Visa Says Bye Bye to Cross Sales

[gonzo]

U.S. Senator Rockefeller applauds Visa effort to curb online ‘data pass’ scam

San Francisco, April 27, 2010

Visa Inc. (NYSE: V) announced today it is taking another step in an ongoing effort to protect consumer security and confidence in the payment system by prohibiting web merchants from providing cardholder information to other companies without the consumer's knowledge or active consent.

The misleading practice, called "data pass," usually involves a consumer shopping at a familiar retailer. At checkout, the consumer receives an offer for a discount or reward and does not realize it is from a different merchant and comes with unexpected monthly membership fees or recurring charges. Such deceptive marketing can result in high levels of consumer disputes and degrades the efficiency, reliability and security of the payment system. According to a 2009 U.S. Senate Commerce Committee staff report, 35 million consumers have paid $1.4 billion for "data pass" marketing offers (1).

"Visa's priority is protecting our cardholders and the integrity of the electronic payments system. Consumers who shop online using their Visa cards should be confident that they will only be charged for the products and services they legitimately intend to purchase - not those that are foisted on them through deceptive data pass schemes," said Martin Elliott, senior business leader, U.S. Payment System Risk, Visa Inc.

Visa's rules already prohibit merchants from sharing a cardholder's account number and other Visa transaction information with any entity that is not directly involved in completing the transaction, preventing fraud, or as required by law. To address the data pass practice, merchants will now have to prompt consumers to re-enter their card information to accept a subsequent offer from a third-party merchant. This provides a clear signal to cardholders that a second purchase is being initiated and protects them from questionable marketing practices.

In 2009, the U.S. Senate Committee on Commerce, Science and Transportation investigated the issue and merchants who use this practice.

"I applaud Visa's decision to prohibit merchants from using 'data pass' marketing on its network," said Senator John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation. "The Senate Commerce Committee's investigation showed that this aggressive marketing practice enabled unscrupulous e-commerce companies to scam millions of American consumers out of more than a billion dollars. Our Committee's investigation revealed how appalling this practice is and makes clear it should not be allowed - I'm glad to see Visa has reached the same conclusion."

The announcement follows Visa's program launched in December with the U.S. Federal Trade Commission and Better Business Bureau to educate consumers on deceptive marketing practices. Visa continues to aggressively enforce risk programs to identify and address merchants who use bogus marketing tactics to dupe consumers.

"Protecting cardholders is among Visa's highest priorities, and we want to ensure every business in the payments system has the same commitment to ensuring consumer confidence," said Elliott.

Visa credit and debit cardholders in the United States are protected by Visa's Zero Liability Policy, which protects them from any financial liability in the event of an unauthorized purchase. Visa cardholders also have the right to dispute purchases. Visa suggests a few tips for online shoppers:

Take time to read the fine print and understand all terms and conditions, so what you think is a free or discount offer doesn't turn into recurring charges you didn't intend to make.
Review card statements when you get them for any unauthorized charges, and notify the card issuer promptly of any unusual activity.
Try to resolve the situation with the merchant. If you're unsuccessful, contact the card issuer immediately to dispute the charge.
(1) "Aggressive Sales Tactics on the Internet and their Impact on American Consumers," staff report, Commerce Committee, U.S. Senate, November 19, 2009.

http://corporate.visa.com/media-center/press-releases/press1011.jsp

[housekeeper]

another reason we're paying higher ccbill rates...

[Peedy]

appears to only be 3rd party xsales. You can still do internal? Meaning two properties owned by the same corp? Surely nobody is shocked by this.

[RawAlex]

I don't think anyone is shocked, only shocked that it took them this long to crack down. I can imagine a few programs who will be closing up shop pretty quickly.

[Toby]

I can imagine a few programs who will be closing up shop pretty quickly.

No more bags of money washing up on the shore. :waving:

[EmporerEJ]

Much as I hate to agree with the government about anything, I think it's a good thing.
As long as it stops at the "good stuff."

But how many times have we seen this type of thing become a springboard to expand the legislation into increasing levels of control over merchants?

Visa (and the various merchant banks) already have all the control they need to jerk the puppet strings on every merchant under their thumb. Anyone that is a direct merchant already knows this.

[TheEnforcer]

This will most assuredly have a very large ripple effect in the industry....

[RawAlex]

appears to only be 3rd party xsales. You can still do internal? Meaning two properties owned by the same corp? Surely nobody is shocked by this.

The most aggressive of the cross-sellers owns many of the programs that cross to each other, but has been very careful not to connect them. It has allowed them to open hundreds of different merchant and processing accounts, and to spread the "wealth" all over the place with little risk to their main brand's processing. If they pulled everything under one roof to continue cross selling, they wouldn't have the needed space to process it all under current accounts, and they couldn't take a risk on the high chargeback levels that could take down their main program.

The end result is pretty simple: Few if any will risk their own processing on sneaky, pre-checked, hidden, disguised, or completely non-disclosed cross sales. The value in buying up tired, worn down programs wasn't to get content or sites, but to get another long term existing corporate identity and another set of processing accounts to beat on until they fail. By the time they fail, the money has long since left for the mother ship, making the collapse of the little outside program meaningless.

I expect what you will see is that many old tired programs that were snapped up in the last 2 years will probably go dark within 90 days, almost certainly before September as they lose their merchant accounts and become black holes. Oh, they will keep the domains and redirect the traffic and not pay anyone for it. But that is a whole other story.

[EmporerEJ]

This will most assuredly have a very large ripple effect in the industry....

Ain't gonna ripple on us. I always thought that stuff was sneaky and dishonest.
We never had anything to do with any of that.
I'm glad it will weed out those vendors.

They'll just find another way to "pop up."

[Far-L]

I don't think anyone will be going out of biz but it could be putting a freeze on some business as usual shenanigans...

[RawAlex]

I don't think anyone will be going out of biz but it could be putting a freeze on some business as usual shenanigans...

Far-l, don't you think that groups that were snapping up older, worn down programs in a hurry were not in the process of setting up their cross bill empires? Do you not think they were careful to keep existing corporate / company structures in place for each of these properties rather than merging them, which in turn allows them to obtain merchant accounts for each of these "separate" programs, all the while operating them together with a common purpose?

There are plenty of programs purchased and operating today that haven't have a single piece of new content in years, yet can magically pay $100 per signup without issue? With a $29.99 or whatever pricetag, do you honestly think they are recurring 4 months to even allow them to break even?

The only way they stay in business (and keep getting tons of traffic) is by being able to make huge payouts. Those huge payouts only happen when they can manage to make more than the payout amount up front. So the $29.99 site needs at least 3 or 4 pre-checks to make enough income to pay the bills. Remove the cross bills, and suddenly these sites will actually have to retain to make money. It's doubtful that people will be lining up for sites that haven't been updated in years. They might make a few sales, but not many.

if they drop the payouts to reasonable levels, their conversions need to improve dramatically or they aren't worth it. 1 in 5000 on a $1000 program beats 1 in 2000 on a $35 per signup site. But when the drop to paying out $35 a signup and are still converting at 1 in 5000, they will rapidly drop off of people's lists.

Like I said, my feeling is that you will see many of those "old" programs that were rescued seemingly only to support a cross bill empire end up closing out, mostly because they won't want to put the money back into them to make them functional businesses at only 20% of the income levels.

[Far-L]

Far-l, don't you think that groups that were snapping up older, worn down programs in a hurry were not in the process of setting up their cross bill empires? Do you not think they were careful to keep existing corporate / company structures in place for each of these properties rather than merging them, which in turn allows them to obtain merchant accounts for each of these "separate" programs, all the while operating them together with a common purpose?

There are plenty of programs purchased and operating today that haven't have a single piece of new content in years, yet can magically pay $100 per signup without issue? With a $29.99 or whatever pricetag, do you honestly think they are recurring 4 months to even allow them to break even?

The only way they stay in business (and keep getting tons of traffic) is by being able to make huge payouts. Those huge payouts only happen when they can manage to make more than the payout amount up front. So the $29.99 site needs at least 3 or 4 pre-checks to make enough income to pay the bills. Remove the cross bills, and suddenly these sites will actually have to retain to make money. It's doubtful that people will be lining up for sites that haven't been updated in years. They might make a few sales, but not many.

if they drop the payouts to reasonable levels, their conversions need to improve dramatically or they aren't worth it. 1 in 5000 on a $1000 program beats 1 in 2000 on a $35 per signup site. But when the drop to paying out $35 a signup and are still converting at 1 in 5000, they will rapidly drop off of people's lists.

Like I said, my feeling is that you will see many of those "old" programs that were rescued seemingly only to support a cross bill empire end up closing out, mostly because they won't want to put the money back into them to make them functional businesses at only 20% of the income levels.

lol, and I am sure you are not talking about any A,B,C or Dee company out there... so let's just establish that first.

I agree with where you are going with that and word winging on the wind did say some big names would shutter up, but those kind of "amalgam of programs previously purchased" programs should never be doubted for their ability to exploit loopholes. All the merchant bank blacklists, negative legislation, and of course the evil tubes in the world are not about to change that.

[RawAlex]

lol, and I am sure you are not talking about any A,B,C or Dee company out there... so let's just establish that first.

I agree with where you are going with that and word winging on the wind did say some big names would shutter up, but those kind of "amalgam of programs previously purchased" programs should never be doubted for their ability to exploit loopholes. All the merchant bank blacklists, negative legislation, and of course the evil tubes in the world are not about to change that.

I do agree. Some of the sites I am thinking have dropped the cross sales, but have shifted the default membership selection on their join page to one time, high dollar 6 month or 1 year memberships. I looked at one site (old solo girl site) that was set to $80 for a 6 month membership. While that isn't a really high price, it is pretty much the same net money as 3+ months of recurring, which most programs can't pull off. Certainly an amateur site that is recycling old content isn't going to see that sort of recur very often.

At the end of the day, the real rewards appear to be for the companies that continue to turn out fresh content, new sites, maybe even new concepts (or at least recycle concepts that are old enough to be new again). Those programs continue to generate real long term business that will allow the program owners (and webmasters promoting them) to make money for a long time to come.

[Mediaguy]

Cross-sales opportunities: Good.

PRE-CHECKED cross sales: fuckers.

That is all...

:D