Panic, hoopla and hubbub. The boards are burning up with talk about the latest regulations impacting third party processing for the adult Internet. Third party processing has been a godsend to online porn purveyors because third party allows them to accept Internet credit card transactions without having to set up their own personal merchant accounts.
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"Third party processing is not the only e-commerce solution for porn but it is a much used and important one." |
Acquiring an actual merchant account requires impeccable credit, a relationship with an approving bank and large start-up fees/deposits. Those who attempt to procure merchant accounts for processing adult entertainment and services have the additional difficulty of being automatically designated as high-risk. They have a harder time finding banks that will work with them and they face higher penalties and lower charge-back ratio thresholds.
Third party processors already have relationships with (acquiring) banks. When your site suffers a charge back ratio of a measly %1-%3 the third party processor absorbs the penalty fee. That fee can cost tens of thousands of dollars. Third party processing is not the only e-commerce solution for porn but it is a much used and important one.
Visa is the major credit-card-acquiring-bank-association-let-us-sell-some-damned-stuff dynasty that "allows" online porn transactions. MasterCard and Visa are virtually the same company and few surfers use Discover cards. American Express washed it’s hands of net smut almost at the beginning of the dot com explosion.
There are other games in town but for online porn, Visa disputably owns the board. Third party processors are our agents who must comply with what Visa mandates or there’s no shopping carts for a lot of adult webmasters. Visa has given third party processors some new regulations that are to be in place by November fifteenth and they directly effect the entire online porn industry.
I have read the official statement cooperatively released by third party processors IBill, CCBill, Epoch/Paycom. I am presently picking a few brains better than mine to research the finer details of this new regulation. For the purposes of this article I shall first analyze a few of the point in this official statement as I and only I see them. In the next one, maybe two articles on this serious subject I’ll give a more informed perspective on this sudden change our smutty status quo.
I’m not an accountant. I’m not a lawyer. I am simply providing my interpretation of the above mentioned processor’s statement. We -the customers of these companies- were not provided with an official directive from Visa. That declaration released by IBill, CCBill and Epoch/Paycom is the valid word of the moment.
"Under the new Visa rules, iBill, CCBill, and EPOCH / Paycom along with other providers in our market space will be considered IPSPs. An IPSP is a company that provides a broad array of services and has financial responsibility and liability for merchant accounts whereby you, our clients (Sponsored Merchants) are allowed to process and settle Internet transactions."
Point one translates to me that third party processors are the wild fillies the credit card companies have been itching to reign in and corral in their stables. Visa has formally designated third party to have Internet Payment Service Provider (IPSP) status. Visa is apparently recognizing third party processors as a real financial entity. Since adult online transactions are a miniscule portion of Visa’s entire income the fact that they haven’t dropped porn processing entirely should be a relief.
"Each Sponsored Merchant must complete a registration form that we will submit to Visa on your behalf. A form will be provided to you by each of us, electronically, as soon as possible. Some of the data elements required are: company name, address, transaction counts, dollar volumes, URL’s, etc.
.An initial registration fee of $750.00 per company (not per url) will be charged to register each Sponsored Merchant. $500.00 of this fee is payable by the Acquiring Banks to Visa, the balance are administrative fees to the banks and processors. These fees are due November 15th.
.An ongoing annual registration fee of $375.00 will be charged. $250.00 of this fee is payable by the Acquiring Banks to Visa, the balance are administrative fees to the banks and processors."
Point two says to me that anyone who has been using fake contact information or has been hiding in the shadows of the adult net had better get ready for the days of full disclosure. Every one who sells content, runs paysite(s), sponsors affiliate webmasters and does so with an IPSP are now under the Visa searchlights. If you’ve nothing to hide, you’ve nothing to lose by complying with this regulation. You’re going to have to shell out $750.00 and you’re going to have to do it quick. After that you gotta give up $375.00 annually for the privilege of selling smut on the web.
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"Sponsored Merchants must be approved by Visa for processing Visa transactions under the new rules, and will be checked against Visa’s TMF list (Terminated Merchant File) and the MATCH File, a joint Visa / MasterCard database. You are obviously processing now, so that service will not be interrupted if you have paid your registration fee and completed your registration form.
.IPSP’s can only register Sponsored Merchants in the country where the Sponsored Merchant has a presence.
.IPSP’s are required to provide Visa with monthly sales, chargeback and credit data for their review, by Sponsored Merchant and down to the URL of each Sponsored Merchant site. Sponsored Merchants who are out of compliance on chargeback and / or credit ratios may be terminated at Visa’s discretion. Please Note: Your ratios at all IPSP’s will be evaluated by Visa."
Point Three tells me Visa is synchronizing their database with those of the IPSPs so no TMFs fall through any cracks. You’re going to have to reside or have some form of operation base in the same country as your IPSP. You will have to supply Visa with superior accountings of all money taken in or charged back and the URLs of those transactions and you better do it every month. You can use more than one IPSP that much is clear. The sentence, "Please Note: Your ratios at all IPSP’s will be evaluated by Visa." Is a little vague. Does this mean our charge back ratios will be lumped together or averaged out among our different IPSPs?
Credit card descriptor on the cardholder’s statement must be the IPSP’s name, as well as the Sponsored Merchant’s identifier, such as your company code.
.The IPSP’s Join Form must disclose the IPSP’s name and the fact that the billing descriptor will be the name of the IPSP and the Sponsored Merchant’s identifier.
.IPSP’s will display, on the Join Form, their Privacy Policy along with Terms and Conditions.
MasterCard"
Point Four is also about disclosure for you and your IPSP. In this business the horny impulse buyer is our favorite buyer. All of the above probably translates into more form pages the surfer has to download. In turn their dicks get softer and softer and some sales will be lost. Then again, determined surfers who suffer web forms are better customers because they are informed. I like disclosure. I like knowing little details like the names of the companies debiting my bank account. Call me kooky.
"The MasterCard logo cannot be displayed on the client’s sites."
Get it off now you dirty sex perverts! Is MasterCard going to bail on adult?
The rest of the statement gives specific dates your IPSPs will send Visa registration forms to you. They also state the dates when the Master Card logo should be removed by and when your IPSP will post their privacy policy on their join pages. If you want to know more contact your IPSP formerly known as your processor.
I’ve given you the thoughts, questions and understandings I gleaned from the joint statement. Come back to Cozy Frog to read my next installment. In it, I’ll share my deeper research into the implications of this newest and hottest adult industry news.
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