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The term “adult novelties” is a generic name for a colorful category of devices and instruments used before or during sex. Types of products include toys, lingerie, edible clothing, chains, whips, masks and so much more. The risque novelty industry has seen unprecedented growth within the last few years. Coming along with that popularity is the growth of an industry to sell these items both in store and online. To better understand the rocky adult merchant processing relationship, we need to first understand this industry and its growing acceptance.
Adult Novelties vs. Sex Toys
If you have ever wondered what the difference between these two terms are, then you are not alone. Typically the word “novelty” denotes that an item is new, original, or unusual, which does not exactly make sense when referring to adult products. The group within the FDA titled the Center for Devices & Radiological Health is responsible for the confusion. Under their legal definition, sexual products fall into two categories:
- A medical device
- A novelty
To be considered a medical device, there are many expensive hoops to jump through which include fling, research, testing, and studying. Because of these challenges, manufacturers often forgo the hassle and simply label their items as a novelty.
A Recession-Proof Industry
When people have more money in their pocket, they love to spend it (on sex toys). When people don’t have the money to go out, they stay home (and use their sex toys). While monetization in some aspects of the adult industry has started to decline, such as porn, businesses selling toys and novelties have actually seen steady growth. This trend is due to increased commercialization, changing perception, and availability to purchase items both in-store and online.
Looking at statistics per state in the U.S., Vermont comes in first place with the number of bedroom items per person being purchased online, buying 77.3% over the national average. Interestingly enough, the type of items purchased greatly range according to location as well. In the U.S., the most common item bought is a dildo; whereas in the other top ranking countries, U.K., Germany, and Australia, vibrators are most common. Differentiating itself from other countries, the United States has penis sleeves and strap-ons as some of their most popular items.
When compared to other adult items in the popular Lovehoney business, toys and novelty items made up at least 36% of purchases, right behind lingerie with 37%, and in front of essentials, such as lubricants and condoms, taking up 10%. Niche-oriented products are gaining in popularity and are carving out a place of their own. Along with them, products made especially for non-cisgender and non-binary individuals are becoming more common. A growing acceptance of gender and lifestyle differences in everyday life has allowed this advancement in the bedroom as well. With all of this growth, people are going to expect certain standards to be met, like any other industry: better prices, higher quality, and more convenience.
Risks of Adult Novelty Merchant Processing
As with the whole of the adult industry, sex toys are tough items to find credit card processing for. Banks consider this industry to be a reputational risk, even though it is a profitable space for them to be in. The propensity for a higher percentage of chargebacks, fraud, and security issues cause every merchant account in the adult industry to be flagged as “high risk”. Extra precautions such as higher associated fees, holding a percentage of funds, and a more strict set of compliance rules are taken by banks due to the inherent risk. However, these stipulations shouldn’t cause you to panic. There are adult payment processors out there who specialize in high risk accounts and are able to take your business.
Rewards of Adult Novelty Processing
If the $15 billion market isn’t enough to convince you that the industry is booming, then maybe the growing acceptance for the industry can convince you. Novelty items are no longer taboo and getting a merchant account to process credit cards for them is becoming easier. There are also varying options to diversify into once you start selling. Subscriptions and CBD-infused products have seen some success and may allow you to gain a wider audience.
How to Secure an Adult Merchant Account
With the increase in demand, there comes a growing pool of merchants looking to accept credit cards online. Even knowing that being flagged as hard-to-place means a more difficult process to begin accepting payments, there is hope. This hope comes in the form of an adult high risk merchant account processing. What to ask when securing a payment processor for your an adult novelty business:
- Are they adept at working with the high risk industry?
The processor must have the right framework to work with high risk businesses. Things to look for are flexible underwriting, chargeback protection, along seamless integration to multiple platforms and gateways.
- More specifically, do they have experience with merchants in the adult space?
Payment gateway providers with no expertise in this space will not be able to handle the needs of your industry. Make it easy on yourself and pick a processor that already has experience with adult merchants.
- Do they offer supplementary services in addition to the essentials?
Essential services include mitigating chargebacks and prioritizing security. Exceptional providers will also offer customization options. These additional services help your business grow and may include a tailored gateway, seamless platform integrations, and an open API.
- Is your business’ success their priority?
Finding a merchant processor who is invested in their merchants is one of the most important aspects of the merchant-gateway relationship. Be sure to select a gateway provider that wants to work hard so that you are able to thrive.