Sales of Virtual Goods Soar

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Second life is the one of the largest markets for virtual goods.  Total dollars spent on virtual goods in Second Life increased from $30 million in 2005 to $344 million in 2008, then increased to $567 million in 2009.  Year to date in 2010, Second Life is up about 30%, on target for yearly revenues of $700 million.

Virtual world Second Life has been laying off workers lately.  But don’t count the company out.

Second life has 18 million members, and only a small number of those are active.  However, the members who are active spend an incredible amount of time on the site.  Active users are on the site an average of 100 minutes during each visit.  Some members spend over 12 hours a day on the site.

Regardless of what happens at Second Life, the sales of virtual goods and digital content will continue to soar in the coming years. 

Companies selling digital goods are considered high risk merchants accounts by banks. Still, payment processing at attractive rates are readily available to digital merchants.

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Every country in the world has experienced an increase of electronic payment processing within the last few years.  Credit and debit cards continue to charge forward rapidly as the preferred method of consumer payment.

Several controversies surround credit and debit interchange fees.  Over the past few years, discussions about interchange have heated up.  In some countries, such as the US, interchange has increased.  In Australia, interchange has decreased.  Debates over interchange continue to rage in countries throughout the world.

For acquiring banks interchange is a cost of providing services to merchants.  For issuing banks interchange is a fee obtained for providing their services to cardholders

An increase in the interchange fees means an increase in the fee issuers receive for every card transaction their customers undertake.  An increase in the interchange fee leads to an increase in acquirers’ costs for every card transaction processed.  Therefore, acquirers ultimately respond to an increase in the interchange fee by increasing their merchant fees.   The merchants, of course, pass the cost on to buyers in the form of increased price of goods.

If interchange decreases, issuing banks receive less money.  Issuers seek to make up lost revenues through other means.  For example, an issuing bank may reduce card holder benefits associated with a card.  Or, the bank may begin to charge cardholders additional fees.

No matter which way interchange goes, banks make money.  And consumers pay the costs.

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Payment Processing for Online Donations

Online giving is the fastest growing channel for donations for non-profits and charities.  

To accept online donations, non-profits need to accept payments. Offering card payments & electronic checks gives donors the ability to pay with either a card or through an electronic debit from a bank account.

Online donations are considered high risk merchant accounts by processors.  Yet, payment processing at attractive rates is readily available for non-profits and charities.

Tips for Accepting Online Payments

  • Get your own merchant account rather than processing though a third party.  A direct merchant account will always save you money on payment processing.  And give you control over your money.
  • Accept both cards and electronic checks.  Electronic checks are much less costly to accept than cards.  And, offering both payment options are important to maximize donations.
  • Offer recurring payments.  You’ll be surprised at the number of people who want to donate on a regular basis. Recurring payments are a great way to stabilize cash flow from donations.
  • Make it easy for people to donate.  Use a “donate now” button.  Don’t make people register before donating.  Simply take them to the payment page.  The fewer the number of “clicks” to donate, the more money you’ll receive.
  • Use the name of your cause as the name the donor sees on their card or bank statement.  This helps the donor remember what the payment is for and gives them another opportunity to feel good about their contribution.  It also reduces cancellations for recurring billing.
  • Reassure your donors that their privacy will be protected and that the donation process is completely secure.  Display privacy and security policies prominently on your site.
  • Payment processing systems can be directed to send a customized email upon receipt upon payment.  Thank the giver for the donation on the site.  And use the email feature to thank them once again with their receipt.
  • Integrate your payment processing with your in-house systems.  It’s easy to do and will streamline operations and increase productivity.


Accept both card payments and electronic checks to maximize donations. The more ways donors can give, the more funds will be raised.

How are you currently accepting payments for online donations?

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Payment Processing for SaaS Providers

SaaS billing is effective for stabilizing cash flow and providing a predicable income stream.  But, as is the case with any recurring payments model, SaaS providers must be concerned with recurring billing revenue leakage.

The biggest cause of loss of revenue from recurring billing is card declines.  During each recurring payments billing cycle, many cards used for recurring payments are declined.  A declined recurring payment transaction means there is no money realized for that transaction, which endangers cash flow.

Recurring Payment Card Declines are Expensive 

Jupiter Research reports that almost 30% of consumers have had a card reissued in the past year due to security breaches.  In addition, cards can be replaced due to upgrades or expiration dates on cards can simply expire.

Whatever the reason for a recurring payment card decline, the loss of income has serious repercussion for any SaaS solution provider. In addition to the lost revenue for the service, companies have the additional costs associated with obtaining updated recurring payment card information from the customer in order to rerun the transaction.  

But, just as importantly, each contact a SaaS solution provider makes with a customer for updating recurring payment card information provides an unnecessary opportunity for the customer to cancel the service.  Manual intervention for updating recurring payment card information can creates a risk of losing the customer, reducing the average lifetime value of a customer to the SaaS provider.

Protect SaaS Billing Recurring Payments

How can a SaaS solution provide company avoid contacting consumers to update payment processing information?   It’s easy with the smart use of technology.

Automatic account updating is specialized payment processing technology for recurring payments.  The technology allows SaaS providers to transform 50-70% of declined recurring payment transactions into authorized recurring payments.

If a recurring payment card transaction is declined, updated card information is automatically retrieved from the issuing bank.  Records are updated and the declined recurring payment transaction is resubmitted for authorization.  This is an automated process and requires no intervention from the SaaS provider.  There no need for manual intervention of any kind.


Recurring billing models stabilize cash flow for SaaS providers. But updated card data is necessary for recurring billing transactions to be approved.

Automated updating services reduce the time & expense required to keep payment information current.  Only a few payment processors offer the service. The updating service is available for SaaS providers that process high volumes of transactions monthly.. 

How are you updating recurring billing card data?

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