Adult Merchant Services to Accept Credit Cards
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, however, as you may have experienced, this can be an incredibly difficult task. What I would like to address in this article is Why is it so difficult to get, maintain, and keep your merchant services to accept credit cards in the Adult industry? and 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 only willing to work with your business but really knows the industry and can provide an affordable solution that will be stable and most importantly - service oriented? The Merchant Doctor is here to help you navigate the complexities of high risk merchant services!
Why is it so hard to get an adult merchant services account to accept credit cards?
There are many reasons that establishing an adult merchant account to accept credit cards in the adult industry (and other “high risk” industries) is more difficult than most "traditional" businesses. Let’s just look at a few of the main reasons.
First, as you probably know, the adult industry is a constant source of international debate in politics, law, and religion. This causes many acquiring (or processing/funding) banks to distance themselves from the adult industry not only to protect their public image but because they do not see the “risk” of processing credit cards for adult businesses as a needed source of profit. The reasons, however, the banks consider the industry a "risk" go far beyond protecting their public image.
High ChargeBack Rate
The nature of the business itself causes adult merchant account to incur 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 or unfulfilled. As soon as this happens the bank who processed the transaction is forced to refund the charge and open an investigation to see if the accusation is founded. It 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 and to call the card company. She does and the chargeback process begins!
Another source of chargebacks is often times due to the monthly memberships that are often sold in this 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 (maybe they are worried about a sales pitch or are simply embarrassed) so 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 for Fraud
Another reason it is difficult to establish an adult merchant account to accept credit cards within the Adult Industry is that the 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. Either through hacking the payment gateways of legitimate adult business owners or through putting up quick adult membership websites and collecting payment information for a service that is not truly available. Most people think these instances are rare, however, the opposite is true and these practices are all too common making the boarding, underwriting, and acceptance procedures more complicated than a standard merchant account. Often times more in depth underwriting and fraud protection software is needed to gain bank acceptance. These additional steps are designed to protect not only the bank but also to protect the consumer as well as legitimate business owners.
International Adult Sites
This applies more to Adult video and chat sites more than most other business types in this category, however, the internet is an international space and often times video and chat sites need to be able to accept credit cards internationally to maximize their business. To get an adult merchant account to accept credit cards on an international scale has challenges all its own but this service is something that most 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 and fund into the business owner’s currency. Some credit card processors offer the ability to not only dynamically convert hundreds of currencies when you accept a credit card but also the ability to fund back out to those currencies in their native currency. Keep in mind that the international internet sales space can be a dangerous and targeted market for fraud and hacking so it is important to deal with the absolute most reputable and experienced credit card processor.
Merchant Account Service Providers - What to watch out for
When it comes to accepting credit cards and especially when it comes to High Risk merchant services there are literally thousands of inadequate sales agents in high risk merchant services who will make a lot of promises but produce few results. So how do you find a good merchant service provider to accept credit cards at your “high risk” business. The problem is that there are a lot of sales reps (good and not so) who have been in the traditional merchant services for a while and get lured into high risk credit card processing with greedy thoughts of higher margins. Unfortunately, most of these agents never even took the time to truly understand traditional domestic 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. What this means to your business is that the only way they know how to set up a merchant account to accept credit cards for your business is to represent it as something that it is not and hope it slips through the underwriting department. Not only can this be highly illegal (depending on the real industry) but it is no real solution for the business owner and will most likely end up getting shut down with the possibility of the business having to endure withheld or frozen funds. Agents and Merchant Service Providers without the necessary experience both domestically and internationally should be avoided. So what do you do? 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 which means 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.
Things to consider and expect when Shopping for a High Risk Credit Card Processor.
Things to consider and expect 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 for your merchant service provider to accept credit cards for your adult business. First and foremost only turn in ONE application - DO NOT do what so many high risk businesses try to turn in 4-5 applications simultaneously with multiple processors. This can cause a lot of problems and confusion when it comes to getting your high risk merchant account approved and making sure you get the best rate.
Speaking of rates, your rates to accept credit cards will vary greatly depending on what part of the industry you participate in, how long you have been in business, how much volume you do, and what your billing model is. Given, due to the industry and that it requires a High Risk merchant account, the average rates 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.
Some things to expect when you are applying for an account.
1. Do not expect an approved account in 24 hours and be cautious of any salesperson that says they will. Most high risk merchant accounts take an average 4-5 business days to establish once all required docs are in.
2. Expect to pay a small application fee. The underwriting and boarding process is extremely time intensive and application fees (averaging about $199) are to be expected.
3. Rolling reserves are also very common in the high risk sector. A rolling reserve means that the processing bank will establish an escrow account where 5%-20% of your sales volume will be held for a period of time like 45 days before it is released to you. These funds are in place to absorb chargebacks and or banking fees if your business disappears.
4. 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
- wire fees
- any programming fee
5. If you are setting up an international bank ask what the funding times are. Most international accounts will only get funded once every week, two weeks, or even a month!
Getting an account - what to have ready
Finally what should you be prepared to have to endure to application process for a high risk merchant account to accept credit cards? First, let me mention that putting together a COMPLETE package for your chosen processor is essential. Acquiring banks are much more likely to want to work with a business who has all their ducks in a row. I have seen accounts 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 to produce when you are 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 business bank statements (or personal if you are a new business)
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 account standing
10.) If available - 6 months Processing statements or screen shots of reports if nothing else is available
11.) Supplier agreement contract if you are reselling a product
These items may sounds 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 to navigate the complexity of high risk merchant accounts. I encourage you to leave your questions and or comments below and remember if you need the absolute best service hire the best! Contact the Merchant Doctor for all your high risk merchant services needs to accept credit cards. Not only do they have over a decade of experience in the merchant services industry and high risk merchant services but they have friendliest staff around!