Merchant Account and Payment Processors
 

OK. On the premise that their is no stupid questions...

I have reviewed the paysite payment model often enough to form a picture of how it works. Please correct me if I'm wrong.

To process credit cards for two, you need two things:

1. A merchant account where the issuing merchant bank accepts adult transactions.

2. A payment processor company that will do the legwork of running a web client through name/address/cc process and checking for available funds, debitting the funds, etc.

The adult side issues come in at two levels:

1. Finding a merchant account that will process adult transactions, especially web sites. Adult products always raise eyebrows and adult website memberships burden the staff with a higher ratio of chargebacks and fraud claims.

2. The payment processors who will take on adult transactions are few and far between, charge a high premium, have plenty of fees and there are plenty of strange waves going on there right now (IBill, Verotel).

So...does that make sense? Or am I missing something?

If you can get an adult merchant account, there is no shortage of gateways that you can work with. If it is your merchant account, you can then pay a small monthly fee and a per transaction fee to a NUMBER of gateway processors that already have member/subscription processing.

Netbilling and ATS both charge $20 for a monthly statement fee and either 1.5% + 15 cents or .30-.50 per transaction. You don't need to pay the 15% to the processor. Even Authorize.net will run members sites through their system at a $20/month and .30/transaction + an AVS authorization fee.

The only companies charging the 15%+ are the ones running IPSP accounts where they are sponsoring you. The IPSP usually includes some end-customer support, etc.

Of course, your bank will charge you a discount rate based on a number of factors. Higher risk might get you in the 3.5% rate to start with. Your personal credit history (or the credit guarantor), length of time in business, the greediness of the person taking your application and your eagerness/desparation level will all affect your discount rate.

Then you get the CISP stuff where they charge you $500-$2500/year to run Nessus & Nmap (both free programs) against your server and certify that you are 'safe'.

Multitude of ways that Visa/MC will get your money, but, the 15+% is usually when you have an IPSP account like CCBill, the recently stated Verotel Pro account, Epoch.

IBill has moved to transaction processing -- however, appears to still be using the IPSP model even for gateway processing. Perhaps that is their value-add for using their fraud scrubbing, customer service, maintaining CISP status, etc.

Although, Netbilling can do all of the same if you have a merchant account. If you've got a business account and have lived at your current residence for more than 6 months, talk with Karen or Mitch @ Netbilling -- they can help with the acquisition of an adult-capable merchant account.

I have no relation with them other than having written quite a bit of code for various clients of mine to interface with their system.

Thanks alot for the feedback. That clears up several of the 'hazier' points.

|bananna|