Whether you are in the Adult Industry or looking to start up your Adult business, one thing you will need is a merchant account to accept credit cards which can be an incredibly difficult task. Why are adult merchant accounts to accept credit cards so difficult to get, maintain, and keep? What can you can do to make this seemingly simple service headache free? The Adult Industry covers a wide range of areas including pornography films and magazines, adult chat sites, adult live video sites, sex toy stores, adult theaters, sex chat lines, adult modeling agencies, strip clubs, and legal prostitution. So if all these services are 100% legal – why should it be difficult to get a merchant account so you can accept credit cards and be paid for your services? How do you find a merchant service provider who is not just willing to work with your business but who will provide an affordable solution that is both stable and service oriented?
Why is it so hard to get an adult merchant service account to accept credit cards?
There are a lot of reasons that being approved for a merchant account to accept credit cards in the adult industry is more difficult than traditional retail businesses.
Acquiring Bank’s Public image
First, since the adult industry is a constant source of international debate in politics, law, and religion many acquiring (or processing/funding) banks want to maintain a distance from the adult industry not only to protect their public image. However, the reason the banks consider the industry a risk goes far beyond protecting their public image.
High ChargeBack Rates
The nature of the adult industry itself causes it to have a much higher than average chargeback rate. A chargeback is when a customer calls their credit card provider and denies a charge as either fraudulent, unpurchased, or unfulfilled. As soon as this happens the bank who processed the transaction refunds the charge and begins an investigation to see if the accusation is founded. This is a costly and time consuming process. Imagine this, a husband goes to a strip club or signs up for your adult site without discussing it with his wife. The wife gets the credit card bill and sees an unusual charge so she asks him about it and (not wanting to admit it) he says he has no clue what it is for. So she calls the credit card company and the chargeback process begins!
Chargebacks are also, often times, due to the monthly recurring memberships that are sold in the adult website industry. This applies to but goes beyond the above scenario. Consider this, a customer signs up for your site, maybe under a trial membership at a discount, and decides not to continue their membership but never cancels. The next month they get their billing statement and see the charge. Instead of simply calling or writing your business to request a refund they simply call their credit card company and say the charge was not approved. Once again a chargeback investigation is initiated.
The Adult Industry is often a Target or Source of Fraud and ID Theft
Another reason it is difficult to establish a merchant account to accept credit cards is that the adult industry is all too often the target of, and in some cases the source of, fraudulent behavior. Unfortunately the adult industry has a track record of attracting criminals hoping to skim credit card information, bank accounts, and Identities. This occurs either through hacking the payment gateways of legitimate adult business owners or through putting up false adult websites and collecting payment information for services that are not truly available. Most people think these instances are rare, however, the opposite is true and these practices are all too common and lead to banks being leary of working with adult industry merchant accounts. Often times more in depth fraud protection software and underwriting processes are needed to gain bank acceptance. These additional steps are designed to protect the bank as well as protect the consumer and legitimate adult business owners.
International Adult Websites
Adult video, chat, and toy sites work in an international space and need to be able to accept credit cards internationally to maximize their business. To accept credit cards on an international scale has challenges all its own and this service is something that many domestic banks are either unable to or unwilling to provide. One of the reasons for this is that accepting credit cards on an international level requires multiple layers of fraud protection, multi point ID confirmation, and the capability to accept payment in the customers currency while funding into the business owner’s currency. Some credit card processing gateways offer the ability to not only dynamically convert hundreds of currencies but also the ability to fund back out to those currencies in their native currency. The international internet sales space can be a dangerous and targeted market for criminals so it is important that your business works with a reputable and experienced credit card processor like Bankcard Brokers.
Adult Merchant Service Providers – What to watch out for.
There are literally thousands of uneducated sales agents for high risk credit card processing who make a lot of promises and produce few results. The problem is that most of these agents never truly understood traditional credit card processing and the interchange system so there is no way for them to grasp the complexity of finding a good high risk solution for whatever client is in front of them. Some of these agents think it is perfectly normal and acceptable to do what is called “mis coding” in order to get an account set up. This means that the only way they know how to set up a merchant account to accept credit cards for a high risk business is to represent it as something that it is not and hope it slips through the underwriting department. This practice can be highly illegal and considered money laundering will most likely end up getting the account shut down while possibly resulting in withholding of the business owners funds. Agents and Merchant Service Providers without the necessary experience both domestically and internationally should be avoided at all costs. So how do you find a good merchant service provider to accept credit cards for your “high risk” business? First off make sure that you ask the salesperson a few questions like:
-How Long have you been in High Risk Merchant Services?
-How many banks do you work with? Domestically and Internationally?
-Do you have a domestic service center?
-What is your cell phone number?
Amazingly many agents will not be able to answer these questions and it is time to move on to another service provider. Interview your potential processors and then choose one that can answer all the above questions and seems interested in your business’ best interest.
What to do when Shopping for a High Risk Credit Card Processor.
Your bottom line and your success should be important to the merchant service provider that you choose to accept credit cards through for your adult business. There are a few steps or best practices you should consider while shopping:
First and foremost only turn in ONE application.
Do not do what so many high risk businesses try and turn in 4-5 applications simultaneously with multiple processors. This can cause your account to get turned down and cause other underwriting confusion when it comes to getting your high risk merchant account approved and making sure you get the best rate.
Secondly understand your rates.
Speaking of rates, your rates to accept credit cards may vary greatly depending on what part of the industry you participate in, what your billing model is, and what your business history is. It is a given that the credit card processing rates for high risk businesses are going to be higher than those that your local retail business pays, but, it is important to work with a processor who is concerned with making sure that your business has every chance to succeed and to provide you with good personalized service. When you are applying for an account make sure to get a detailed rate sheet with FULL disclosure on all the fees you will be responsible for including but not limited to:
– application fee
– monthly and annual fees
– processing rate
– per transaction fee
– chargeback fees
– rolling reserves
– gateway fees if applicable
– any programming fee
Finally be prepared to apply for a high risk merchant account to accept credit cards.
There will be a checklist of items requested of you and putting together a COMPLETE package for your chosen processor is incredibly important. Acquiring banks are much more likely to want to work with a business who has all their ducks in a row. Many times applications will be denied simply because the package was piece worked together and response times from the business owner were too slow. When you are filling out the application provided to you make sure that every field is completed to the absolute best of your your knowledge and provide all the supporting documentation that is requested. If your chosen processor did not give you list of supporting docs that are potentially going to be needed then you might want to reconsider your choice! Following is a general list of items that you can expect to be asked for when applying for a high risk or adult merchant account to accept credit cards:
1.) Completed and signed application
2.) 3-6 months of most recent bank statements
3.) Articles of incorporation showing directors, shareholders and beneficial owners
4.) Current Valid ID preferably a passport
5.) Business plan including 6 months sales projections and marketing plans – used
attached form if they don’t have one and must have Clear explanation of
goods/services provided with price points if not clearly stated on website
6.) Recent utility Bill less than 3 months old
7.) Screen Shot(s) confirming ownership of the website
8.) CV/ Resume
9.) Bank letter of good standing
10.) 6 months Processing statements or screen shots of reports if nothing else is available
11.) Supplier agreement contract if you are reselling a product
This list may sound excessive, but the fact is, that the better understanding that the bank has of your operations the more likely they are to want to work with your business and the better the rates they will offer when it is clear that you are a professional business owner and not a fly by night operator!
We hope that this was an insightful article that will help your adult or high risk business navigate the complexity of high risk merchant accounts. Contact Bankcard Brokers for all your high risk merchant service needs to accept credit cards. Not only do we have decades of experience in the merchant services industry and high risk merchant services but Bankcard Brokers has the friendliest staff around! Simply fill out the contact form below to get your Adult Merchant Services Application TODAY!