There are basically two types of merchant accounts, which are based on the level of risk involved in transactions and payment processing. When determining the most suitable classification of merchant accounts, financial institutions, such as banks, often consider the products and services offered by the merchant as well as the nature of their business.
Adult credit card processing involves transactions, where the legitimacy or identity of the concerned customer is withheld, hidden or simply unknown. These accounts have proven to be vulnerable to fraud activities and other inappropriate dealings. Most banks avoid these accounts by turning down applications from high risk merchants because statistics show that they have a high risk of charge backs, which are undesirable.
Currently, there are thousands of companies that get revenue from adult oriented websites. Financial institutions consider adult service providers to be high risk merchants. While this line of business can be very lucrative and a high income earner for any financial institution, most banks reject merchant account applications because of their ethical values. This makes it extremely difficult for businesses to get adult credit card processing.
A few banks accept high risk merchant accounts and they process credit card transactions for online pharmacy sites, online casinos websites, shopping clubs and lotteries among other high risk online businesses, but they draw the line when it comes to adult websites. The few companies that offer adult credit card processing services often charge exorbitant fees and strict conditions, so potential clients often shy away because nobody is willing to give up a huge chunk of their profits to card processing companies.
If these adult companies decided to use these costly credit card processing services, they would have to increase their charges or reduce the quality of their products and services. In business, any of these actions can be a disaster as users are likely to look elsewhere for more affordable products and services.
If there is any lesson to be learned here it’s that there are unique merchant accounts for different types of businesses. It does not make sense to classify accounts as merely high risk or low risk. Every business posses a certain level of risk to card processors, and this risk varies from one business to another. Credit card processors and banks need to do a little bit of research and adjust the criteria they use to assess applications. Proper assessment of the types of businesses that merchant account applicants run should be done and unique terms and conditions drafted for maintenance of those accounts. This will enable service providers to find a suitable merchant processing company without having to compromise on the quality of their services or raising their charges.
Fortunately, there are numerous credit card processing companies and banks that have already researched extensively on the subject and updated the factors they consider and techniques they use to assess merchant account applications; this has made it possible for them to provide adult credit card processing to businesses that meet their criteria.