I hope everyone made it home safely from the January shows. It was so good to see familiar faces, and exciting to see so many new ones too! Hopefully, your time on the road was educational and well-spent. Now that you’re back and ready to go, you may be asking yourself: What’s next?
The demand for adult content is booming, and merchants in the industry are under pressure to meet customer demands while also ensuring the whole customer experience is simple, pleasant and — most importantly — secure.
From flat-out denial of services to dealing with seemingly unnecessary fees, getting a merchant account for your website or store can seem daunting if your business falls into the adult industry category.
The adult industry expanded exponentially following the advent of the internet, which provided a level of privacy and anonymity previously unattainable to potential customers. Since adult’s expansion into the digital marketplace, merchant accounts have become essential for vendors. Every day, customers use credit cards to pay for services rendered online. However, adult businesses fall into the “high-risk” category, which makes obtaining a merchant account in order to be able to process credit card payments much harder. From flat-out denial of services to dealing with seemingly unnecessary fees, getting a merchant account for your adult website or store can be daunting.
In this article, I will discuss some of the reasons why banks consider adult merchants to be high-risk. By understanding the risks that make obtaining a payment gateway for adult services more complicated, we can begin exploring the options available.
What exactly is the “adult” industry? If you’re reading this, chances are you already know. Still, for the sake of elucidation, it can be defined as businesses directly or indirectly providing clientele with products or services related to sex, such as:
- Pornographic magazines
- Sex toys, novelties, costumes and other paraphernalia
- Fan sites with user-generated content
- Webcam communication platforms
- Video streaming platforms
- Video-on-demand “tube sites”
- DVD sales
- Chat and phone operator platforms
- Dating, call girl and escort services
- Stripping and cam girl services
And let us not forget all of the gentlemen’s clubs, massage parlors and adult bookstores that exist off the internet that also fall into this category. Some of these businesses are very obviously adult-related, while others are slightly less so. Some are considered high-risk by one bank but not by another. This can cause confusion for merchants in the adult industry when searching for payment processing services.
When products and services are questionable in terms of legality, such as some of the ones listed above, the likelihood of being considered high-risk increases and banks will often outright deny a merchant account. Also, in today’s digital age, many transactions occur online, and banks recognize the additional fraud risk that comes with such transactions. Adult companies, along with businesses that provide subscription-based or pay-per-minute services, are generally considered high-risk merchants.
Another contributing factor is the general consensus that clients of adult entertainment merchants are notorious for disputing charges. This has been an ongoing problem for the industry for some time, as the threshold for excessive chargeback ratios has grown smaller over the years. Regardless of the reasons behind credit card disputes, excessive chargebacks remain a problem, and the issuing banks almost always side with the cardholder. This is why many adult merchant accounts are terminated unless adequately monitored. This is also one of many reasons why it is so important to find a payment processor that offers chargeback protection tools and will take the time to explain and educate you properly on best practices.
Before applying for an adult merchant account with a payment service provider, do your due diligence and ensure you meet all the requirements for the application. A quality payment processor can walk you through all of the steps, but here are some general requirements for obtaining an adult merchant account:
- Have a business bank account, to which your merchant account will transfer funds once processed.
- Prepare up to two years of financial documents, such as profit and loss statements, balance sheets and tax records.
- Obtain all business licenses deemed necessary by federal, state and local governments.
- Ensure that you are PCI compliant, as well as compliant with all laws and regulations specific to the adult industry.
- Fill out the application honestly, as lying about the nature or volume of your business is a surefire way to be denied.
Obtaining your adult merchant account may seem arduous, but it is not impossible. Adult entertainment merchants just need a high-risk payment processor that understands their needs. Some things to look for in a quality payment processor: staff that will take the time to get to know your business and create a payment solution tailored to your needs, flexible underwriting, chargeback protection, fraud prevention tactics and seamless integration with multiple platforms and gateways. A processor that offers necessary resources and support can help you navigate the “high-risk” category, and help your business grow.
Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.
