The way we pay for goods and services is changing. Research shows that customers are increasingly using innovative and varied ways to make payments. For businesses in high-risk industries, this represents big new opportunities as common pain points around accepting payments are resolved — but that’s just the start.
In 2022, McKinsey reported, 62% of U.S. customers regularly used more than one form of digital payment, up from 51% in 2021. Digital payments include everything that isn’t cash or check, from online card payments to mobile wallets, account-to-account payments and more. All of these forms of payment come with benefits for businesses in high-risk industries.
With closed-loop systems, cross-border payments are not only easy, but made in real time.
Closed-Loop Payment Systems
A closed-loop payment system is a way to move funds within a shared banking ecosystem. Funds are loaded into an account and then can be passed between accounts within that ecosystem, instantly.
One key advantage of these systems is that the payments have a high approval rate, making them attractive for businesses in high-risk industries. By avoiding card schemes, the possibility of chargebacks is completely removed.
Closed-loop systems also make it easy to transfer funds across borders. For instance, platforms that host content creators from all over the world have traditionally faced costly operational headaches when it comes to organizing payments. With closed-loop systems, cross-border payments are not only easy, but made in real time.
The impact of fast payments shouldn’t be understated, as instant payments have become increasingly expected in this day and age.
The above closed-loop systems can also be slightly altered by providing each content creator with a debit card to make it easier for them to access the funds in their account. In this case, though, it would be an open-loop payment system.
Crypto Payments
Cryptocurrencies are becoming increasingly mainstream; 31 million European citizens owned cryptocurrency in 2022. For the adult industry, this is a positive step, as sending funds via crypto is another way to bypass the issue of banks and payment providers not wanting to support high-risk industry businesses. It is also a cost-effective option, since fees associated with crypto transactions are lower than card processing fees.
Does that mean adult performers have to be content with holding their funds in crypto, the value of which can fluctuate very quickly? No. The relationship between fiat money institutions and cryptocurrency businesses has progressed a great deal in recent years. Accepting funds in crypto and withdrawing them to a bank account in fiat currency is now very much available as a solution that more and more businesses are offering.
Crypto payments also come with the benefit of customer privacy. One of the core tenets of cryptocurrency is that it is decentralized and anonymized. For many customers in the adult industry, a payment method that guarantees their anonymity is a huge plus.
Card Payments
While not new, card payments continue to grow in popularity. This trend reflects the fact that more people are becoming banked, and that we are seeing more and more payment cards enter the market.
Crypto payments and closed-loop systems are gaining ground, but ultimately many people will still prefer to use card payments, something they know and trust. Some people, for whom cards are their introduction to online payments, might not yet be ready for anything else.
All this notwithstanding, it’s worth keeping in mind that cash is still a very popular payment method in several European countries, so much so that we are seeing growing demand for cash voucher solutions to pay for goods or services online.
Keeping track of the latest developments in the payments industry isn’t always a top priority for most businesses. However, given the potentially transformative power of different payment solutions, they really are worth knowing about.
Modern approaches to payments are not only helping businesses in high-risk industries get paid in a secure way — a challenge that has troubled the industry for decades — but helping them thrive in a variety of ways. From easing cash flow problems to facilitating international expansion, a better payment system can be one of the biggest drivers of a business’s success in 2023.
Stefan Haenel is the CFO and co-founder of FinXP, a service-oriented payment and banking services company in Europe. As a strategist with a business economics and finance management background, he specializes in global capital markets, financing issues and business development. For more information, visit FinXP.com.
