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The adult industry comes with misunderstanding, misplacement, and risk. Some of it is inherent to online businesses while others are unique to the adult dating space. If you already have a business in this arena, then you already have jumped the hurdles of securing payment processing for it. But that’s not the end of your relationship with your high risk payment processors. In order to continue supporting your adult dating payment gateway, you will need to reduce the risk factors associated with it. Fraud and chargebacks can cripple businesses in this space. So, utilizing the procedures and software to mitigate your risk is an important aspect to continue using your account uninterrupted.
The Adult Industry is Hard to Place
Different industry types have different levels of risk according to the bank. The adult dating industry is one of the business types that has a high risk factor on their scale. High rates of fraud and chargebacks cause monetary risk, while the adult industry itself causes reputational risk.
Love knows no bounds. But scams involving online adult dating don’t follow that rule. In fact, according to the Federal Trade Commission (FTC), scams that take advantage of online dating sites rank number one on the total reported losses. With the median reported loss as high as $2,600, it is 7x higher than other fraud types. With the rates of these fraudulent procedures rising, the risk level of supporting this type of business rises as well. In order to accept a merchant account in this space, the acquiring bank hikes up their rates and fees to cover themselves in the case of excessive fraud.
Because there are no physical products being purchased, the chargeback ratio for this industry is much higher. Most companies are required to keep their ratio to under 2%, sometimes even lower. When it comes to adult online dating, people assume that there is a guarantee for them to find love. But if that doesn’t happen in a timely manner (or at all) the customer may become upset and request their money back. Poor customer service can exacerbate these issues and force the customer to report it to their bank for a refund. Once this happens, your adult dating merchant account will be penalized. If your ratio percentage raises higher than the allowed rate, your account may be shut down. It’s important to stay on top of these issues and prevent credit card chargebacks from happening.
This aspect of the business is harder to pinpoint because each bank judges this area differently. Some banks find this risk too much to support and therefore do not allow any businesses in the adult space. Other banks consider this industry but will have higher rates and processing fees in case the risk costs them more than they make. The reason the adult dating industry is considered high risk is because of its ambiguity.
Reduce Monetary Risk in Adult Dating
The only way to find success in reducing monetary risk in the adult dating industry is by upholding mitigation procedures to prevent them.
Ways to reduce fraud
There are ways to detect debit and credit card fraud from your customers by adding a verification step in the payment processing procedure. By using this extra step you can prevent fraudulent transactions from being accepted. On the other side of the coin is the internal fraud that goes on between customers. There are far fewer ways to prevent user-to-user fraud. But one good way to start is by informing your subscribers about the possibility of fraud. Even by giving them information on what to look for, you can help prevent some instances. Just know that your tactics will not prevent it from happening all of the time. But hopefully, fewer of your user will fall victim to this because of your help.
Ways to lessen chargebacks
A chargeback begins with an unsatisfied user who wants a refund. But instead of receiving a refund on your behalf, they go to their bank to get their money back. This can happen in 3 possible ways:
- The customer couldn’t find a way to contact you directly first.
Be sure to provide your contact information immediately after your user signs up. Also, be sure to have it easily accessible on a contact page or on the bottom of the site. If a customer has to search for your information, they probably won’t. In addition to your phone number, think about providing an email address and/or chat service. Some issues don’t require a phone call, while others need to be handled directly.
- The customer talked to you, but wasn’t satisfied with the resolution.
In very few cases, you will be able to satisfy a customer without issuing a refund. If that is what the customer wants, you won’t be able to convince them otherwise. And even with a partial refund, they can still report you to their bank in order to get the remainder of their money. When in doubt, issue a refund. This is a small charge to the business that will prevent a much larger issue.
- The customer is using the issue to get free services.
This can be the case in any industry, and there is not much you can do about it. Make sure to retain records of the refund and escalate it if the issue comes up again.
Other techniques to try
- Send confirmation and satisfaction emails.
This is a great way to stay current with the customer. Remind them that you are reachable and should be the first line of defense if there is an issue.
- Setup dispute alerts.
If a chargeback is issued through the bank, the business owner has only 72 hours to refund a customer before you can be penalized. But without a chargeback protection suite, the merchant account holder would never be notified of the alert in the first place. By setting this system up, you get a chance to rectify the issue before it becomes worse which may save you tons in the long run.
Risk Mitigation for Adult Dating
If you already have a high risk adult dating merchant account, you can start by contacting your processor to set up these procedures. They might even have more ways for you to combat fraud and chargebacks that fit your specific business goals.
On the other hand, if you are just beginning your business in adult dating, you will need to apply for an online credit card processing account. High risk payment gateway providers will have the structure and procedures to get your adult dating business started and reduce your risk. By doing so you can begin processing credit card transactions and scale your business without worry.