How to find the right payment gateway for your adult business, and what to look out for.

The process of starting any business today is fraught with potential pitfalls. However, when it’s an enterprise that sells adult items or content, the stakes soar all the more. One thing is for sure: If you’re running an online adult business, you will not succeed without understanding how to secure access to a quality payment gateway.

The adult industry consists of various sub-industries. Among the most common are the following, all of which can include memberships and subscriptions.

• Pornography.
• Adult dating services.
• Live chat/webcams.
• Adult toys and lingerie, etc.

Depending on what grown-up products or services you sell, your company could be deemed as high-risk which would require registration with Visa and MasterCard. However, adult bookstores, for example, that also sell intimacy-related toys and items, lingerie, and other adult goods do not require registration.

Why are adult businesses singled out?

You might be wondering why, if online adult sales are legal, they are placed under more scrutiny than other online sellers for payments. The reasons have to do with reputational risk since the adult industry has a higher propensity for money laundering, trafficking, and cyber fraud. 

Because of this, payment providers and banks are wary. In other words, many either do not want their reputation associated with that vertical of business or to take on the compliance risk. Furthermore, the nature of what is sold leads to a much higher rate of chargebacks, i.e., forced refunds, which are expensive and time-consuming for both merchants and the companies that provide their payment services.

Finally, the fact that these products have age restrictions leaves them open to potential legal consequences if they are accessed by juveniles or participate in content. 

Again, something that makes payment service providers require enhanced due diligence before approval. For example, your business will be required to provide your complaint logs, AML policy, detailed description outlining your monitoring software, content provider contracts, etc., to name a few requirements.

Transparency with your payment provider is key! 

Entering the world of high-risk account providers.

The bottom line is that if you sell adult-related products or services, you will need to sign up with a high-risk payment processor. This payment technology provider will give you access to the merchant account and secure payment gateway that are essential if you are going to accept customers’ online payments.

Compared to so-called, “low-risk” businesses, the degree of scrutiny you will undergo during the application process will be higher, as will the fees that you’ll be required to pay on an ongoing basis to mitigate the provider’s risk.

When going through the application process for a high-risk payment processor, you can expect to be asked to provide the following information.

• Business Registration and possibly an Operating Agreement
• Processing and bank statements for at least the past three months.
• A letter from your bank or a voided check verifying your business banking information.
• Your Social Security Number and Employer Identification Number.
• A valid government-issued ID, including driver’s license or passport.
• Your website and login credentials for underwriting to review.
• Transparency Reporting such as Complaint Logs.
• Details of your AML policy and monitoring software.

You may also be required to register with Visa and MasterCard, which your processor will do for you. This fee is $500 per card brand, with an annual fee after registration. 

The dos and don’ts of applying for a high-risk business account.

As you already know, entering the adult business realm has the potential to net you soaring profits. However, you must make your entrance in the proper way, particularly when it comes to applying for a high-risk processing account. Here are some tips to follow when seeking a payment company. Let’s start with the dos:  

• Find a provider that is capable of meeting your specific needs like redundancy and intelligent payment routing. You should not have to enlist the services of more than one payment services company if you choose a provider who is capable of providing this within their gateway. Your chosen partner should have the capacity to offer a full range of services to reduce risk and fraud while increasing your authorization rate. Additionally, you should be able to accept all types of payments while leveraging features like recurring billing, multi-currency conversion, and a payout solution. When all of these tools are available, you can easily add or subtract what you offer as your needs change or expand.
• Come to the table prepared to disclose whatever details they request. This may extend to data about your credit history, as well as how your past businesses have fared. You should be an open book.
• Fully describe what your adult-oriented business will be selling and how it operates. This should include the shopper’s experience and payment flow. 
• Make sure that the company you choose is one with a great deal of experience with high-risk businesses in general and with the adult entertainment sector in particular. 
• Conduct research ahead of time to make sure that past customers have been satisfied with the company’s offerings, including its customer service and responsiveness.

On the flip side, there are also a few things you should avoid:

• Minimize or leave information out. Sooner or later, your omissions or mistruths will be discovered, at which time you may pay high penalties or have your account closed altogether. This could also result in Card Brands adding you to an international database that would disqualify you from accepting credit cards permanently. 
• Compromise on security. Your provider should be Payment Card Industry Data Security Standard (PCI DSS) certified to safeguard sensitive cardholder information as should you. Your provider can assist you with becoming certified. Moreover, you should have a process on how you monitor content and how you store contracts for your content providers. 
• Assume that you need to pay exorbitant fees, especially if you are required to register with the Card Brands. While it is true that you will probably pay a bit more to have a high-risk account because of the risk that your provider is carrying, some of these charges are negotiable depending on processing history. Therefore, don’t jump at the first high-risk payment partner you see. Compare and contrast, with your priority being on what is best for your long-term success. A rule of thumb is to look at your overall ROI and not just your processing fees. 

As is the case when initiating any new enterprise, your best chances of getting ahead hinge on your level of preparedness and flexibility.

Allying your adult business with a top-of-the-line high-risk payment services provider is one of the most effective and proactive steps you can take to increase your chances of success in this highly competitive and potentially lucrative sector.