Risky Business – Running an Online Dating Service


October 25, 2018

Online dating may be a match made in virtual heaven for merchants who are in search of a growing marketplace to leverage and can come up with a way to differentiate their offering. There are more than 2,500 online dating services operating in the U.S. alone, with 1,000 new online dating services opening around the world every year. So, there’s plenty of competition, but significant opportunities too – according to research firm IBISWorld, in the U.S online dating is expected to grow from 2.5 billion in 2018 to $3.2 billion by 2020. But while falling in love may be easy, running an online adult dating service is challenging.

Operating an Online Dating Business

Any business that offers “adult-only” services and goods is automatically branded as a high-risk business by financial services companies. This is primarily because the adult services industry as a whole has a high rate of chargebacks, and chargebacks cost money.

A chargeback happens when a customer is unhappy with a business’s services or products. The customer files a chargeback request, stating that their payment should be refunded. Fees are applied as soon as the chargeback process begins; retrieval fees to investigate the dispute all the way to a chargeback fee if the customer’s claim is ultimately found to be true. The typical retrieval fee is $5-15 per incident, and between $20-$50 for a chargeback – but may be much higher for high-risk businesses. Meanwhile, the money in dispute is withheld from the merchant’s account until the matter is settled – typically 60-75 days or longer. And even if the cardholder’s dispute will be rejected, the merchant still has to pay the fees associated with the chargeback.

Those fees aren’t the worst thing that can happen. If more than 2% of customers decide to institute chargebacks a merchant may lose the ability to process credit cards. And there are so many reasons for online dating customers to file chargebacks. It could be that the service didn’t fulfill their impossible dreams. Or they might need a little plausible deniability (“I didn’t sign up for this! My card must have gotten hacked, honey! I’ll call the credit card company right now!). Perhaps they just regret the whole thing. Or maybe the merchant wasn’t clear about what the service could deliver.

Merchant Accounts for Adult Businesses
Chances are excellent that anyone who is running an online dating site will need to work with a payment processor that specializes in high-risk businesses. But be wary of payment aggregators who approve accounts before they do their underwriting (a review of your business, management practices, financial history, and legality). Quick approvals can result in equally quick terminations or accounts that are frozen with no warning. It’s far better for the owner of an adult dating business to work with a payment processor like T1 Payments that specializes in high risk businesses and offers flexible underwriting that greatly increases the chances of approval, with no unpleasant surprises later.

Mitigating the Financial Risks 
Once approved for a merchant account, keep that account in good standing by doing everything possible to reduce chargebacks, by:

  • Having a clear refund policy
  • Providing an easy way for customers to cancel accounts/request refunds
  • Not promising things that the service can’t deliver, such as “True Love Guaranteed!”
  • Being very clear about any recurring charges such as subscriptions
  • Telling customers what company name will appear on their payment card statements.
  • Providing excellent customer support
  • Protecting customer privacy

Typically, customers will try to solve a problem directly with the merchant before filing a chargeback. Make it easy for 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. It’s best to look for 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 chargebacks and/or financial loss for 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 t1payments.com or call 866-518-2216