Adult

Why Adult businesses are considered High-Risk?

Legal Restrictions:

Many jurisdictions have strict laws regarding the sale and distribution of adult materials, making it difficult for payment processors and financial institutions to operate in this space.

High Likelihood of Chargebacks:

Customers may feel embarrassed or ashamed about their purchases and seek to reverse the transaction.
Merchants may also experience fraudulent chargebacks.

Potential for Fraud:

The nature of the products and services being sold makes adult businesses more susceptible to fraud.
Anonymity of online transactions makes it easier for fraudsters to use stolen credit card information to make purchases.

Apart from the legal, chargeback, and fraud risks, adult businesses that sell pornographic content online are also considered high-risk merchants due to the following reputational risks:

Social Stigma: Pornography is a contentious issue in many societies and cultures, and its association with adult businesses can result in a negative perception of the merchant. This could harm the merchant’s reputation and potentially drive away customers who are uncomfortable with the nature of the products or services being sold.
Brand Risk: Adult businesses that sell pornographic content online also face significant brand risk. If a customer is dissatisfied with the quality of the product or service, or if they encounter issues with the merchant’s website or payment process, they may leave negative feedback or reviews online. This could damage the merchant’s brand and potentially harm future business opportunities.

Mitigation measures for Adult merchants to reduce risks when selling online

Compliance with Legal Regulations: Adult merchants must comply with all relevant legal regulations in their jurisdiction, including age verification requirements and content restrictions. Failure to comply with these regulations can result in fines, legal action, and reputational damage.
Robust Fraud Prevention Measures: To reduce the risk of fraud, adult merchants should implement robust fraud prevention measures, such as AVS (Address Verification System) and CVV (Card Verification Value) checks, identity verification, and fraud detection software.
Clear Refund Policies: Adult merchants should have clear refund policies in place, communicated to customers through the website, to reduce the likelihood of chargebacks.
Reputational Management: Adult merchants should monitor their online reputation and respond promptly to negative feedback or reviews. They should also consider investing in advertising and marketing campaigns to promote their brand and products in a positive light.
Partnering with a High-Risk Payment Service Provider: Adult merchants should partner with a payment service provider (PSP) that specializes in high-risk merchants and offers a range of payment options, including credit card and alternative payment methods. The PSP should also have experience working with adult businesses and provide a secure payment gateway.

Being a high-risk merchant vs. a regular merchant

Higher payment processing fees
Lengthier application process
Higher chargeback fees
Cash reserve requirments:
- Capped reserve
- Rolling reserve
- Upfrom reserve
Volume caps
Additional technical requirements
Being on the TMF / MATCH list

Check out our knowledge hub to learn more about what processing fees, application process, chargebacks and cash reserve requirements or TMF / MATCH list mean.

Other risk factors?

There may be other risk factors as to why you as a Adult merchant are classified as a high-risk merchant, such as:

Accepting subscription-style payments
Being on the Member Alert to Control High-Risk Merchants, or MATCH list — a list managed by Mastercard that monitors merchant behavior, like chargeback history
High average transaction sizes
High sales volumes
Highly regulated industries
International sales
Large number of card-not-present transactions
Little to no business experience
Long fulfillment time frames
New or poor credit scores
Past fraud or illegal activity

As high-risk Adult merchant how to find a payment provider?

It takes effort for businesses to secure a payment processing partner when they are considered high-risk but it is definetly possible to find the right payment solution if you focus on:

Maintaining healthy cash levels. Most processors would like to see a healthy cash level in your business bank account.
Try to reduce chargebacks. There could be a number of factors behind the soaring number of chargebacks in your business. Whatever the reasons may be, you can always analyze them and try to reduce your chargebacks.
Be transparent. Disclose all materials and relevant information during the application process. Payment processors may ask you for very detailed information about your business and finances. Be open, honest, and transparent.
Keep your documents ready. This could mean having six months of bank statements and a few years of tax returns. That said, each processor has its own set of requirements so make sure to check them.
Follow the guidelines of your payment processor. When you apply for a high-risk payment solution, besides your business needs, the risk the payment solutions provider takes also matters. So, be flexible and see if there are things you can do to reduce your risk by discussing with them and following their recommendations.