Merchant accounts are classified into two based on the risk factor involved in the payment processing and transaction. Banks or financial institutions, after taking into account the nature of the business or product or service offered by the company or merchant, decide which classification is suitable for them.
Adult credit card processing includes those types of transactions, where the identity or legitimacy of the concerned customer is not known. It has been proved that such accounts are more vulnerable to fraudulent transactions. Statistically, these accounts present potential risks of charge backs which is a risk most banks tend to avoid by declining the account applications.
Today, there are a lot of companies which run on revenues from adult oriented websites. Adult service providers are deemed to be high risk merchants. This adult services business is highly lucrative, but taking into account the ethical values of the financial institution, most banks tend to turn down these merchant account applications. Thereby, adult credit card processing is quite difficult to attain.
There are high risk merchant acquiring banks which allows to establish merchant accounts for other high risk services like online casino sites, online pharmacy sites, lotteries, shopping clubs etc, but it when it comes to an adult service provider, they usually decline the request for the merchant account. And credit card processing companies, who are willing to set up these processing accounts, demand high charges for this account, which might not appeal to the adult service provider, the simple and logical reason being that they are not willing to give up a considerable amount of their profit to their account provider.
If at all these providers decide to open an account succumbing to this high charges, they will either have to reduce the quality of the service provided or increase the amount that they charge their customers. Unfortunately, implementing either of these options will adversely affect their business since it will eventually cause customers to stop using their services or products.
All these factors highlight the importance of having unique merchant accounts for all sorts of businesses. Merely classifying them as high risk accounts will not do. Every business has its own characteristics, and some might present a higher risk profile than the others. Banks and credit card processors should do more research on their underwriting which decides whether an account application should be accepted or declined. Proper assessment of the parties that are submitting the application should be done, and based on that they can put down unique rates and charges for establishing and maintaining these accounts. This way, adult service providers can ensure that they can find credit card processors to conduct their online transactions without having to cut down on the quality of their services.
There are a number of banks and credit card processors who have researched intensely on this and have come up with unique adult credit card processing accounts which depends on a host of factors that they can implement, before turning down the applications.