Adult Credit Card Processing
The adult industry, though not mainstream or openly discussed much, has always been one of the largest segments of e-commerce business and with the ever-increasing growth of the internet and constantly improving content and services, the demand for adult entertainment products is projected to continuously grow and post record sales annually for years to come. The need for merchants in the adult industry to partner with a credit card processing service that specializes in these higher risk payment processing services is key for the longevity and success of an adult business operating in the 21st century. At Adult Merchant Services, we work to find the best solutions for our merchants to ensure that their credit card processing and check processing services are being handled by the best banks for the industry.
Beginning with the first modern adult pornographic literature in 1748 followed by the first known adult movie in 1896, sexual imagery has been used by people for well over 2000 years, as early as the times of Mesopotamia. Over the centuries, civilizations have begun to slowly recognize pornography and begin to slowly recognize it as part of the fabric of society. Fast forward to the 20th century and nearly 100 years after the first pornographic movie in 1994 is generally considered to have been the first adult website to have started, opening a door to an industry that has never looked back. With the increasing demand of adult content, websites struggled to accept payments until a solution for accepting online credit card payments, CyberCash, allowed for fast and simple payments to be made by customers and accepted by businesses.
Today, many of the banking institutions and eWallet services in the United States that are available to e-commerce merchants are not open to accepting adult businesses, limiting the options of merchants and making the process to find a suitable service provider more difficult. Working with financial institutions that have a proven track record of providing safe and reliable adult payment processing services is essential for building a successful adult business, preventing any disruptions or sudden terminations of merchant account or other payment services, a problem that has the potential to ultimately destroy a business that would otherwise prosper.
Credit Card Processing Table of Content
How Credit Card Processing works
Why Use Credit Card Processing
Online Credit Card Processing
Credit Card Processing Compliance
Credit Card Processing Requirements
The History of Pornography
Dating back to nearly 5,000 years ago, ancient Mesopotamians produced artwork depicting sexual acts, whether for religious or other rituals, has been widely regarded as some of the first images of sexual activities outside of Paleolithic cave drawings of nude men and women. Again, during the Roman Empire imagery of sexual activities and other erotica were present at many of the ruins, surprising modern scholars as to the extent of blatant sexual references used by this culture that is thought to have been intellectually superior to other groups of the time. While not regarded as pornography, sexual references have appeared in other writings, including the Kama Sutra, though as a guide to living a meaningful and graceful life with love and family, part of the guide discusses various sexual positions in a manner available to all Hindu followers.
Erotica existed in writing for centuries even before the 1748 book Memoirs of a Woman of Pleasure was published in England, the first documented publication where the authors were recognized and thus eventually punished for their lewd writings that to that depraved society. Literature and artwork remained as the most common means for the distribution of pornography until a movie in 1896, Le coucher de la mariée was produced, beginning a new chapter in the history of pornography only 8 years after the first movie was produced. In the first three-quarters of the 20th century, video and magazines became some of the most available forms of pornography, from published novels to adult magazines and stag movies, the availability of pornography was more mainstream than ever before, but no one had ever imagined that its largest medium had yet to even be invented.
Pornography has become even more mainstream with the advances in technology; what were once explicit novels about sex and sexual activities had made their way onto the internet with forums and bulletin boards allowing articles and stories to be shared among users. Shortly afterward it was discovered that images could also be shared online and with this revelation, the first adult websites emerged. Unable to find ways to charge customers, merchants devised systems to gather customer information and only require a phone call to capture payment card information and complete the transaction. It was not until 1996 that the first online payment e-wallet systems were designed by CyberCash, not a perfect solution for online payments since it limited transactions and used a coin system to transfer virtual currency between customers and CyberCash then to the merchants, creating a lethargic system that begged for improvements.
As technologies improved, the number of adult websites on the internet grew, and so did the demand. Online pornography is estimated to comprise of nearly 30% of all online content, relating in millions of adult websites and hundreds of thousands of searches per month on various adult topics. The growth of online pornography has forced adult websites to keep up with the demand for their products by offering videos and images, all of which are costly to produce and provide for free. E-commerce solutions have improved drastically since 1996, making transactions much easier for customers but merchants in the adult industry have still struggled to find safe and secure payment methods to continue accommodating their websites.
What is Adult Credit Card Processing?
Credit card processing is a payment system that is available to nearly all business types for companies located throughout the world, making it a truly global payment method for merchants and customers alike. Merchants operating a retail storefront that want to provide customers with convenient and easy payment methods will usually decide to accept credit cards as a payment option, while online credit card processing for internet merchants is an all but mandatory payment acceptance method.
Payments accepted by credit cards, and similarly by debit cards, provide merchants with nearly instantaneous authorizations for payments from the customer bank when a purchase is attempted in person or online. Authorizations that are approved and finalized during the same day will usually settle into the merchant’s bank account within 24-48 hours, providing consistent and reliable funding for businesses.
Merchants in the adult industry will find that most major credit card processing companies will not work with businesses that are categorized as high risk, as adult is generally deemed. Merchants in the USA that are adult providers have to register with the card associations as an adult provider, requiring an annual fee that is similar to insurance, to properly process transactions through their network.
The predicament caused by the adult industry has created a void that has been filled by adult payment processors that focus on working with adult-friendly banks to provide reliable adult merchant services. While rates might be slightly higher than a general e-commerce business, the reliability of the merchant account from an adult credit card processor will offer a long term solution well worth the added expense.
How does Credit Card Processing work?
As with general e-commerce and other high-risk card payment transactions, an adult credit card processing transaction is a quick and convenient payment service for both the merchant and the customer. Even though the transaction only takes a few seconds to complete, the credit card or debit card authorization process is a complex process involving multiple banks and financial institutions working together to complete the payment request. At the point of authorization, the customer card account information received by the merchant from the customer and securely sent to the customer bank through the payment networks.
Involved in a single authorization are the:
• The cardholder
• The merchant
• The payment processor (working with (or is) the acquiring bank)
• The acquiring bank (merchant’s sponsoring bank)
• The issuing bank (cardholder’s bank)
• The payment card association (ie; Visa, MasterCard, American Express, Discover, etc.)
After a merchant has contracted with a merchant services provider, they will be furnished with a merchant account that allows the business to process credit cards through a few different methods, including online or through a storefront. When a customer is ready to make a purchase, either a credit or debit card is presented at the merchants terminal location, allowing for card account information to be captured by swiping or manually entering information, at that point the cardholder account information is encrypted and transmitted to the payment processor.
Online transactions are handled in a very similar method as are sales occurring at the merchant location, but require the use of extra security service to provide card security. When the online customer is ready to checkout, the online process will require the customer to enter card account information through their browser to be sent to the merchant’s shopping cart for submission into the payment gateway and onto the payment processor for submissions at the merchant acquiring bank.
The customer card account information is received from the merchant location in the encrypted file format and is forwarded on to the merchant acquiring bank to be entered into the payment card association’s network. The payment processor is usually a separate organization from the acquiring bank, also known as an acquirer. The payment processor integrates securely into the merchant acquiring bank and actively provides merchant support, including financial management of the merchant accounts, for the businesses using their merchant services. The acquirer is integrated into the payment card network and provides the backend services to allow the processor to send and receive transaction information on behalf of the merchants.
Transaction information is sent through the merchant acquiring bank and entered into the payment card associations network. Upon receipt at the card association, Visa, Mastercard, American Express and Discover, cardholder account information is received, decrypted and a determination will be made as to the type of card requesting authorization. Customer card account information can be determined by the numbers on the front of the credit or debit card. Each payment card company has its own unique account numbers, usually, the first 2-3 numbers will be what easily distinguishes one card company from another.
Once the card type is determined and the information from the transaction is entered into the network, the customer account needs to be checked and verified to complete the customer payment request. If the payment card belongs to either Visa or Mastercard network, they will forward the account information to the appropriate cardholder bank for verification. Authorization involved checking the amount of the transaction requested against the available credit of the cardholders account along with any other fraud protection measures that card issuing bank might have in place. Since American Express and Discover act as card issuing banks, cardholder’s requests are received and responses are determined in-house.
Once the card issuing bank has determined an answer to the customer authorization request, the answer is sent back through the network to the merchant location. Transactions that originated in a storefront using a credit card machine or POS system will print up the sales receipt with transaction ID or a declined receipt with the response code causing the decline. Online transactions will display the answer on the page gateway page, providing either a transaction ID or response code similar to a storefront location.
How Credit Card Processing Fees are determined
Merchants shopping for adult credit card processing services will notice that merchant accounts are advertised in a number of different ways, many times depending on the processor and the niche they operate in. Most merchant accounts will be priced in one of 3 ways; tiered, interchange plus (cost-plus) or flat fee.
One of the original methods of billing merchants for payment processing services was through a tiered pricing system that was very common during the 1970s up through the early 2000s. The tiered system established a number of pricing levels that all transactions were run through to determine the fees charged to the merchant. Varying from 4-8 different levels, all credit and debit card transactions are checked against interchange fees from Visa and MasterCard to determine what pricing level the transaction qualifies. The various tiers are predetermined in the merchant services contract and are not always known until the monthly statements are sent out, leading to some levels of mystery surrounding the actual costs of accepting cards.
One of the most common methods used today for merchant fees is the interchange plus pricing model, also known as cost-plus pricing. Used by larger retailers and merchants for years, this method has caught on with smaller merchants due to its simplicity and even pricing across all transactions. The cost-plus pricing tacks on a flat fee on top of the interchange prices charged by Visa and MasterCard, meaning every transaction is charged the same amount from the merchant services provider and eliminating any questions or confusion on the merchant’s side.
A popular method that initially took off with the likes of PayPal and other eWallets has been the concept of flat fee pricing where a set fee is assessed on every transaction, regardless if the card is debit or credit or if it’s a Visa, MasterCard, Discover or American Express card. These types of solutions are generally better for startup merchants due to the speed and simplicity of the setup process, but prove to be much more costly for established merchants when compared to an interchange plus pricing model. Merchants operating in higher risk industries also experience problem being approved for accounts through these types of payment schemes due to the strict acceptable merchant policies of many of these eWallets.
Why use an Adult Credit Card Processor?
Businesses in the adult industry accepting credit cards without a high-risk payment processor or high-risk payment gateway are at the risk of having their merchant account frozen or terminated. This can be a costly problem, both in the short term and in long term scenarios depending on the severity of the situation.
Merchants can have a variety of problems, including:
• Merchant Accounts Closed
• Funds and any Reserves held 180 days or more
• Fines from the Payment Processor and/or Card Association
• Business and Name added to the Match List
Most merchant accounts that are being used for adult purposes and not registered as such with the payment processor or card association will be closed, resulting in funds being held for 6 months or more, the potential for fines and being placed on the Match List, a file of terminated merchants who are unable to apply for merchant services due to prior problems.
Verifying that the merchant services company can work as an adult provider and will ensure that businesses register with Visa and MasterCard as an adult provider will alleviate many potential problems and unnecessary costs in the future. Not all merchant services providers are able to process payments from adult businesses, but a search online can yield a number of financial services companies that include adult as one their acceptable merchant types.
Types of Merchants using Credit Card Processing
Most adult businesses are using some form of adult credit card processing, whether it is a direct merchant account at the bank or it is an aggregated account with other higher risk businesses, many companies have opted to use a payment processor specializing in their industry.
Most common businesses using Credit Card Processing
Adult Membership Websites
Adult Video Services
Phone Sex Services
Adult webmasters that manage content services, whether they are the producers or operate the websites, can have a challenging time setting up a merchant account to accept payments. Partnering with an adult credit card processor that specializes in the industry can help businesses establish reliable payment processing services.
Merchants operating adult dating websites charging customers on a monthly re-billing model can experience higher than normal chargebacks due to a variety of fraudulent sales. Having a strong fraud scrubbing program to verify transactions can help limit most fraud before it hits the banks.
One of the larger segments of the online adult industry, adult membership websites will need to use the services of an adult credit card processor. Occasionally these membership websites with monthly recurring billing can be plagued by chargebacks stemming from friendly fraud or other variations of fraudulent activities.
A segment of the adult industry that operates as a general e-commerce business, adult toy stores can experience difficulty at times establishing merchant services with certain payment processors. The number of chargebacks and returns are minimal in this industry and credit card fees reflect this with some of the lowest costs in the adult industry.
Webmasters and Video producers can struggle at times finding a payment processing partner to accept payments for downloadable video clips, whether it’s a single website or a network of channels offering downloads, this can pose to be a significant problem finding reliable services.
Streaming video is one of the largest segments of the adult industry today, with businesses offering new products and experiences for customers, the niche has grown year over year at exponential levels. Merchants have experienced problems with customers charging back due to high bills and other friendly fraud reasons, leaving businesses with higher than average chargeback ratios and a difficult time securing credit card processing services.
An often difficult type of business to set up with merchant services due to the negative connotations surrounding the industry, bathhouses will want to use the services of an adult payment processor. Like any other type of sports club, bathhouses offer a variety of memberships, but many of the problems with finding merchant accounts are due to the financial institutions not wanting to work together.
Escorts have experienced trouble for years finding a payment processor able to accept payments from their clients as many financial institutions refuse to partner with these businesses. Many view the risk of chargebacks from clients as the leading concern for declining the industry making it necessary for escorts to work with adult payment processors that understand and knowingly accept the business type.
In recent years, escort directories have come under fire for a variety of problems that occurred on a few websites. This has negatively impacted the industry with payment processors pulling back, resulting in webmasters losing merchant accounts and having a very difficult time scrambling to find payment processing solutions.
Massage parlors have been affected by a negative history of illegal activities and circumstances in and around their businesses. Many times, massage parlors experience difficulty in finding merchant services, requiring additional documentation to prove the legitimacy of the operation applying for credit card processing services.
Working in a remote environment that usually does not involve an office or permanent location, massage therapists have experienced difficulty find payment processing services for their businesses. Working with a higher risk payment services provider, massage therapists are able to set up payment card processing services.
Like sexual enhancement products, penis enlargement products usually work on a re-billing platform and many times customers will resort to charging back before contacting the merchant. Instances of friendly fraud are very common and result in many times higher than normal chargeback rates that can affect the longevity of these merchant accounts.
An otherwise tricky solution to set up for businesses operating over the phone, using and IVR dialer integrated into an adult payment processor will allow phone sex workers to accept payments over the phone without having to manually take payment card information prior to beginning the services. Most adult payment processors can help set this program up for merchants in need of this solution.
Sexual enhancement products can fall into a gray area due to the claims of the manufacturers as to the abilities of their products. Customers that feel they do not want the product they purchased many times will chargeback on the transactions. Friendly fraud due to embarrassment or other similar reasons is very prevalent in this business space.
Patrons of Gentlemen’s clubs have a history of running up large tabs and from time to time merchants deal with these chargebacks. Partnering with an experienced adult payment processor familiar with the industry, merchants can find solutions to fit their needs with an advanced point of sale equipment and other fraud detection software.
Openly advertising swingers clubs have experienced difficulty with certain payment processors when attempting to establish merchant account services. Some clubs work on a monthly membership plus entrance fees while others might just charge a monthly fee; but regardless of the billing manner, it’s important to work with an adult payment services provider that understands the industry and is fully accepting of all aspects.
Accepting Adult Credit Card Payments Online
Most adult businesses operate online; whether it is a service or a product being sold, customers generally prefer to shop and make purchases from the privacy of their own homes. Most adult businesses will require having an online presence to capture their potential customers, so working with a merchant services company that understands both the adult and online industries is essential to providing a reliable payment processing solution.
Accepting payments online is nearly identical to operating a storefront, the difference being that the customer is entering their card information into a business’s shopping cart located on their website. There are many different types of payment gateways available making it important for merchants to read up on the various products available and comparing what features they offer and the level of security they can provide to businesses using their services.
Any fraud or theft occurring due to a merchant not operating with the required level of PCI compliance can result in enormous costs; between fines and other legal fees associated with the problems. Having an experienced payment processor that can provide all the part for proper online merchant account setup, along with providing fully PCI Compliant software, will help ensure that the business is better protected from any breaches in security or liability from fraud.
Benefits to Online Credit Card Processing
In the adult industry, its a necessity today to operate online. Most customers want to remain anonymous in regard to their personal life, so shopping online has become the norm nearly every type of adult businesses.
Merchants Benefits from Adult Merchant Services
• Integrate into over 100 of the most common shopping carts
• Fraud Monitoring Services
• Easy reporting, batching and transaction management
• Offsite storage of sensitive customer account data
• Automated Load Balancing between merchant accounts
• Daily Payouts
Operating through a payment gateway can give merchants many other options and functions that a credit card terminal can not offer, including transaction management, sales management along with the ability to remotely accept card present transactions using a card swiper that is integrated into the payment gateway. it is important for merchants to realize that not all payment gateways are secure nor offer the necessary services that a business might want or need.
Contrary to what a merchant services agent might say to close a deal, some payment gateway services do not want to have higher risk businesses in their portfolio, rather they prefer to work exclusively with lower risk/general e-commerce type merchants. When searching for a payment gateway program to integrate into a website, it is suggested that merchants confirm the gateway provider will accept adult businesses and that they are a fully PCI Compliant payment gateway.
Adult PCI Compliance
Merchants receive more than just an adult credit card processing service when teaming with Adult Merchant Services; we ensure that all accounts are handled with fully PCI Compliant software and services, eliminating merchants liability and significantly reducing any potential fraud being processed through the payment gateway.
PCI Compliance for adult merchants includes:
• Easy Registration — Becoming a PCI compliant business is fast and simple
• Ongoing Protection — Remain in PCI compliance and stay safe from fraud
• Stress-Free—Monitoring — Managed by our fraud protection support and services
As part of our ongoing services offered to businesses working with us, Adult Merchant Services will ensure that any changes to PCI Compliance standards are handled properly and promptly through all parts of the business. Merchants with questions or concerns are always welcome to contact our team to confirm their situation and that all programs remain in full compliance.
Adult Provider Registration
One of the most commonly misunderstood parts of the adult registration process revolves around the annual registration fee that is charged by the payment card companies to merchants operating adult businesses in the USA.
Frequently Asked Questions about Adult Registration
• Is this necessary? Why don’t some processors charge it?
Per the guidelines set forth from MasterCard, higher risk merchants in the adult industry are required to register with the payment card association to complete their high-risk compliance. This fee is assessed by the North American MasterCard association, so all payment processors and acquirers in North America are required to assess this fee.
• How much is the registration fee?
The fee is $500 and it is assessed by every acquiring bank, meaning merchants with multiple merchant accounts at different payment processors will have to pay the fee for each MID, or merchant account.
• Is it mandatory to pay this fee to start accepting payments on an adult website?
Yes, this registration fee is mandatory for merchants wanting to accept MasterCard credit and debit cards through their store.
• Is this a one time fee or is it charged to merchants annually?
The registration for adult providers is an annual fee, billed by the acquiring bank on the anniversary of the merchant account start date.
Merchants that opt to use European or other payment processors might not have to pay a yearly registration fee, but the costs of processing transactions, wiring funds along with other account fees will many times supersede the costs of registering in North America.
What is required for Credit Card Processing services?
Merchants in the adult industry looking to set up a merchant account should be prepared to submit various information used by the underwriters at the payment processors and/or merchant acquiring banks to complete their due diligence.
Most commonly required documents include:
• Completed Application
• Social Security Number
• Copy of Drivers License or Passport
• Voided Check from Settlement Bank Account
• 2257 Regulations present on websites (not all adult categories require this)
• Last 3-6 Months Bank Statements (if currently processing)
• Last 3-6 Months Payment Processing Statements (if currently processing)
During the underwriting process, a completed application will be required for underwriters to complete proper KYC (Know Your Client) research on every applicant, running a background check of the business owner and researching the history of the business for any potential problems. A variety of scans will be run on the business and website, checking for any words, images or other content that violates bank terms and/or any laws in regard to pornography.
The background check of the business owner will include a credit check to ensure that the merchant does have an acceptable credit rating along with a check against the MATCH list, an industry operated file where merchants that operated with problematic practices or owe money from a previous merchant account are listed and potentially barred from being approved for a new merchant account. Merchants with certain problems, such as a low credit score, might be offered a merchant account with special terms including lower monthly volume or a reserve might be placed on the account.
Providing a financial history is a common requirement for higher risk merchant accounts, specifically for existing businesses when underwriters want to take a glimpse of how a business operates along with gauge the financial health of the operation. Some underwriters will require upwards of 6 months of processing statements to satisfy their requests and require an equal amount of bank statements to complete the picture of the business’s financial situation.
A final check of the website will require full access into members areas, allowing the underwriters to verify that the website is fully operational and that the shopping cart is ready to accept payments. A check of the age verification software along with the 2257 Regulations, for websites requiring it, will round out most of the concerns that underwriters will have with the website itself.
Credit Card Processing with Adult Merchant Services
As a leader in the adult credit card processing industry, Adult Merchant Services has built a reputation for providing some of the best services with the best rates for adult merchants in all segments of the business. Many of the merchants and businesses in the adult industry have made the switch over to Adult Merchant Services for their payment processing services.
E-commerce merchants have excelled with our award-winning PCI Compliant adult payment gateway as it has helped merchants improve the flow of their businesses and reduce credit card processing costs through the direct banking relationships that provide lower fees, faster authorizations, and rapid settlements.
Benefits of Partnering with Adult Merchant Services include:
- Low Cost Merchant Services Fees
- Fully PCI Compliant Payment Gateway
- 24/7 customer support services
- Easy Transaction Management
- Personalized Customer Service
Adult Merchant Services is a global leader in the adult credit card processing industry with our quick and simple application process and our discount merchant services that offer one of the lowest rates in the adult payment processing industry. Our extensive knowledge of the adult payment industry has provided the necessary training for our staff to provide exceptional customer service in all segments, including transaction management and technical support.
Merchants in the adult industry in need of help starting a new adult credit card processing service, or with questions about their current adult payment processor are urged to contact one of our professionals at Adult Merchant Services. Our staff will be more than happy to take the time and answer any questions or concerns merchants might have in regard to their business and payment processing services.