Those are just a few of the Internet billing companies that have gone out of business in the last three years, a sure sign of how dangerous this part of the online industry can be.
And yet, there are billing companies like Amsterdam-based Verotel Merchant Services that have thrived in this perilous environment. What sets them apart?
"Our broad array of billing and payment options," answered Darryl McDade, Verotel's merchant relationship executive. "We are one of the only billing companies that provides third-party solutions as well as merchant accounts. We have the merchant account with the bank, and the merchants that process under those third-party processing accounts basically process their transactions on our merchant account. So it's more like an aggregate system, where all of the merchant accounts are under our hat."
Verotel's wide array of billing methods includes Visa, MasterCard and JCB credit cards. The company also accepts online checks from U.S. checking accounts, direct debit from German bank accounts, Chinese debit cards, and even a 1-900 billing method for the U.S. and six European countries. Verotel also recently added SMS billing (short messaging system, similar to text messaging in the U.S.) for its end-users in the U.K.
"Our added value as a billing company is that we manage the relationships with the banks," McDade said. "We monitor the chargeback levels and refund levels of the individual customers who are processing with us. We're the only payment processing company that provides third-party processing as well as merchant accounts."
Basically, Verotel offers three different accounts. The entry-level account, called Tickets Club, is a third-party processing account that requires no setup fee and no Visa or MasterCard registration fees. Verotel simply charges a flat processing rate, and customers can be processing within two or three days.
A step above this is the Verotel Classic account, which is similar but has a different acquiring bank. It requires a $350 registration fee.
"If it's an individual signing with us," McDade said, "he would have to send us information, like a copy of his passport and a recent utility bill which contains his name and address. For a company, we ask for copies of passports from the company directors, its articles of incorporation and its corporate bylaws. Once that is done, the company can be processing with us in two to five days."
The top rung is the Verotel Pro account, which gives customers their own merchant account with the acquiring bank. It's basically a Verotel-sponsored account, which uses its reputation to vouch for the customer with the bank.
"The customers get their own descriptor," McDade said, "so the customer's website name or company name appears on the end-user's credit card statement. There is a registration fee on the Pro account of approximately $1,200, $1,000 of which is a MasterCard registration fee, and the rest of the charge is for registering with the local chamber of commerce."
The majority of Verotel's customers are entrepreneurial rather than end-user types, webmasters in the adult industry. All of the accounts allow customers to accept payments in U.S. dollars, euros, British pounds and seven other currencies. But one of Verotel's biggest advantages over the competition is that in certain countries, they are the only billing game in town.
"Many billing companies accept only merchants in the U.S. and Europe, which leaves Canada and Australia out in the cold," McDade said. "We were just at a show in Toronto, and the feedback we got there was basically, 'You guys are the only ones who can process for us.' I get the same thing from Australian webmasters."
Verotel's customers also have been pleased with the conversion rates of their sites, according to McDade.
"Our customers have told us that their sites convert better overall with Verotel, primarily in the European market," he said. "Being located in Europe, and having different acquiring banks than most of our competitors, we process transactions better for the European market. There are fewer declines than what our U.S. counterparts have with European transactions. And on the flip side, I've never heard anything negative about us in processing U.S. transactions."
About the only complaint Verotel has received so far centers on the company's rate charges, which are higher than most. While McDade admits that Verotel's service is more expensive, he insists that customers save money in the long run.
"I've heard people in sales say that we charge an enormous percentage just for doing transaction processing, while they can get their own merchant account with a merchant bank at a much lower rate," he said. "That's true, but they wouldn't have a lot of the services that we provide, like fraud scrubbing, risk management and customer service. If they provided those same services for themselves, they would wind up paying more than they pay us."
When McDade mentions "fraud scrubbing" and "risk management," he is reciting the duties that all companies like Verotel must apply to guard against online billing scams.
One of the most common schemes is reseller fraud, in which an affiliate gains access to stolen credit cards, credit card numbers or possibly even a credit card generator and pushes through transactions on a site. Upon receiving the commission, the affiliate disappears off the face of the earth, and when the chargebacks start rolling in, the billing company has to try to recover the money it has paid out to the reseller, who is long gone.
"You have to watch out for any new resellers that immediately earn massive amounts in commissions," McDade said. "You have to check those transactions. That's part of the responsibility that we as a billing company take on.
"From what we've heard among the credit card associations, our acquiring banks and from talk on the golf course, those companies failed primarily because of mismanagement," McDade said. "They weren't managing their chargeback levels. The money coming in was likely good, and these companies didn't want to lose any of that. Hypothetically, if a $300,000-per-month merchant has a 3-5 percent chargeback ratio, and the billing company continues processing for that merchant, then they're putting that whole merchant account in danger."
