Adult Merchant Accounts:
Voted the #1 High Risk Merchant Account Provider, Soar Payments is focused on providing comprehensive and affordable adult merchant accounts for our clients.
Our goal is to be the undisputed best adult merchant account provider for your dating, escort, adult novelties, adult toys, adult bookstores, adult ebooks and magazines, strip clubs, membership and adult content websites. To achieve that, we have to cater to the unique needs of different adult businesses. For the adult industry, we’ve created the below “adult credit card processing cheat sheet”. It’s designed to give adult businesses a single place to obtain all the information they’ll need to obtain a retail or eCommerce adult merchant account and have long term success when accepting debit and credit card payments in their business.
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ADULT INDUSTRY CATEGORIES:
SIC Code: Businesses in the adult industry would generally fall into one of the following SIC codes:
- 5945: , Hobby, Toy, and Game Shops Primarily for adult novelty and adult toys
- 5947: Gift, Novelty, and Souvenir Shops Alternative for adult novelty and adult toys
- 7375: Information Retrieval Services For adult websites
- 729903: Dating and Escort Services For adult dating and escort services
- 7299: Miscellaneous Personal Services; Not Elsewhere Categorized For adult massage
- 792903: Amusement and recreation services For adult book store, strip clubs, and other adult retail locations
- 5968: Direct Marketing, Continuity / Subscription Merchant For pornography websites, membership products, and other adult continuity products (electronic goods or physical)
The adult industry’s use of MCC codes is pretty varied, and depends entirely on what type of product or service you offer. In addition to the above, adult merchant accounts are often listed under SIC codes specific to whatever unique product or service they sell, if the business doesn’t fit neatly into one of the above.
See the entire list of SIC codes here.
NAICS Code: Adult novelty, toy, adult dating, escort, massage, porn websites, and membership / continuity products generally use one of the following NAICS codes:
- 451120: Hobby, Toy, and Game Stores: Primarily for adult novelties and adult toys
- 453220: Gift, Novelty, and Souvenir Stores: Alternative for adult novelty and adult toys
- 517110: Wired Telecommunications Carriers For adult content websites
- 454111: Electronic Shopping, Internet Retail Sales For adult eCommerce websites and adult online sales.
- 812990: All Other Personal Services For adult dating, escort services, strip clubs, and adult massage
- 451211: Book Stores For adult bookstores, magazine sales, DVD and other retail products.
- 8139: Business, Professional, Labor, Political, and Similar Organizations (often used for adult membership sites)
There are unfortunately not many NAICS codes that specifically capture adult businesses models, so while most adult businesses fit into one of the above, a good number use general NAICS codes for the non-adult version of their industry type.
See the entire list of NAICS codes here.
A Note From Our CEO
Adam CarlsonSoar Payments, CEO
It’s a great time to be in the adult industry.
While the last 5 years have proven difficult for the print pornography industry, as a whole adult businesses are thriving, and even pornography is projected to rebound over the next 5 years.
At least that’s what a few of our adult merchants have told me personally. With an increasingly sexually liberated society, the number of consumers looking for adult products and services is exploding, and it’s boom time for adult businesses.
OK, maybe it’s not always that good, after all there’s still a lot that can go wrong, particularly with payments with your adult business. Things like:
- Getting approved to legitimately sell all your products, as opposed to trying to “sneak through” underwriting.
- Making sure you avoid payment fraud.
- Managing and recovering money on illegitimate chargebacks
The good news is, these problems are all solve-able. It took me about 12 hours of research, but I put together the below “adult merchant account cheat sheet” for entrepreneurs in the adult novelty, toy, dating, escort, porn website, and adult membership space to help you navigate these pitfalls.
It’s my sincere hope that you find this article useful (because I put a lot of time into it)… and if you need help with adult merchant services for your business, I’d love to help you with that, too.
P.S.If you own an adult business, and want affordable and reliable adult credit card processing we can help you (in fact, adult businesses are one of our specialties). Click here to begin a free online application.
June 7, 2016
Getting an Adult Merchant Account
How do I get an adult merchant account?
Getting an adult merchant account for an adult book store, dating, escort, adult massage, strip club, novelties, toys, adult membership or pornography content website isn’t as easy as talking to your local banker. The reason, is that for a credit card processor to accept adult businesses, their sponsor bank must allow adult businesses in their underwriting guidelines. Most of the largest banks (think Chase, Wells Fargo, etc.) don’t allow their credit card processors to write adult businesses. Therefore, if you want to accept credit cards you’ll need to go to a high risk processor whose sponsor bank supports adult businesses (like us).
Once you’ve found an adult merchant service provider, the process is pretty simple. You just complete an application, submit a few documents (e.g. a copy of the owner’s drivers license, a voided business check) and that’s it. Then the credit card processor’s underwriting team will review the application, and typically in a few days you’ll get an approval. If you need equipment, your adult credit card processor will ship it out to you, and if you take payments over the phone or internet, you’ll get setup with a payment gateway. Then you’re ready to roll.
Why can’t I just go to PayPal for adult credit card processing?
The short answer is because they don’t want you. PayPal, Stripe, Square or any other payment aggregator doesn’t allow for adult businesses. These credit card processors work a little bit differently, they don’t do underwriting on the front end, but only once you’ve started accepting credit cards. Thus, unfortunately, they’ll still accept your adult business when you apply, and then, one to six months later, when they do their actual underwriting they’ll notify you that they don’t accept adult oriented businesses, and they’ll immediately kick you off and, worst of all, freeze your funds for six months. So, if you don’t want to live in fear that any day you’re account is going to be suddenly frozen, you need an adult credit card processor (like us).
How do I know who accepts my specific type of adult business?
In general, if it’s a responsibly run legally operating business, an adult merchant services provider will accept your business. We work with adult novelty, adult toys, adult bookstores, online lingerie / clothing shops, strip clubs, membership websites, escort, adult massage business, among others.
That said, the adult space is constantly evolving and there are regularly new products, services or business models that we’re unfamiliar with. So, you may have to explain the business to us, but in general, if its legal we have a payment solution for your business.
For us that’s true because we work with a number of different sponsor banks and processors. So, if it’s something we’ve never come across before, we’ll need to understand the business model and translate that to something that the underwriter can understand and review.
What is the process for applying for an adult merchant account?
Applying for an adult merchant account is fairly easy, just complete the five minute online application, then we’ll email you a PDF copy of the application with all pricing and terms for your electronic signature. We’ll usually also ask for a few supporting documents, such as a copy of the owner’s ID, and recent business bank statements if they exist.
Once approved you can begin processing credit cards. We’ll also setup your chargeback management software, enable chargeback alerts, e-commerce fraud filter (if you’re taking online payments), make sure your payment gateway is integrated with whatever software you’re running, and answer any questions. In sum, we try to make this as easy as possible.
How do I get a higher credit card processing volume limit?
If you’re a new business (or a really fast growing one) when you get approved for an adult merchant account, it usually comes with a monthly volume cap. That means you can only accept credit cards up to your monthly cap (say for instance, $100,000). If, your business is growing really fast, you may need more than that $100,000. This is obviously a big problem, because if you can’t accept more credit card payments your business is effectively shut down for the rest of the month. So, there is one reliable way that adult businesses deal with monthly volume caps:
- If your business has processed for 3 to 6 months before asking for an increased limit, then you can just ask your adult merchant services provider, and if everything has gone well thus far will re-review your account and generally increase your limit. (In this context “gone well” generally means that you’ve had manageable chargeback levels, you’ve paid your bills on time, you’ve kept a positive balance in your company’s bank account, etc.)
What is an underwriter looking for when reviewing my adult merchant account application?
An adult credit card processor accepts some adult businesses, but it doesn’t accept them all. In general, an underwriter is looking for two things: legality and strong business fundamentals. The first requirement is obvious, legitimate adult credit card processors are not in the business of supporting illegal businesses, and thus will want to make sure that your business has the proper disclosures and restrictions to ensure it operates legally.
In sum, if you want to get approved by an adult credit card processor’s underwriting team, take the time to finish your website (for ecommerce businesses), make sure there’s a decent positive balance in your company’s bank account, select an owner who has decent credit to sign the adult merchant account application, and generally try to present your business as the responsibly managed legally operating organization that it is. And the better your business looks, the more likely your adult merchant account application will be approved, and with fewer restrictions (e.g. a lower rolling reserve, shorter funding delay, a higher processing volume cap, etc.).
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Question? Ask Away. We’re Ready to Help.
If you’ve got a question about a payment gateway, chargeback management tool, adult merchant account or anything related to growing an adult business, and want some advice, shoot me your question directly: AdamCarlson@soarpay.com.
Ready to Get Started?
Ready to start accepting payments at your adult business, Click here to begin a free online application.
Adult Platform Integrations
Most eCommerce business owners have a particular shopping cart they want to use. Same goes with MoTo (phone sales) businesses insofar as they have a CRM they want to use, and to a lesser extent some adult retail businesses have a point of sale (POS) or other piece of hardware they want to use.
If that describes your business, then it’s generally going to be easier to use an adult credit card processing company (and their payment gateway) that is already fully integrated with your software or hardware of choice. (A quick note: when you talk about integrating payments into your system, what is actually integrating is the payment gateway not the credit card processor, so check for integrated payment gateways not integrated credit card processors.)
So at this point you’ve got two options: you can either contact the shopping cart, CRM, hardware provider and ask what payment gateways they integrate with, or, contact the adult merchant service provider and ask them what their payment gateways integrate with.
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Reviews of Adult Payment Gateways
If your adult business accepts payments over the phone (typically called MoTo payments) or over the internet (called eCommerce) then you’ll need what is called a payment gateway.
Put simply, a payment gateway is a piece of software that you can access on your computer desktop or by logging in over the internet, which securely encrypts and transmits the customer’s credit card data to the adult credit card processor (who in turn processes the transaction). Put even more simply, if you want to accept payments in any way other than in person, you need a payment gateway. There are dozens of payment gateways out there, but most adult businesses use one of just a few, which are pre-integrated with most major shopping carts and CRMs. Some of the leading adult payment gateways are reviewed below:
- Authorize.net Payment Gateway: Owned by Visa, this is the default payment gateway for most credit card processors. It’s simple to setup, almost every adult related CRM software and major shopping cart integrates with it, and it’s reasonably cheap. All that said, there’s a reason why most larger adult businesses don’t use it. It’s limitations are that you can only use one adult merchant account in the payment gateway at a time, which effectively means that it’s off limits to almost any adult business with more than one location or website, or doing more than, say, $250k per month. Additionally, because it mostly serves low risk or small high risk merchants, it doesn’t integrate as well as high risk payment gateways with most chargeback management services and tools.
- Soar Pay High Risk Gateway: This payment gateway is built on the NMI platform, which means that it integrates with almost every adult CRM and eCommerce shopping cart. In addition, because it’s built for high volume high risk merchants it includes it can accommodate large sales teams, and integrates well with front end fraud filters and back-end chargeback alerts, and chargeback fighting platforms (which are a necessity with most adult ecommerce businesses).
- USAePay Gateway: Typically the cheapest payment gateway, it offers most of the same features as Authorize.net at a slightly cheaper price. It has fewer integrations than Authorize.net o generally, adult eCommerce or adult MoTo businesses use one of the first two options. That said, if saving a few bucks a month is important this is an option worth considering if your preferred shopping cart integrates.
A quick word about getting a payment gateway: Most adult merchant account providers are integrated with a variety of payment gateways (we are). And generally, it’s cheaper to obtain your payment gateway through your adult merchant account provider than getting it directly from the payment gateway company directly. That’s because adult credit card processors buy the service at a steep discount over retail and pass some of those savings on to their customers. In sum, pretty much no matter what payment gateway you want to use, your adult merchant account provider can accommodate it, and usually at a lower cost than you going direct to the payment gateway developer.
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Everything an Adult Business Needs to Know About Chargebacks
Most adult businesses are at their core small businesses. And small business owners are generally unaware about how chargebacks happen, how they can be managed, and the consequences of not managing them.
Because excessive or unmanaged chargebacks are the most common reason that businesses have their adult merchant accounts terminated (and the most common reason they can’t get a new adult merchant account), it’s important to understand what the causes, consequences and solutions to managing chargebacks.
Why do adult businesses get a lot of chargebacks?
Adult businesses unfortunately face a ‘double whammy’ in terms of chargebacks, because they get attacked by both ‘friendly chargebacks’ and ‘fraud chargebacks’.
Friendly Chargebacks: The term ‘Friendly chargebacks’ is a misnomer of a phrase, but it refers to situations in which the customer legitimately made the purchase with their own credit card and received what they ordered, but then decided that they either regret the purchase or otherwise don’t want to pay for it. The customer will then call their issuing bank and claim that the good or service wasn’t received, that they didn’t actually order it, that it wasn’t as advertised, or some other reason why they shouldn’t have to pay for it.
Fraud Chargebacks: The second major type of chargeback faced by adult businesses are fraud chargebacks. Fraud chargebacks are simply situations in which the credit card owner didn’t actually make the charge, often because the card had been stolen and used by a fraudster to make the purchase.
The reasons that these two types of chargebacks are so common with adult merchants is obvious. With friendly chargebacks it’s often because the customer is either embarrassed that they made the charge, they made it and now regret it and are hoping by disputing the payment they can make it go away, or they figure that they can get away with pretending that it wasn’t them.
With fraud chargebacks, the reason adult businesses are vulnerable is simply that there are tons of stolen credit cards floating around on the dark web, and fraudsters try to target what they perceive as vulnerable businesses that provide goods or services that they want. That of course, includes adult businesses.
What is a Chargeback?
Let’s start simply… A chargeback is when a credit card holder calls their issuing bank (e.g. Chase bank if it’s a Chase credit card) and disputes a charge. The customer may dispute the charge for a variety of reasons, but a few of the most common are that they don’t recognize the charge, they never received the good or service they paid for, they were double billed, the good or product was defective, etc. Most commonly in the adult space, the customer will say that they don’t recognize the charge.
Whatever the reason, once the credit card holder has called their bank to dispute the charge, the “chargeback process” is underway. At this point, (with a few exceptions) the credit card holder’s bank contacts the merchant’s bank (meaning your credit card processor’s sponsor bank) who in turn contacts the credit card processor, who in turn contacts you. The funds in question are then held in escrow, and you as the merchant bear the burden of proving that the charge was legitimately authorized, fully delivered, etc. If you, the adult business owner win the dispute, you get the disputed funds returned to you. If not, the customer gets the funds returned to them.
I know how to answer a few questions, and we don’t ‘scam’ people in my adult business, so I don’t have anything to worry about, right?
Unfortunately, the chargeback process is heavily weighted in favor of the customer. When you receive a chargeback notice, you often have only a couple of days to respond. The response needs to be in the precise format that the card brands allow (down to the right font and paper size… no, that’s not a joke). And you need to provide very technical responses that prove that you were right. That’s why the vast majority of small businesses plan to fight chargebacks, but when it comes down to it, just end up not responding or responding in a way that they’re certain to lose.
The downsides to this are serious. First, the adult business loses all of that revenue, plus they’re out the expense of the product or service they provided, plus they’re out the fees their adult credit card processor imposes for having a chargeback in the first place. And finally, if you get a bunch of these, you’ll have your adult merchant account terminated, and likely won’t be able to find another one.
How to Calculate my Chargeback Ratio?
The key to keeping an adult merchant account up and running (and avoid getting it terminated) is to maintain your chargeback ratio below 2% (with a high risk processor). With a low risk processor it’s usually 1%. Offshore adult merchant accounts can be 3-4%. In any case, it’s obvious that you need to know how to properly calculate your chargeback ratio.
Unfortunately, the formula that each adult credit card processor uses is unique. Most either use a transactional or dollar amount cost. And most do not let you deduct “won” chargebacks from your account, but some do. So it’s important for you to ask your adult merchant services provider exactly how they calculate chargebacks before you start accepting credit cards so that you can track this number.
If, for example the adult merchant services provider uses a transaction count method, then you need to know how many chargebacks were initiated in a month (the numerator) divided by the total number of transactions in that month (the denominator). By contrast, with an adult credit card processor that uses dollar count for calculating chargebacks you need to know the total dollar amount of chargebacks initiated in that month (the numerator) divided by the total number of dollars transacted in that month (the denominator).
With respect to adult credit card processors that allow you to deduct won chargebacks, this also dramatically affects your chargeback ratio calculation. If, for example, you’ve won 50% of your chargebacks, then your ratio is literally only half as much if that adult merchant services provider allows you to deduct “won” chargebacks, as compared to with an adult merchant service provider that does not.
Note: chargebacks can be initiated at anytime up to 6 months after a transaction has taken place. Most chargebacks happen in the first 45 days after a sale (generally most are in the first week, and then there’s another big group around the 30 day mark when customers get their credit card statements for the month). However, you may see a chargeback in month 3 count against your month 3 chargeback ratio, when the underlying sale occurred in month 1.
Why does an adult credit card processor care what my chargeback ratio is?
Your adult merchant services provider cares more about your chargeback ratio than about almost any other statistic about your account. The reasons are a few:
First, adult credit card processors can face Visa / MasterCard / Amex / Discover fines for allowing a business to continue accepting credit cards with a high chargeback ratio. Second, the sponsor bank may levy fines or costs to the processor for this. Third, rising chargebacks are a sign that there is something wrong with the business, and as a consequence, that the adult merchant services provider may face future losses on the account. Fourth, an adult credit card processing company does not want to obtain the reputation that they sponsor ‘scammy’ businesses, so the reputational costs are not insignificant.
In sum, an adult credit card processor is going to watch your chargeback ratio like a hawk, so it benefits you to figure out how to ensure that your ratio is consistently below 2%.
How do I keep my chargeback ratio low?
There are a lot of things that an adult business can do in order to keep their chargeback ratio low. As a diverse industry, however, only some of the following techniques are likely to apply to your particular adult business.
- Disclose, disclose, disclose:
If you have a 30 day refund policy, make sure it’s clearly listed on the website at the time of purchase. If you have a continuity or membership component to your adult product, make sure to make it as transparent as possible so customers don’t feel “tricked”.
- Send confirmation and customer satisfaction emails:
If you accept a credit card payment, the customer should receive a detailed receipt. That means if it’s an e-commerce or phone transaction, the customer needs to be emailed a receipt. And if you want to doubly protect yourself, have a customer satisfaction email go out that asks the customer whether they had any issues with the recent purchase, and offers to address them.
- Integrate Customer Dispute Alerts:
Remember that I said there were a few exceptions to the fact that when a customer calls their issuing bank to complain about a charge that the “chargeback process” has begun? Well, perhaps the biggest exception to that are chargeback alerts. If you sign up to receive chargeback alerts (we’ve integrated this into our high risk payment gateway by the way) you’ll get an email telling you that you have 72 hours to work the issue out with the customer before a chargeback is initiated. For this to be effective, the issuing bank that the customer is using has to also have signed up to participate in chargeback alerts, which only about 25-35% of them have, but it’s still a good easy opportunity to eliminate 25-35% of all chargebacks.
- Teach customer service personnel to refund:
Many small businesses feel like each sale is a ‘win’ for the company. And therefore, voluntarily offering a refund to a customer who is not complying with the refund policy seems like giving away free money. And, in a sense, it is. Unfortunately, however, adult businesses will face a lot for chargebacks, even if they’re doing everything right. As a consequence, it’s important for you to avoid every chargeback that you can, even if the customer is in the wrong. So, if your customer service center gets a call from a customer who wants a refund, and you’ve confirmed that the customer hasn’t already disputed the charge with their issuing bank, consider just giving it to him/her.
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Need Adult Merchant Services?
We’ve Got You Covered.
Soar Payments provides ACH, debit and credit card merchant services to adult novelty, toys, bookstores, lingerie, strip clubs, adult massage, membership websites, dating, adult content, eBooks, and other adult businesses, ranging from new startups to businesses processing millions of dollars a month. So when you’re ready, we’re ready.