How to Take Payments for Your Adult Business

Adult merchant accounts can be tough to get approved
Lizzy Rosenberg
August 15, 2022

The worldwide adult industry is now measured in hundreds of billions of dollars. The Internet, virtual reality, mobile communications, and other technological developments provide the industry with various new ways to continue growing. The types of business in the industry vary as well, and range from one-man businesses to large corporations. Especially considering some of the unique characteristics and challenges of doing business in the adult industry, an important first step in starting is determining how to take payments for your adult business.

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What is an Adult Business?

What, specifically, are we talking about when we say “adult business?” What types of business are considered to be part of the adult industry?

The answer is not always clear cut or consistent. Many of the applicable laws and regulations are determined by state or local governments, meaning that not only the rules, but also the definitions, may change once you step into another town or state.

There are, however, some general characteristics that tend to be common. The International Encyclopedia of Human Sexuality states that “adult industry generally refers to the sale of sexually explicit material or services, including legal and illegal exchanges, for profit in commercial marketplaces.” For example, the municipal code of Corona, California defines “adult business” as any business where employees or patrons expose specified anatomical areas or engage in specified sexual activities, or any business which offers to its patrons services or entertainment characterized by an emphasis on matter depicting, exposing, describing, discussing or relating to specified sexual activities or specified anatomical areas.

This does not include “bona fide medical establishments operated by properly licensed and registered medical personnel with appropriate medical credentials for the treatment of patients.”

Some of the most common types of legally operated business that would be included under this definition are as follows.

There are also commercial establishments that have a main business not related to the sale or rental of descriptions or depictions of “specified anatomical areas or engage in specified sexual activities.” These include live strip clubs and other adult theaters, as well as adult motels that rent rooms in hourly units rather than in day units.

Why are Adult Merchant Accounts High Risk?

Banks and credit card companies, etc., use merchant category codes (MCCs) to classify businesses by the types of good or service that they sell. An MCC can be used for tax purposes, collection of information, and analyzing purchasing behavior, but they can also be used to restrict transactions or flag high-risk businesses.

Certain MCCs are used by banks to identify adult businesses. One of the most common is MCC 5967 , which identifies businesses that provide adult chat and entertainment, among other businesses.

What is it that makes banks and other financial institutions view the adult industry as high risk? The two most common reasons that a company is labeled “high-risk business” are a high chargeback rate and a high frequency of fraud . These both apply to the adult industry overall, so having your business categorized as MCC 5967 alone could result in the bank rejecting your application for a merchant account.

Chargebacks and Fraud

Chargebacks are an issue for just about every business, whether high risk or low risk. However, there are aspects of the adult industry that can lead to a higher rate of chargebacks than other industries. One is that customers of adult businesses usually don’t want others to know about their purchases. If the purchase is discovered, they might deny making the purchase in order to save face. That can result in a chargeback.

In some cases, credit card information really is stolen and used to buy goods or services from an adult business. If the cardholder doesn’t notice the charge soon, the loss can be significant. There are also cases in which a family member has used the card without permission, and not wanting to get in trouble, denies it when asked. The cardholder assumes that the card information has been stolen, and might initiate a chargeback. This type of unintentional fraud is called “ friendly fraud .”

“Friendly” or not, it can cause a lot of problems and loss for everyone involved. It’s not exclusive to the adult industry, of course, but the higher likelihood that the guilty family member, etc., will be extra secretive means that there is a higher degree of motivation to deny making the purchase in the case of the adult industry.

Laws and Regulations for Adult Businesses

The adult industry also has a more challenging legal standing. One of these is the lack of uniformity in applicable laws and regulations between states and municipalities that was mentioned earlier. Another is that there are often legal requirements and restrictions placed on businesses in the industry that are not placed on businesses in other industries. Compliance with laws, regulations, and industry standards has become a pressing issue in every industry, and the United States is especially strict toward the adult industry.

Some of the requirements may even be somewhat unexpected. For example, the U.S. Code includes requirements for record-keeping related to simulated sexual conduct ( U.S. Code § 2257A ).

Be sure to look into the relevant laws and regulations thoroughly and make compliance a priority in your business. Your high-risk payment processor should be able to help you with this, so if you are unsure, don’t hesitate to ask. Our team at Zen Payments will be glad to help you.

It’s Difficult for Adult Businesses to Take Payments

Taken together, these and other factors can make it very difficult for adult businesses to accomplish one of the fundamental acts of operating a business: getting paid. Even with customers ready to spend hundreds of billions of dollars on your products and services, you’re not going to see any of it if you can’t even open a merchant account, let alone process payments.

Even if you are able to convince a bank to open a merchant account for your business, a tiny increase in the number of chargebacks could get your account shut down without warning. The complex, inconsistent, and frequently changing laws and regulations in the adult industry could even get your business itself shut down.

There is certainly a high degree of potential for your business to prosper in the industry, but in a sense, you have to cross a minefield to get to it.

Finding the Right Adult Merchant Account

That’s where an expert in navigating that minefield can come in handy. A high-risk payment processor such as Zen Payments can be a highly effective resource in helping you get things set up in a way that your business will be in compliance with laws and regulations from the start. We specialize in helping high-risk businesses and other businesses that may have a difficult time opening a merchant account at a traditional bank. Whatever payment processor you choose, the ideal is to find a high-risk payment processor that has a good level of experience in payment processing, etc., for the adult industry .

Wherever you are in the process of starting and operating your business, Zen Payments can answer your questions and provide solutions that meet your specific needs. Our team specializes in helping you ensure that your business fully complies with the relevant laws and regulations so that your adult merchant account is always ready to accept your customers’ payments.

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Lizzy joined the Zen Payments team following her graduation from Utah Valley University. As a dedicated customer service representative, she brings extensive experience in client relations and customer support. Lizzy is committed to delivering exceptional service to all Zen Payments clients.

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