One of the hottest topics of this year's Internext, held at the fabulous Westin Diplomat Hotel here, was the new regulations handed down last month by credit card giant Visa. As a result of these new rules, many Internet Payment Service Providers (IPSPs) have been forced to make some changes in the way they do business, while others are scrambling to stay afloat.
On the final day of Internext, Sunday, Aug. 3, this controversy was discussed in detail at the Billing Roundtable. In attendance was CCBill CEO Ron Cadwell, corporate transactions attorney Sean E. Macias of Leader Kozmor Macias, Paycom CEO Christopher Mallick, and Karen Campbell, director of sales for Netbilling (filling in for Netbilling president Mitch Farber). Moderated by Frederick S. Lane III, an author and attorney who specializes in Internet-related issues, the panel focused on how IPSPs can survive in this climate and how to fight fraud, the real reason for these recent clampdowns.
Reminding us that MasterCard issued similar regulations last year (they have been at one percent for 22 years), and that Visa is simply following suit in an attempt to avoid fraud, Cadwell noted that CCBill was going out of it's way to stick to the new regulations and that everyone else should, too. "Running a quality Website" is the most important thing, he noted. "Not just getting customers, but keeping them. We have to play by the new rules."
"Now, only the smart will survive," added Macias, who explained that, "Visa and MasterCard want you to be successful, but need to avoid fraud."
Fraud was a major bone of contention during the roundtable, with panelists and audience members alike trying to figure out how to prevent it, be it from fly-by-night IPSPs or the customers themselves. No matter the source, one thing was made clear: it is up to the adult business to fight it on their own behalf, as, clearly that is exactly what Visa and MasterCard are doing.
"Visa is a political organization," said Cadwell. "They don't want their cards used for questionable purposes. They don't care that Webmasters are being frauded and not doing the frauding."
"It's not so much that they don't care so much as they're trying to protect themselves," added Macias. "You have to put the mechanisms there to protect yourself. Visa doesn't want to be used for age verification." Noting that Visa is clamping down simply to weed out the fraud perpetrators, Macias noted, "They just want a smaller pool. They want to know who the players are."
Stating that Visa wants chargebacks down and wants to avoid liability, all the panelists were quick to remind the audience that Visa is not the bad guy and that, like everyone else, are simply trying to protect themselves.
"They are trying to stop the cowboys," said Mallick. "They've spent a lot of money to see who's complying and who isn't."
So Visa doesn't have it out for the adult industry?
"Adult chargebacks are no worse than Toys R Us chargeback [to Visa]," assured Mallick.
"High risk is not just adult," added Cadwell. "These rules apply to others, too, like the travel industry. There's no big government conspiracy against adult. Visa understands this industry [and] has spent a lot of money to see what where you are and ID you."
"They are getting to the point where they will leave us alone," Mallick predicted.
"It's an evolving process," Macias said. "The bottom line is that Visa has guidelines and everyone has to comply."
So what does the future hold? How can IPSPs survive these tough times?
"Don't be greedy," offered Campbell.
"Give customers what they want," offered Macias, noting there are "alternative billing solutions, but whatever it is it has to be industry-wide." He suggested, "Electronic signatures will help."
"Offer shorter memberships, one month instead of three," recommended Cadwell.
Macias concurred: "People don't want to watch the same movies over and over again, so why do they want to go to the same sites over and over again?"
"Do your homework and use whatever tools you have to prevent fraud," summed up Mallick. "We need new and better ways to fight new and better fraud. Every industry has to police itself."