Merchant accounts come in handy for companies conducting business online. Ultimately, these specialized bank accounts open the doors to cashless, digital payments — a must for any online merchant. The only problem? They’re not that easy to obtain.
Businesses operating in high-risk industries — like adult entertainment — typically get barred from using services like PayPal and Stripe. And while that might already limit their ability to go cashless, banks jump on the bandwagon by making merchant accounts inaccessible. Good thing there’s Shark Processing.
Merchants offering services that provide entertainment targeted at audiences 18 years old and over fall into the adult entertainment industry. This includes popular merchants like OnlyFans.
Filling in an obvious demand, adult entertainment merchants mainly operate online but some physical service providers do exist, like the ever-popular Rick’s Cabaret. For the sake of convenience, these merchants give customers the option to pay in sundry ways, with credit and debit cards being the obvious favorite.
To be able to do this, adult entertainment merchant accounts become an important necessity. Essentially, a merchant account gives a business the capability to accept digital payments in a variety of forms.
However, since banks and traditional merchant acquirers avoid the risk of losses, they typically veer away from partnerships with high-risk merchants — including those in the adult entertainment industry.
But why?
In the complicated world of banking and finance, the risk is anything that would potentially cause losses to banks and financial service providers. That said, these merchant acquirers perceive certain businesses as ‘high risk’, being that they come with unique predispositions that make them more likely to succumb to financial failure.
Here are some of the factors that merchant acquirers look into to calculate a merchant’s risk:
| FACTOR | LOW RISK | HIGH RISK |
|---|---|---|
| Location | Within the US, EU, Canada, Japan, or Australia | Everywhere else |
| Average transaction cost | Under $500 | More than $500 |
| Average monthly revenue | Under $20,000 | Over $20,000 |
| Transaction type | Card present | Card not present |
| Currency | Domestic | International |
| Customers | Domestic | International |
| Payment scheme | One-time | Subscription or recurring |
| Credit rating | Poor | High |
| Industry | Low risk industries include furniture, apparel, groceries, food, etc. | High risk industries include cannabis, hemp, online casinos, adult products and services, etc. |
Some of these factors fall well within the merchant’s control, like their location, the currencies they accept, and even their payment scheme. But things like the merchant industry are slightly harder to address. Unfortunately, industry involvement also makes up the biggest chunk of an acquirer’s considerations.
All of the factors stated above contribute to the likelihood of a merchant experiencing chargebacks. Developed when cards were new to the scene, chargebacks aim to protect buyers from the possible dangers of unscrupulous vendors.
The only problem is that since customers can initiate chargebacks without contest, they’ve also turned into what’s called friendly fraud. That is, buyers can get their money back without having to prove anything, and without having to return products received.
The issue here is that when customers initiate a chargeback, everyone involved in the digital payment gets slapped with expensive fees. That includes the merchant, the acquirer, and even the card issuer.
So to avoid the risk of having to pay unwanted fees and penalties, acquirers simply avoid doing business with high-risk merchants.
Ultimately, merchant acquirers remain wary of adult entertainment providers for three reasons. These include:
Some adult entertainment service providers require their customers to pay per minute. While that might not seem like such an issue, people can lose track of the time, ending up with large grand totals that exceed $500.
The problem here is that when a customer decides to initiate a chargeback, the bank would instantly owe $500 plus any penalties associated with the transaction. If multiple large-sum transactions become chargebacks, then the total amount owed plus the charges would become particularly expensive.
Banks and financial service providers place a high estimate on their reputation. They need to appear professional and polished if they want to attract the trust and confidence of the general public.
Unfortunately, businesses in the adult entertainment industry might not fit that idealized image. Associating with such businesses places a reputation risk on acquirers that might rub their existing and future clients the wrong way, thus costing them business.
There’s a stigma that comes with adult entertainment, and some people don’t want their network to know what they’re up to. So fraud runs rampant throughout the industry, with people faking names and accounts in order to access the services without compromising their reputation.
In some cases, customers might even initiate a chargeback in order to hide the transaction from their partners. Unfortunately, this happens despite their willingness and desire to access the services, and the satisfactory fulfillment on the merchant’s end.
Struggling to open a high-risk adult merchant account with traditional acquirers? Shark Processing has the answers. We’re working closely with a network of high-risk merchant account providers who gladly and willingly take on the challenge of proving merchant services to high-risk clients.
We guarantee placement for hard-to-place merchants who might have trouble getting approval from conventional, conservative banks and financial service providers.
At Shark Processing, we make it our goal to level the playing field and give every merchant a fighting chance — regardless of the risk. We eliminate the struggles by giving fast, effective, and tailored solutions that aim to help our clients obtain high-risk merchant accounts sans the hassle.
Open up your high-risk adult entertainment merchant account in 24 hours when you collaborate with Shark Processing. Fill up our pre-application form or send us a message through our Contact Page to get started on your high-risk merchant account application.
