Who's going to drive porn off the Internet, assuming that would ever happen? According to some adult website operators, it won't be the politicians - it'll be the moneylenders.
MasterCard Vice President of Fraud Control Vinny DeLuca says there's little doubt about it - the adult Net is the major chargeback driver. And both MasterCard and fellow credit-giant Visa are seemingly getting tougher with the Internet porn world by the month. They've been hiking the pressure on the adult Web merchants to get the chargebacks down or pay through the nipple rings for them. MasterCard announced at the beginning of last month that adult Web merchants falling into "certain" high risk categories have to keep the chargebacks to less than one percent of their monthly transactions. On April 1, Visa saw and raised, making it less than fifty chargebacks per month.
Wicked Interactive CEO Aaron Karacas told ZDNet "the small guys" would be squeezed out of the adult industry. "It is impossible not to be above one percent," he said.
It seems the new fines are the big problem. Visa plans to charge merchant accounts which don't comply with new chargeback rules a discretionary $5,000 review fee the first month, jumping it to $25,000 the sixth month, and adding to that a one-hundred dollar per chargeback handling fee.
Not to be outdone, MasterCard is getting even tougher - two months past the minimum and an e-merchant has to pay $25,000 per month, going to $50,000 per month after six months and $100,000 per month after ten months or more, according to ZDNet.
Granted, the adult industry contending with considerable chargeback action - usually due to customer fraud and bad customer service - many, like Flying Crocodile mastermind Andrew Edmond, suggest the industry is being labeled a scapegoat. Edmond said the new rules don't account for the numerous adult sites cutting their chargebacks while still facing penalties. "We're doing a heck of a lot better than other industries," he told ZDNet, adding he aims at keeping his chargebacks between 1-2 percent per month.
"It's really putting a pinch on the adult community," said Danni Ashe, owner of Danni's Hard Drive. "I keep my charge-backs to one-half of one percent, and we work really hard at keeping it down. We're being horribly penalized for others in the industry."
However, Ashe said she's been marked as a "video-text" merchant and thus now falls into a higher-risk category, with higher transaction rates and fronting $300,000, ZDNet says, to open a new merchant account.
And there seems another fallout coming - ZDNet thinks third-party pay processors might be moving to drop the Net porn business, thus triggering a movement toward consolidation in the e-porn world and forcing those that remain to clean it up financially. Craig Tant, Vice President of Phoenix-based third-party processor ccBill, is blunt about it: "The ones that have been less than ethical deserve to get squeezed," he says.
