The Adult industry is labeled as a high-risk industry by merchant service providers and financial institutions alike; however, it is not for the more common reasons of susceptibility to chargebacks and fraud. It is because the products sold or services rendered tend to fall into a grey area of moral, ethical, social, or legal acceptance. Furthermore, many of these adult merchants sell products or services that require age verification as they are prohibited from falling into the hands of minors. So when it comes to working with adult merchants, merchant service providers that are risk adverse such as First Data, Square, or PayPal will simply refuse the business outright. Then you have other so-called high risk merchant service providers that either force adult merchants into a high-rate offshore merchant account with horrible funding times or provide a domestic high-risk merchant account with unreasonably high rates and fees as well as “bundled packages” or contracts that milk profits from adult merchants, unnecessarily.


How can adult merchants avoid getting milked for their profits?


There are several ways adult merchants can avoid being taken for a ride by payment processors. For example:


  • The vast majority of adult merchants that are owned and operated within the United States do not need to go offshore for their processing solution. If a merchant services provider says your only option is offshore; you probably want to get a second and possibly a third opinion as they may be looking to stick with unreasonably high rates so they can make an unreasonably high profit.
  • Be wary of bundled packages. If the merchant service provider says that as an adult business you need to have their specific package that comes with all kinds of nifty equipment or special software’s, get a second opinion. Some adult merchants do need these bundled packages, but in general they don’t. For the most part, if you’re e-commerce all you really need is a merchant account and a gateway and if you’re retail you can operate with an account and terminal to swipe cards.
  • Adult merchants with retail locations such as strip clubs that need one or more terminals or POS machines can use their monthly volume as leverage to negotiate heavily discounted or free hardware equipment. However, when you leverage free equipment you typically need to sign a multi-year contract that locks you into that merchant service provider. These are usually 3-year terms, but in all fairness, it’s so that the merchant service provider doesn’t get taken for their equipment which tend to cost thousands of dollars.
  • Show fiscal responsibility. Make sure that the financial and credit position of both the business and signers are in good standing. This should be historical so the further back you can show that you are fiscally responsible; the more leverage you have.
  • For advanced billing or recurring billing models, know that the further out you bill will equate to a higher risk and thus higher rates and fees. Best practice is to bill monthly but not more than quarterly. In many cases, annual billing won’t be accepted.


How should they feel about signing a contract?


If you’re working with a trusted, proven merchant service provider it should not be viewed negatively. For merchant service providers in general, the contract is simply a way to keep you as a customer for the foreseeable future. In situations involving free hardware or terminals; it is a way of hedging against potentially heavy loses that could occur from reversed bait and switch scenarios. So if you are a retail location and you get free equipment; it’s a fair trade off. E-commerce or moto-merchants can negotiate their way out of early termination fees if it is for circumstances beyond their perceived control such as selling of the business or a natural disaster. In any case, if you run your adult business responsibly and plan on being in business for a lifetime, then being in a contract with a payment processing company that has a mutual interest in your success will almost always work out in your favor as the relationship between the parties mature.


What about renegotiating?


It depends on the position of your current processor. Some merchant service providers have a set structure or bundled package for adult merchants and there is no flexibility. Others may not be interested in renegotiating or simply do not have the ability to renegotiate because they are not a direct source for merchant services but more of a middle man. Ideally, if you are going to renegotiate with your current processor you should have the renegotiated rates and fees provided in writing. You should then take the time to shop around figure out if there is another merchant service provider that will meet, beat, or come close to that price as they may provide a better overall service or product offering; whichever is most important to you. However, if any adult merchant wants to renegotiate their current rates and fees they should be certain of at least four things:


  1. Terms and conditions of the product or service being provided need to be clear, concise, and reasonable, if not favorable to the customer in certain areas.
  1. Management should be in place that is customer-centric and promotes responsible operating practices.
  1. Clean processing history. This is extremely important for adult merchants. It shows proof of the aforementioned need for responsible management as well as legitimizes the products and services sold within the business.
  1. Clear understanding of the financial and credit position of the business as well as the signer(s) of the application.


Monthly processing volume always helps with negotiating leverage but if you have a business that is well-run and signers that are financially sound; you will hold the upper hand with high risk merchant service providers because their favorite client is a low risk signer with a high risk business. They want and need adult merchants like you.


What about switching and integrating to a new payment processor?


If you are working with a trusted and proven merchant service provider they will have technical support staff as well as customer support staff available 24 hours a day, 7 days a week. These associates will assist in all aspects of integration and installation. Additionally, they will be there for you after the switch over is complete to help you with anything you need. This gives adult merchants a complete cycle of service and support. In this way they assure your experience is a pleasant and painless process.


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