The fallout from Visa’s new chargeback guidelines has begun in earnest. One by one, sponsors have been hitting the boards with announcements that clarify how they are going to respond to the new chargeback ceilings, domestic (1%) and international (2%) that go into effect October 1st.
Webmaster affiliate/content provider SilverCash, for instance, is instigating a series of lowered payouts in response to the new set of regulations.
“In the past, we were allowed to have a 2.5 percent chargeback ratio. That ratio has now been changed to 1 percent,” SilverCash president Mike Price told AVN Online.com. “The root of all evil is that we charge the surfer too much and all the companies are up-selling them to another site that’s also charging too much.
“In order to help reduce chargebacks,” he continued, “there will be [fewer] opportunities for cross sales, and we will lower our monthly membership charge from $39.28 to $29.28, a big jump. This change will have to be passed down [to affiliates] in order for us to make some sort of profit, and it also helps us with chargeback issues. No more free cross sales or joining any other sites for free. It’s going to have to be at least a minimum-dollar transaction just to do it for a trial. Obviously, we have to pass this down to our Webmasters.”
All chargeback ratios are calculated on a monthly basis, and are based upon chargebacks and transactions, not dollar amounts. Visa introduced the new program to more closely monitor and manage chargebacks at the sponsored merchant level, with the result that sponsored merchants using more than one Internet Payment Service Provider (IPSP) become new risks to IPSPs such as Epoch/Paycom, CCBill, iBill and PSW Billing.
Sponsored merchants that Visa identifies as being in violation of the thresholds at any IPSP will be removed from all IPSPs with which they do business. In other words, a sponsored merchant could be in compliance with threshold levels at two IPSPs, but out of compliance with a third. Under the new Visa program, that merchant will be put on a list and monitored for six months, subject to termination at the end of that period if the ratios are not brought into line with the new regulations.They may also be fined.
“In addition,” Price said, “SilverCash will be lowering payouts within the next week to $25 per join and $30 per join for those sending over a certain amount per period.
“When I first got in this [business], we were charging our surfers $9 a month, then $14, then $19, then $24, then $29, and kept jumping [the price] up because everyone was competing for the Webmaster traffic in our affiliate program. It’s just gotten too high. It’s just gone the wrong way, and we’re paying them too much.
“By reducing what we’re paying the Webmasters, we can reduce what we charge the surfers. This downward trend is what we need to get our business on the right track and back under 1 percent chargeback ratios in order to [assure] the longevity of the industry. You’re just eliminating the bad guys anyway, the frauds, not the good people. Everyone seems thrilled by it.”
“Epoch/Paycom has also made some new regulations that we must follow,” added Price. “We will now only be offering one easy click on our join pages; there will no longer be free easy-click joins, and people joining can be charged a maximum of $20 per month.”
“Obviously there will be changes to the billing models we will process and some minor precision adjustments made to our back end processes,” confirmed Rand Pate, director of corporate communications for Epoch. “The clear goal is to be fully compliant with the Visa regulations, which although stringent, are not impossible to work with. We have already met the 1 percent threshold imposed by MasterCard, so there is no reason that the same cannot be done with Visa.”
"There isn’t anything we can do," said John Lombardi, CEO of PSW Billing. "Visa has lowered us down to one percent, yet still calls us a high risk business and retroactively charges us exorbitant fines and rates. We’re at their mercy ? same with MasterCard ? and we have no choice but to comply. It’s discriminatory, and it’s only our industry gets these ridiculous fines.
“What it does is [take us] back to the old days. If you’re a Webmaster, you give the people what they paid for, let them cancel when they want to, and you don’t do blind cross sales. Basically, don’t screw your customer and update your members areas, and you’ll keep your chargeback rate down.”
As previously reported to AVN Online, PSW Billing recommends a few general guidelines that all adult site owners should take into consideration: Webmasters should review their processors Acceptable Use Policy and Terms & Conditions, and be in compliance with current and updated regulations; customer service is strongly encouraged by providing visible links for both the Webmaster and customer support on both the main page of the site and within the members area.
Some sponsors, such as OrgasmCash and GigaCash, said that they have always had chargeback ratios lower than one percent and will not be affected by the change. An announcement from GigaCash stated, “GigaCash has always had extremely low chargebacks due to our proactive fraud watch policies. Regardless of such obstacles, we will continue paying top industry payouts.”
Mansion Productions is taking a creative approach by offering their customers free upgrades for their MPA2 program to reflect Epoch/Paycom’s new policy of not accepting merchants who also processing with iBill. “You have to stay on top of everything,” Mansion Productions president Garry told AVN Online. “We thought it would be a nice gesture.” The MPA2 program offers cascading processing, where online transactions are sent through multiple processors, resulting in a higher sales ratio and more recurring income. “We have customers like Triple X Cash, Mens Niche, Helmy, Boob Dollars, Adult Mega Cash and many more using this program and everyone loves it, not only because of the extra 20 percent more signups they get using the cascading, but also because it has a lot of great features that they can offer their Webmasters.”
“It's hard to tell what the effects [of all this] will be,” said Pate, “but I believe we will start to see a change in payout structures, a more reasonable approach to paying for traffic which is more in line with what it's actually worth, and a chance for more small to medium size webmasters to compete in the marketplace. Further, it is my belief that we may begin to see a resurgence in revenue-share programs.”
“What [the Visa changes are] going to do,” said Lombardi, “is make an honest Webmaster out of everybody. It going to be a shakedown.”