Merchant Accounts for Adult Businesses

May 31, 2018

Merchant Accounts for Adult Businesses
If your business involves “adult-only” services and goods, you’re automatically branded as a high-risk merchant by any company that provides financial services. Why? Because your industry is plagued by chargebacks, and banks really hate chargebacks.
And there are so many reasons for adult business customers to file chargebacks. It could be that your business didn’t fulfill their impossible dreams. Or they might need a little plausible deniability (“Honey, the computer must have got hacked! I’ll call the credit card company right now!). Maybe they missed the fact that they were signing up for a subscription. Perhaps they just regret the whole thing. Or maybe they are deliberately trying to defraud you.
There are a multitude of reasons that might inspire someone to deny they ever used your services, and if more than 2% of your customers decide to institute chargebacks – you run the risk of immediately losing your ability to process credit cards.

Risky Business
Adult businesses experience sudden terminations of their merchant accounts, as well as freezes and holds on their funds more often than many other businesses. While this can happen if a third-party processor provides an account and only later realizes that you provide adult services, it’s more typically due to regulatory changes that impact the legal status of adult businesses, consumer complaints or chargebacks and suspicious activity associated with the merchant’s business.
What is suspicious activity? It could be anything that violates the terms of your agreement with the payment processor. For example, if you have an online dating business and decide to branch out to escort services – your account could be terminated. Financial services might be comfortable with one type of adult business, but spooked by other types – either due to heightened risk or concern about a particular subset of the adult industry, which typically includes:

  • Adult bookstores
  • Adult membership sites
  • Escorts
  • Massage services
  • Novelties and toys
  • Online dating
  • Streaming adult videos

Suspicious activity can also mean fraud on the business owner’s side, such as failure to deliver services or goods as promised, overcharges, deceptive billing practices and other issues.

High Risk Payment Processing

It’s not hard to find a payment processor who specializes in high risk businesses – a quick Google search will reveal dozens. But you may struggle to find a high-risk payment processor who doesn’t charge insanely high fees for substandard services. No matter how risky your business model may be, you deserve to be treated like a valued customer.
That respect starts with onboarding. Be wary of payment aggregators who approve your account before they do their underwriting (a review of your business, management practices, financial history, and legality). In this scenario, you’ll be in business for a few months (at best) before your account is frozen with no warning. It’s far better for your business – and your sanity – to work with a payment processor like T1 Payments who specializes in high risk businesses and offers flexible underwriting that greatly increases your chances of approval and your peace of mind.

Mitigating Your Risks
Once approved for a merchant account, you’ll want to keep that account in good standing. A key area to address for adult businesses is chargebacks. You can mitigate the risk of chargebacks by:

  • Accurately describing your goods/services
  • Having a clear refund policy
  • Providing an easy way for customers to cancel accounts/request refunds
  • Detailing any recurring charges
  • Delivering products on time
  • Letting customers know what company name will appear on their payment card statements.
  • Excellent customer support
  • A secure website that protects customer privacy

Typically, customers will try to solve a problem directly with the merchant before filing a chargeback. Make it easy for your customers to resolve the problem, and many chargebacks can be avoided.
Unfortunately, though, a merchant can do everything right and still get hit with chargebacks. That’s why you want to work with a payment processor that offers chargeback protection services. For example, T1 Payments works with two chargeback protection solution services – Ethoca and Verifi to reduce chargebacks and help merchants resolve payment card transaction disputes directly. T1 Payments also offers another layer of protection with Fraud scrubbing technology, which can quickly spot and stop suspicious transactions that could result in security problems and/or financial loss for our merchants.
T1 Payments specializes in meeting the needs of high-risk merchants, with over two decades of expertise and a full suite of payment processing services and solutions, including Payment Gateway services that integrate with over 175 different shopping carts. Our flat fee merchant accounts and customizable global payment solutions help your business grow and prosper. To find out more about T1 Payment’s services for high-risk online merchants please visit please visit or call 866-518-2216.