It is no secret that merchant service providers look at the adult industry with a perverted eye. This eye is a double standard in terms of the way the industry is perceived and treated as a whole.
Oddly enough, adult entertainment is one of the most sought-after product and service industries in the world, amassing billions of dollars in revenue. And, even though many of these businesses have responsible ownership and management, some with established brand names still find themselves at the mercy of a social and moral hear-no-evil, see-no-evil, speak-no-evil mentality that should have been abolished with prohibition long ago.
Yet, most of today’s financial institutions look at adult merchants as owners and operators of what would be considered a modern-day speakeasy.
So where is the bias? Adult merchants are considered high-risk. This is a blanket designation based on the overall majority of the products and services sold, not on the risk assessment of the owners and operators of the business. Most merchant service providers are risk-averse and will refuse to accept any adult-related business because of that blanket high-risk designation. This automatically puts adult merchants into a bracket of higher rates and fees.
While adult merchants are often able to negotiate rates and fees to an extent, even the lower rates seem steep compared to the rates and fees offered other businesses that don’t have the high-risk distinction because they have a greater diversity of products within their overall business model.
The adult industry is not alone. The same holds true for merchants whose main focus is selling tobacco products. They are viewed as high-risk because of the nature of the majority of the products they sell. However, gas stations and convenience stores can sell the exact same products as part of a mix along with a six pack of beer and a bag of chips. Yet, gas stations have the lowest processing rates and fees available in the market. But tobacco merchants pay significantly higher rates and fees as well as additional miscellaneous charges such as Visa and MasterCard registration fees because of the nature of their business.
Another great example of distorted bias is Wal-Mart. A merchant like Wal-Mart has the lowest fees not only because of its immense transaction volume, but also because the product array is so varied that it is perceived as a purveyor of general goods. So now a woman or man can walk into a Wal-Mart and purchase diapers, baby formula, a pack of cigarettes, vitamins or supplements, condoms, massage oil or lubricants, and a personal massager (aka a vibrator) and pay with a credit card, and Wal-Mart will pay a set low rate even though five out of seven of those items are considered high-risk if sold by an adult or tobacco merchant.
How are adult merchants expected to compete, survive and thrive in the land of opportunity we call the United States of America? It’s unfair. Adult merchants are forced to accept additional costs and compete by raising their retail price points, or settle for smaller profit margins and hope they are not pushed out by the rising costs of overhead.
The irony in all of this is that it is very likely many of the employees of these merchant service providers, payment-processing companies and financial institutions regularly seek out and use adult products and services. They use adult products with the lights out and hidden under the covers so no one sees them, but they use the products.
Luckily for an adult industry that is estimated to bring in more than $12 billion dollars annually within the U.S. and for a nation of 310-million-plus who secretly, silently need adult products and services, there are a few merchant service providers that cater to high-risk merchants, understand the perception of the adult industry and embrace adult merchants. And, even though they have the high-risk merchant designation, the merchant service providers provide adult merchants the ability to accept multiple forms of payment across several mediums in a competitive environment that allows them to survive and thrive — simply, easily and painlessly.
At the end of the day, adult merchants are left to fend for themselves and decipher which payment processors are truly there to help them by providing helpful insight and long-term payment processing solutions that make owning and operating an adult business a more pleasurable and profitable experience. This is all while figuring out how to avoid those merchant services companies that exist simply to bend adult merchants over their financial knee and spank them with a combination of high rates, excess fees, ridiculous reserves, unnecessary equipment and high-pressure sales tactics — and then finish them off with a complicated multi-year contract.
At the end of the day, adult merchants are left with one simple-to-ask but hard-to-answer question: How do I choose a merchant service provider I can trust with my money, knowing the company won’t take advantage of me?
Artie Quintero is the chief marketing officer for Painless Processing, a high-risk credit card processing firm.
