Merchant Account and Payment Processors

[domweb]

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?

[cd34]

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.

[domweb]

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