Customer’s credit and debit cards usage is up to every day for services done online. However, if you work in an industry considered “high risk,” such as the adult industry, being an adult merchant account holder can become a major trouble. From denying the services by industry rulers like PayPal and Stripe to dealing with seemingly unwanted fees, credit card processing can be irritating, to say the less, if your business is in the adult industry.

This blog highlights the factors behind this high-risk consideration by banks and payment processing companies. First, force stop your frustrations by knowing the industry risks that make acquiring a payment gateway for adult services tougher. Then, start inspecting other options available to adult entertainment industry merchants. You can develop your adult business in the perfect direction with a merchant services company ready and wish to help businesses in high-risk industries
 

A Review of the Adult Industry

What is the “adult” industry? Businesses directly or indirectly giving clientele products or services related to sex built the adult industry. Products that contain toys, costumes, and other various equipment. Simultaneously, the services provided in the adult industry consist, among others, of stripping, call girl services and cam girl services. Completely, the adult industry has enlarged exponentially following the occurrence of the internet, which gives a level of privacy and namelessness before unattaining to potential customers.
 

Who built up the adult entertainment industry?

 
Adult entertainment is not only online pornography place. The industry is made up of different types of services and products, such as:
 

• Dating and escort services
• Pornographic photography
• Webcam communication platforms
• Chat and phone operator platforms
• Gentlemen’s clubs
• Sex toys and novelties
• Pornographic magazines
• Lingerie stores

 
The adult entertainment industry is also sustained by the internet. Places like strip clubs, massage parlors, and adult bookstores fall into this segment as well. Some of these businesses are considered adult-oriented, while others are smaller so. And some are declared as high risk by one bank, but not another. This is one of the roots of the dilemma that businesses in the adult industry encounter when looking for merchant services support.
 

Knowledge about Adult Merchant Services Account?

For your adult business to get in process credit and debit card payments, you must have an adult merchant account. Merchant accounts are the mediator between your customer’s bank account and the merchants’ business’s bank account. They are often associated with your website shopping cart via an online payment gateway. The customer then set foot into their card information to buy your products or services. Your account has to be safe to operate cardholder data, as well as have the help of a supporting bank.

Many business owners reach out to a payment processor, which then combines them with a proper bank to have a merchant account. However, adult businesses may look that this connection is not easy for them to establish. The reason for this comes from your business being at high risk to numerous banks. Established banks can be very choosy with the merchant types they approve. Adult businesses often do not cut.

Because of the financial and character risks your adult business has, you may need to look longer and harder for merchant services support.
 

Why are Adult Merchant Accounts Declared High Risk?

If you are a business owner in the adult industry which needs credit card processing, it is declared a high-risk business setup for payment service providers. Not only is the industry cursed with fraud and chargebacks, but few banks and payment service providers straight away denies to work with businesses in the industry to think of reputational risks.

Breakdown of the risk factors with adult entertainment

Sadly, the adult industry’s high-risk consideration is a multi-tiered matter without a single one-word answer. The first step is to know and understand how each risk factor particularly gives back to your business.
 

1. Fraud

 
Fraud is much more usual in online businesses than in physical stores. This thing occurs because it is much more effortless to camouflage behind a screen. More than this, with products and services connected to adult content, users may try to go around using their unique and secret information for the phobia that it will show up on their bank statements. The most widespread type of fraud in the adult entertainment industry is the use of stolen credit card information. But that isn’t the only type left of fraud with which adult businesses deal in.

Some fraud is so obvious, such as using similar card info on multiple purchases in a minimal period, while other times, it’s not so obvious. Utilizing eCommerce and credit card fraud prevention amazing practices is a crucial part of keeping your business up and running.
 

2. Chargebacks

 
A chargeback is fundamentally the returning of money due to a consumer disputing a charge on their credit card statement. While few consumers may have genuinely not used their cards to access your services, chargebacks in the adult industry may also occur out of embarrassment and may create a point of shame. A consumer does not want a record of their utilization of adult services, so they assure that it was an authorized charge to their bank. Some even employ this fraud blame game to have their cake and eat it too. The purchaser uses the product or service, then wants their money back and disputes the charge.

 

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Other chargebacks occur due to the adult merchant services account setup. Many adult businesses show up on a bank statement as a different identity and a person itself. While this is the best thing for adult-related companies to do, it may promote a few issues, such as misleading the customer. Thankfully, it is possible to defend your account against chargebacks neatly on your site.

This whole scene also happens in many subscription-based businesses in the adult industry. People forget to unsubscribe from the recurring payments, then try a chargeback to regain some of their money. Remembering customers of upcoming recurring payments is simple gameplay employed to avoid this chargeback scenario.
 

3. Reputation

 
Banks in common depend on outdated ideas of business types and impose very strict actions terms of service standards. If the business’s industry is not something that you can open or convenient to talk about at the dinner table with your family, it probably poses a reputational risk to the bank. For adult businesses, there is no hope of fitting into these terms and conditions.

The only expectation for companies in the adult entertainment industry is to look at a banking institution and credit card processing company eagerly waiting and able to help them.
 

4. Applicable laws

 
There are numerous laws applied only to businesses within the adult entertainment industry. For example, 18 U.S.C. 2257, commonly prescribed as simply 2257, states that you must have age verification on your sites or in your store, as well as keep a record of government-issued photo identification for all performers. Other laws may include the complete banning of the purchase of adult toys in a few states.

These laws may limit your customer base, which, in the eyes of potential payment processors, limits your ability to sell to a wide, huge audience.

Does Being High Risk Diminish Your Possibilities of Getting Approved for a Merchant Account?

Merchant accounts clasp all income for an average of 2 to 7 days, as transactions process, placing said money into your business’s bank account once processing is fulfilled. This account holder on the merchant agreement connects your business and your bank.

The merchant agreement highlights the denomination of this relationship. Incorporated in these terms is “compliance with laws and regulation,” which brings on businesses into the adult industry difficulty. Even if you’re fully compliant with all laws and regulations, some banking institutions may deny your adult business simply because it must stick to more laws and regulations than other businesses, thus enlarging the chance it’ll one day break down to be completely compliant.

Having an adult merchant account is not the toughest task, but you may go into bad days and situations in getting approved. However, choosing the suitable payment service provider through which you set up your adult merchant account may help deduct this problem.

What can you do to increase your chances of getting approved?

Handling a business in the adult industry falls you in a high-risk zone. There’s no manner around that. However, there are actions you can take to otherwise boost your chances of getting approved for an adult merchant account. These actions include:
 

• Securing a pleasing personal credit history and personal credit score
• Being genuine on your application, as puffed up numbers will create unpredictability between your processing volume and adult merchant account application
• Eluding the MasterCard Alert to Regulating High-Risk Merchants which lists businesses that have had a merchant account finished, as well as the reason for said termination
• properly paying your taxes, as tax liens imposed for belated taxes may result in a denied application

How to Stop Frauds and Chargebacks in the Adult Industry

The probability of experiencing chargebacks and fraud are factors for which your business may be rejected for an adult merchant account. Both are annoying situations that business owners should work to stave off for the financial health of their business, as chargebacks result in fees that can add up. Techniques to neglect fraud and chargebacks include:
 

• Boosting customers to make password-protected online profiles with your company
• Requiring customers to actively agree to your website’s terms of service before purchases
• Utilizing Address Verification System (AVS) to cross-check billing and shipping addresses
• Confirming a Card Verification Value (CVV) is mandatory for all CNP purchases on your website
• Utilizing IP Tracking to flag unusual purchases if a majority of your customers are from a certain country or region
• Applying 3D secure technology using three-party verification, such as Verified by Visa
• Allotting a two-day authorization hold before shipping products or performing services, permitting the bank or rightful card owner a chance to flag possible fraud

 
There are various ways for businesses, even those of high risk, to guard against chargebacks and fraud.
 

Knowing 2257 and Its Importance for Your Adult Business

Compliance with rules and regulations is of importance to banking institutions, as they don’t want to put their company in reputational, financial, or punishment by servicing businesses smashing the laws. That the adult industry has to follow many laws than many other industries simply means there are more chances of unsuccessful compliance. It’s of considerable importance to follow all laws applicable to the adult industry, not only to get an
 
adult merchant account but to help establish the adult industry as law-abiding.
 
That said, 18 U.S.C. 2257 must be rehearsed in the daily routine operations of your adult business if you employ an actor of any kind. Performers start from strippers to cam girls to phone sex operators. 2257 stipulates that all producers of adult content must have and record government-issued photo identification that confirms the performer is 18 years or older. You must keep this record for at least seven years. If your business liquefies, you must keep this record for five years following dissolution.
 

How to be an Adult Merchant Account Holder

While payment service providers are doubtful to work with adult businesses, many providers expertize in high-risk credit card processing solutions. You can write for the application process by guaranteeing your credit score is as costly as it can be. Pay all pending debts and make definite you’re most recent report mirror that action. If you are trying for another merchant account, prepare to explain why the initial account was dismissed.

Payment service providers waged with high-risk clients have the fair to ask for a deposit. This deposit works as an account reserve, giving them a pond of money with which to issue refunds in case your business is ever in a position where you are unable to do so from profits. Also, know that your processing fees may be as high as 2 to 10 percent per transaction. The rate may lower down in time as your business proves to be constant and money-making, but the benchmark for a rate reduction is unique with every payment service provider.

When asked to elaborate about your business, be as honest and descriptive as much as possible. A payment service provider is more favorable to do business with you if you are proactive about your business dealings and make every possible effort for them to understand your day-to-day burden.

By making up your mind to direct higher fees and describe and protect your business, you secure that a payment service provider will invest in your business be set up a safe, legalized way for you to take payment via credit cards.
 

Everything You Need to Put in for an Adult Merchant Account: Checklist of Requirements

Before registering for an adult merchant account with a payment service provider, do your close introspection and make sure you have all the important requirements for the application. Below is a checklist of general requirements for having an
 
adult merchant account:
 

• Unlock a business bank account, to which your merchant account will transfer funds once the process is done.
• Prepare up to two years of financial documents, such as profit and loss statements, balance sheets, and tax records
• Get all business licenses considered necessary by federal, state, and local governments
• Make sure you’re PCI compliant, as well as compliant with any laws and regulations specific to the adult industry
• Fill the application honestly, as lying about the nature or volume of your business is a foolproof way to be denied

Know The Exact Place To Get An Adult Payment Gateway?

While many payment service providers are uncertain to work with adult businesses, many of them are experts in it. Adult payment processors like Payment Guru are adept at providing services to high-risk clients. The reason that you need a processor like this is that they will have the banking relationships that you require. Merchant service providers specializing in high-risk businesses come equipped with flexible underwriting and a multitude of integration. Having your adult merchant account may be tough, but it is not impossible.