by Penthouse Corp. - the same Penthouse that operates the magazine and Manhattan strip club. However, word this month is that IBill has lost its underlying commercial bank backing for an unstated reason. IBill is promising that it will actually pay out the money it has taken in on behalf of adult websites once it obtains new bank backing, but this doesn't help the tens of thousands of adult websites who have sold memberships or products to customers via IBill, but who have not yet received their money (and who may be waiting months to get it), and who must now pay their web host/supplier out of their own pocket !
FYI because of the extreme difficulty/expense for a single girl independent adult website to work with online credit card processors these days, I decided not to pay the renewal fee to IBill last month and shut down my pay website. As a result I avoided losing money this month by the purest of luck. Had I kept going, I would have owed about $400 in web hosting and bandwidth bills for this month, but wouldn't have received a dime in monthly membership money from IBill to pay that hosting and bandwidth bill !
Re: Adult web site credit card processing
Someday the Government will control Everything ! Reminds me of Communisn. They will get rid of paper money and everything will be on a card. A man wants to pay for a dance, it comes out of his check card or credit card and the into the clubs bank electronicly.Then the club will credit the dancers at the end of the week. That means the Gov will tax every cent you make and men won't want to have it known that they go to see dancers, so they will stay home.Look for BIG changes in the next 5 years.
Re: Adult web site credit card processing
Well Melonie,
My hubby and I have been thinking about opening another business not adult related only for the sould purpose of being able to get a credit card company at a lower rate in order to run CC for the parties that I do. I don't know if this will be possible but if it does happen I'll let you know the turnout.
Take care,
ViXie
Re: Adult web site credit card processing
I just go another official e-mail that IBill is committed to staying in the adult website credit card processing business, and is making all efforts to cure their internal banking problems. However, they have 'boned' a lot of adult websites recently by not yet paying out to the website owners all of the money they have collected from website customers.
Re: Adult web site credit card processing
Hey Melonie ~ have you gotten any updates from your IBill account? Have they decided to do good with you? Keep me in the loop.
Thanks!
ViXie
www.Sexxxy-Me.com
Re: Adult web site credit card processing
yes, I-Bill just conducted an internet "conference call" discussing how and when they plan on paying out the money they have collected from website members but haven't yet paid to website owners. Of course, like all promises, I'll believe it when I see the check !
Re: Adult web site credit card processing
Melonie~ I can't believe that they are still holding out on you...Sure, when money is owed to them they want it right a way, when they owe you money they have an excuse for extending the deadline. It's a vicious cicle. Let me know what happens.
ViXie
www.Sexxxy-Me.com
Re: Adult web site credit card processing
Wow. Thanks Mel - that was an education and a half! I had no idea as to how any of that stuff worked, and was especially surprised to learn about effects of Patriot Act, etc.
Re: Adult web site credit card processing
For good information (I found in the past tho I'm out of this side of the biz - I used to work for what was once their parent company) I've always relied on the Ynot Webmasters forums (http://www.ynotmasters.com/). They have forums dedicated to the credit card processing issue and also to running adult sites in general. At least it can be a resource for others' opinions on different cc processing companies and a place to ask questions about current issues as they come up.
Good luck... V