Adult Merchant Accounts: Everything You Need to Know

Read Time: 5 min

Credit cards are used every day to pay for services rendered online. However, if you work in an industry deemed high risk, such as adult, obtaining an adult merchant account can become a major hassle. From denial of services by industry leaders like PayPal and Stripe to dealing with seemingly unnecessary fees, credit card processing can be frustrating if your business is in the adult industry. This article addresses the reasons behind this high risk consideration by banks and payment processing companies. Help quell your frustrations by understanding the industry risks that make obtaining a payment gateway for adult services difficult. Then begin exploring other options available to adult entertainment industry merchants. Get your support system straight and grow your business in the right direction with a higher risk merchant services company.

Who Makes Up the Adult Entertainment Industry?

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Adult entertainment is not simply an online pornography platform. The industry is comprised of many different types of services such as:

As you can see, the adult entertainment industry also exists off of the internet. Brick and mortar strip clubs, massage parlors, and adult bookstores all fall into this section as well. Some of these things are very obviously adult-oriented, while others are not. And some of these sectors are high risk by one bank but not another. This is one of the roots of confusion that the industry encounters when searching for eCommerce merchant services support.

What is an Adult Merchant Account?

In order to process credit and debit card payments in your adult business, you must have a merchant account. Merchant accounts are the middleman between your customer’s bank account and your business bank account. They are often hooked up to your website shopping carts through an online payment gateway so that the customer can enter their card information and purchase your products or services. Your account needs to be secure in order to process cardholder information as well as have the backing of a supporting bank to your business.

Most business owners reach out to a payment processor that will be able to pair them with an appropriate bank, but that connection is not easily made for adult businesses. The reason for this comes down to your business being high risk to many banks. Tier one banks can be very picky with the merchant types that they approve and often adult businesses do not make the cut. Because of the financial and reputational risks, you will need to search longer and harder for support.

Why are Adult Merchant Accounts Considered High Risk?

If you have a business in the adult industry that needs credit card processing, it is considered a high risk venture for payment service providers. Not only is the industry plagued with fraud and chargebacks, but some banks and payment service providers flatly refuse to work with businesses in the industry. This is because they have a problem with the content being produced and worry about reputational risks.

Unfortunately, this is a multi-tiered issue without a straight-forward answer. The first step is to understand what each risk factor specifically reflects on your account.

Breakdown of the risk factors with adult entertainment

1. Fraud

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Fraud is much more common with online businesses rather than brick and mortar stores. This is because it is much easier to hide behind a screen. In addition to that, with products and services that deal with adult content, users try to skirt using their personal information in fear that it will show up on their statement. The most prevalent type of fraud in the adult entertainment industry is the use of stolen credit card information. But that isn’t the only type of fraud that adult businesses deal with. Some of it is obvious, such as using the same card info on multiple purchases in a short period of time, while other times it is not so obvious. Utilizing eCommerce fraud prevention best practices will be an important part of keeping your business up and running long term.

2. Chargebacks

A chargeback is essentially the return of money due to a consumer disputing a charge on their credit card statement. While some consumers genuinely did not use their cards to access your services, many chargebacks occur out of embarrassment. The consumer does not want a record of their use of adult services, so they claim it was an authorized charge to their bank. This is also often a fraud tactic to have their cake and eat it too. The purchaser utilizes the product or service then wants their money back and disputes the charge. This is commonly called ‘friendly fraud’, even though it is not so friendly.

Other chargebacks occur due to the adult merchant services account setup. Many adult businesses show up on a bank statement as a different name and can confuse the customer. While this is a good thing for adult related companies to do, it may lead to a few issues. Thankfully, it is possible to defend your account against chargebacks organically on your site.

This same scenario also occurs in many subscription businesses. People forget to cancel recurring payments and then attempt to go back and recoup some of their money. Many times this is a double whammy for adult entertainment businesses that use subscription billing.

3. Reputation

Banks are commonly old fashioned. They utilize outdated ideas for business types and have strict terms of service standards. If the business’ industry is not something that you can talk comfortably about at the dinner table with your family, it probably poses a reputational risk to the bank. For adult businesses, there is no hope to fit into these terms.

The only hope for companies in adult entertainment is to find a bank and credit card processing company that is willing and able to support them.

4. Applicable laws

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There are a number of laws that apply only to businesses in the adult entertainment industry. Having a legal age verification on your sites or in your store is just one of those laws. Other laws may include the complete prohibition of the purchase of adult toys in certain states. These laws limit your customer base which, in the eyes of potential payment processors, limits your ability to sell to a wide, diverse audience.

Where Should You Get Your Adult Payment Gateway?

While many payment service providers are hesitant to work with adult businesses, there are several of them who specialize in it. These processors are adept at providing services to high risk clients such as yourself. The reason that you need a processor like this is because they will have the banking relationships that you need. High risk businesses need high risk payment processors and high risk banks.

High risk banks and credit card processing companies come equipped with flexible underwriting and a multitude of integrations. On top of that, fraud prevention tactics are all things that you will need to ensure that your account and business can stay up and running.

Obtaining your adult payment gateway may be difficult, but it is not impossible. By preparing yourself to mitigate the risks, you ensure that a payment service provider will be able to support you with a safe and PCI compliant way to process credit cards.