Processors Jockey for Position in Fast-Growing Digital-Content Market

While most attention in e-commerce is focused on enabling payments for Web sites run by major chains, airlines, and other hard-goods merchants and sellers of high-end services, some processors have begun to carve out stakes in a corner of online commerce that doesn't get as much notice?digital goods. This week, Redwood City, Calf-based Vindicia Inc. announced several enhancements to its processing platform for digital merchants to support payments based on usage as well as time and to automatically update card accounts that have expired or changed account numbers. The move by the 5-year-old company follows an announcement last month by Valista Ltd., a processor with offices in San Mateo, Calif., and in Ireland, that it is extending its services to process so-called in-game transactions. These are payments by online gamers for virtual clothes, swords, or other items required for characters to play a given game. And earlier this year, Javien Payment Solutions Inc., McLean, Va., introduced a payments gateway for its platform, which processes transactions for online sellers of music, games, movies, and other digital goods (Digital Transactions News, Jan. 29). The moves come as sales of digital content are expected to soar. In announcing its move into the online-games market, Valista cited statistics from researcher DFC Intelligence indicating that the worldwide market will grow from $8 billion this year to more than $13 billion in 2012. Sales of in-game items will total $5 billon by 2011, according to data from the Wall Street Journal cited by Valista. In the most recent development, Vindicia says it is launching a new version of its hosted billing software, CashBox, which supports both subscriptions and one-time payments on cards and through the automated clearing house. New features include a so-called updater service that allows merchants to charge transactions to the correct card account in cases when a card has expired or been closed or upgraded and has been replaced by a new card. The new version extends this service, which has been available in North America for about a year, to European accounts. Many sellers of digital goods simply forgo payment in cases of expired or closed accounts, leaving “money on the ground,” says Sanjay Sarathy, vice president of marketing at Vindicia. In most cases, he says, this is because merchants have designed billing systems without accounting for exception items. “A lot of merchants have built payment systems to account for success, but don't build them to account for failure,” says Sarathy. “But dropping a transaction and not billing a customer could be worth $300 [over the course of months of usage].” The updates, which come from Chase Paymentech Solutions LLC, are gathered by that processor from issuers and the card networks and are entered automatically by CashBox for merchants. Vindicia is also enabling its platform, which charges for conventional time-based subscriptions, to charge for usage as well. This so-called metering capability is in beta currently and will become available as part of CashBox in January. “We have a number of clients who want the ability to bill based on usage,” says Sarathy. And the company is integrating its platform with a processor called Global Collect, which will give clients access to a payment method called Boleto Bancario in Brazil, a fast-growing market for U.S. digital-content sellers, Sarathy says. With Boleto Bancario, customers visit a storefront service provider to make payments, which are then transmitted electronically to merchants. Vindicia charges 1.5% to 3% on each transaction, depending on volume, with a $2,000 per month minimum fee. There is no additional fee for any of the new features. The platform is linked to First Data (Nashville) and Litle & Co. as well as Chase Paymentech and Global Collect, and is processing 140,000 transactions per day for a client base of between 40 and 50 merchants.