Adult Merchant Account – Credit Card Processing for Adult Industry

Over the years, the internet has significantly adopted a series of advancements and innovations, providing an unlimited opportunity for all industry players to display their content. From the arts to sciences, technology, and every other industry, it is now easy to access any kind of content via the web. And the adult entertainment industry isn’t an exception.

Statistics from Transparency Market Research revealed that the adult entertainment industry’s global market value is expected to surpass $300 billion before the next decade. Every day, the adult entertainment industry is embracing innovations and technology, providing unlimited opportunities to tap into these innovations and become the next moneymakers with promising potential.

Despite the potential of this industry, the adult industry has continued to face issues of poor reputation from banks and payment service providers, also known as processors. The content of the adult industry aren’t only categorized as high-risk, but the payments for these products and services are also distinctly labeled high risk. As a result, banks and payment processors are usually turned off from processing adult merchant payments with unnecessarily high rates of chargebacks, rampant fraud, and poor reputational risks.

Ultimately, this has led to a massive loss for these banks and payment processors. This is because there’s a high demand for sexual-related products and services and the market seems promising. Statistics from Global Newswire show that over 25% of sexual products are sold in the U.S. via online channels, with Amazon.com being the most patronized website. This trend is rapidly increasing not only in the U.S. but across the world.

This blog post will take a deep dive into the adult entertainment industry and discuss the importance of solid payment processing for this promising industry. We’ll also take a deep look into the reasons behind high-risk considerations by banks and payment processing companies while exploring the best options available to process your adult industry payments. But before then, let’s take a brief look at the adult industry.

You might have been misinformed if you think the adult entertainment industry only involves online pornography platforms. Several different types of products and services dominated the adult entertainment industry. These include dating and escort, webcam communication platforms, lingerie stores, sex toys and novelties, and gentlemen’s clubs. Others include sex education courses, streaming services, phone sex operators, toys and novelties, adult photography, and many more.

Interestingly, the adult entertainment industry exists on other platforms beyond the internet. You can find them in brick-and-mortar stores, adult bookstores, strip clubs, and massage parlors. While some of these businesses are highly adult-oriented, others have a mixture of both young and old. In addition, some are considered high-risk businesses, while others are not, thus springing up a scenario of confusion, especially when searching for the best merchant payment platforms to partner with.

Now that you’ve read an overview of the adult payment industry, what it represents, and who makes up the industry, it is time to look at the adult payment processors and the associated issues.

As mentioned earlier, different niche markets dominate the adult entertainment world. And besides, it features a vast array of products, accessories, and services, covering various categories. These kinds of products and services make the entire adult industry a high risk because not all payment processors want to be associated with these categories of products and services.

Additionally, engaging in the sales of items with age restrictions (18+) alongside other legal frameworks turn most merchants into high-risk categories. Take a look at the gentlemen’s club, for instance. To a layman, the legality of such category of products or services is questioned, thus considered high risk.

Most banks do not entertain the registration of merchant accounts. And more importantly, billions of transactions are carried out online every day due to the advancement of the digital world. Like any case of card payments, not present transactions, most banks find implementing an additional layer of security checks on their platforms challenging. Let’s examine some other reasons adult entertainment industry is considered high-risk.

Fraud

Fraud is much more rampant in our digital world with online businesses than brick-and-mortar stores. Why? It is because making online payments while hiding behind the screen is more possible nowadays than ever. In addition, with adult products and services, users may manipulate the system by choosing not to use their personal information to make payments as it would reflect on their bank statements.

In the adult entertainment industry, the use of stolen credit card information seems to be the most prevalent form of fraud. Another common scam includes using the same card information to make multiple purchases within a short period. While some frauds are glaring and obvious, others are not. Hence, setting a system in place to checkmate e-commerce transactions and prevent credit card fraud is essential.

Chargebacks

Essentially, a chargeback is described as the return of money due to a dispute opened by a particular consumer on their credit card statement. Most of the chargebacks occurring in the adult entertainment industry are usually out of embarrassment. For instance, a customer does not want to have a record of their purchase of adult services from your website. So, they simply claim it was an unauthorized charge from their bank account and file for a refund. For many, they deploy this strategy to eat their cake and have it at the same time. The consumer typically uses the product while filing for a refund at the same time.

Another example of chargebacks is when the setup of an adult merchant services account is faulty. Many adult entertainment industry businesses are wrongly displayed on a bank statement as a different name. Although, this is excellent for adult-related companies, it doesn’t guarantee that there won’t be issues, such as getting a customer confused when making payments. Thankfully, it is possible to prevent chargebacks against your account from your website.

Many subscription-based businesses also experience similar scenarios. A customer may forget to cancel recurring payments. Then, once he/she discovers that he/she is being charged for products not organically purchased, or he/she attempts to file a chargeback to recoup all the money. That’s why adult entertainment businesses must continue to send constant reminders to consumers in a bid to reduce the issues of chargebacks.

Reputation

Generally, most banks are highly dependent on outdated ideas of businesses. Hence, they impose strict terms of service to guide the standards of their services. For Instance, the adult entertainment industry isn’t a business you can comfortably talk about at a dinner table with your family. So, it is considered high risk and poses a reputational risk to the bank. For adult businesses, there’s no guarantee that these terms shall fit into the working systems or banks at any time.

The only way out for companies and businesses in the adult entertainment sector is to find a banking institution and credit card processing company that’s willing to provide the needed support.

Applicable Laws

Since it’s an adult industry, there are a number of laws guiding the industry. A typical example is the 18 U.S.C. 2257 law, which is commonly referred to as 2257. It states that companies must have an age verification on their websites or online stores coupled with accurate records of government-issued photo identification of all performers. Other laws may focus on the total prohibition of the purchase of adult products or services in specific states. You can now remember that some websites require you to fill in whether you’re above the age of 18 or below.

With these laws, the customer base is significantly limited, consequently limiting your ability to sell adult products or services to a broad audience.

Fees that PurePay will charge on Adult Credit Card Processing depends on factors like Processing history, method of sales, Countries, Volume of sales, and products. All merchant accounts are unique but included terms stays the same for most:

Merchant discount rate
Transaction fees
Monthly statement fee
Monthly gateway fee
Four and a Half – Six-month rolling reserve (Depending on bank)
Chargeback fee
Refund fee

There’s no denying the fact that running an adult entertainment business is considered high-risk. So, the application process for your adult merchant account can be rigorous and might even be declined. However, when preparing your application for an adult merchant account, there are certain things you can put in place to increase your chances of approval. These could include:

Being Honest about Your Business

Honesty is crucial, especially when it comes to getting your adult merchant account application approved. And in most cases, your account can even be frozen or deleted permanently. Due to misleading information or misrepresentation, processing companies turn down millions of merchant account applications daily. From what your company does to your specific products, accessories, and services, you have to be open, honest, and transparent in your application.

In addition, you shouldn’t get your hands in dirty, shady, or illegal deals. Many payment processing companies are always committed to profiling only legitimate businesses for approval. The consequences of supplying misleading information in your application might range from being blacklisted or placed on a watchlist, thereby creating bigger problems for high-risk merchant accounts in the future.

Boost Your Personal Credit Score

Another way to boost your chances of getting your merchant account application approved is to improve your personal credit score. This might be difficult for new business owners to achieve because they’re new to the industry and have no established payment processing history. However, every applicant must know that the lower your personal credit score, the lower your chances of getting approval for your adult merchant account. However, you can boost your personal credit score by paying off your bills and credit card debts.

Have Your Documentation Ready

When applying for an adult merchant account, ensure that all your relevant documents are ready and available. From your banking license to your business plan, bank statements, and other documents, you must ensure that everything is available. However, it may interest you to note that the requirement varies slightly depending on the payment processing company. Generally, it’s good to ensure everything is ready. This will help you in case you’re partnering with different payment processing companies at the same time.