Unethical processing

Eric Johnson, developer of Chef Recipe Software, writes in his blog that he has dumped payment processor SWREG and switched to PayPal and Google Checkout to take payments for his software. He found that SWREG was trying to sell something unrelated while taking payment for his product. To a customer, it would look as if Eric was selling this other product, which he was understandably unhappy about.

Software payment processors came into existence just over a decade ago. As the Internet became accessible to ordinary people, independent software developers (ISVs) wanted to sell online. But in those days, systems like PayPal didn't exist, and banks would not allow small one-man businesses to take credit card payments over the net. If they did, they charged huge set-up fees, often more than the annual income of the business!

So software-specific payment processors like Digital River and RegNet started up. They took the money for the developers, often issued the registration keys or provided the full version downloads on their behalf, and charged a commission for doing so. However, they were always supposed to be working on behalf of the developer. They even encourage that illusion by allowing developers to customize the shopping cart pages so they look like part of the developer's website.

In the last couple of years, software payment processors have come under pressure from cheaper competitors. Companies like PayPal charge a smaller commission for processing payments, while inexpensive off-the-shelf scripts make it easy for developers to automate the delivery of full version downloads or registration keys themselves.

At the same time, consumer rights laws in many countries make the company that takes the money and delivers the download or license key accept responsibility for the products they are (in effect) selling. Software payment processors have been seeking the right to act as software resellers in their own right, and to promote the software themselves in any way they see fit. If you are an ISV who signs up to use ShareIt, for example, you have to give them the right to charge whatever they want for your product. I think ShareIt, RegNow and company need to decide which side of the fence they are on, instead of pretending to be the ISV's payment processor while actually acting as a software reseller.

It doesn't surprise me that independent software developers, most of whom seem to begrudge every cent that's taken from their product purchase price, are switching to cheaper payment processors. However I do view this with a certain amount of alarm. One of the services that software payment services like RegNow, ShareIt and Plimus offer is an affiliate system that tracks referrals from other websites and awards a commission to those sites for any sales that result. This allows businesses like Tech-Pro.net to make a living promoting other ISV's products.

Most developers who use PayPal and similar systems don't provide any support for affiliates, which means that we have to ignore some excellent products. Some ISVs will argue that most affiliates produce few if any sales, so they aren't losing much. But most of them would probably also argue that it is important for their marketing effort to list their software products at as many download sites as possible. They are happy to have the marketing help, as long as it's free. If more download sites insisted on having an affiliate agreement in place before they would list software products then ISVs might be less keen to dump software payment processors in favor of cheaper alternatives.

I'm all in favour of ISVs making it clear that they do not approve of unethical practises like upselling other products while taking payments on their behalf, but don't throw the baby out with the bathwater. If your products weren't listed on sites like ours, you would make a lot fewer sales.

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