Quadrapay

Hello, fellow GFY Forum members! I am new here, and as an experienced high-risk processing consultant, I wanted to share an article that will help entrepreneurs in the adult toy industry easily secure a low-cost merchant account. This article primarily focuses on entrepreneurs operating businesses in the U.S.

Getting approved for an adult toy merchant account can often seem like a difficult task. Unfortunately, throughout the payment processing world, there is a stigma attached to the adult industry and its high-risk classification. The majority of merchants face roadblocks when trying to obtain a payment gateway or merchant account. However, there are various strategies you can implement to increase your chances of approval. These strategies can also help you secure lower rates, which will increase your profit margin.

For the GFY Forum members, here are my 7 recommended steps to help you easily get approved for an adult toy merchant account:

1. Understand the High-Risk Nature of the Adult Industry

MCC 5947 | Gift, Card, Novelty, and Souvenir Shops


Adult toys and products are generally classified as high-risk due to the nature of the industry, the potential for high chargebacks, reputational risk, and regulatory scrutiny. Before applying for a merchant account, it’s important for a merchant like you to understand this classification. Businesses operating in such high-risk industries face strict approval criteria, higher fees, and limited options for payment processing. However, it’s equally important to know that being categorized as high-risk because of selling adult toys doesn’t mean you cannot get approved. It simply means you have to be more prepared than others.

FAQs:

Why is the adult industry considered high-risk?


Merchants operating in the adult industry are considered high-risk for a variety of reasons, with reputational risk and regulatory challenges being the most significant. Certain subsectors of the adult industry, including adult novelty and e-commerce stores, have a better chance of approval compared to VOD, streaming, and cam sites. Novelty stores are categorized under MCC 5947. It is relatively easy to get a retail as well as an e-commerce merchant account for adult toy novelty stores. Another reason that makes the adult industry high-risk is the potential for high chargebacks and fraud.

Can I apply for a regular merchant account?


Merchants from the adult industry can definitely apply for a regular merchant account; however, these accounts may not provide long-term solutions primarily because of their risk appetite. It’s important for entrepreneurs to understand that obtaining a merchant account is not the only objective; another critical objective is to maintain the merchant account for a long time. This can only be achieved if the merchant processor actually knows what you are selling and is comfortable with it. It’s always better to work with a high-risk payment processor that has multiple years of experience.

2. Choose the Right Payment Processor

Not every payment processor is equipped to handle high-risk accounts. However, from a merchant's point of view, they may assume that all providers are suitable for onboarding merchants from all industries—this is not the case. High-risk processing companies are approved to onboard merchants from select high-risk industries with specified Merchant Classification Codes. These specialized payment processors implement various risk reduction measures that not only help onboard such merchants but also ensure that the accounts remain active for a long time without any potential issues. Keep in mind that certain subsectors of the adult industry now require a specialized fee known across the industry as the Risk Merchant Registration Fee.

You should look for processors that have a track record of working with businesses in similar industries. Work with a processor that offers flexible terms and is equipped to handle the complexities of payment processing for merchants in the adult industry.

Key Points:

Do Your Research: Search the internet for high-risk merchant accounts for the adult industry. You will find a list of payment processors claiming to provide solutions. Contact these processors and ask them specifically whether they are comfortable onboarding your business, and if so, what rates and terms they can offer. Also, ask for references of merchants from similar industries that the processor is already supporting.

3. Prepare Thorough Documentation

To improve the chances of your account approval, make sure you present your business in the best possible way to the underwriter. You must ensure that you have all the necessary documents needed for approval. The most common documents needed for an adult toy merchant account include business registration documents, bank statements, domain ownership proof, supplier agreements or inventory proof, a bank letter that confirms your account number, and previous processing statements.

What You’ll Need:

Business Plan: This is one of the most important documents you can submit to the payment processor at the time of approval. A business plan clearly defines your vision, including a detailed analysis of your target market and projected revenue. A professionally written, detailed business plan can motivate underwriters to have more trust in your business.

Financial Records: Another crucial document to submit to payment processors at the time of application is your financial records. Avoid submitting bank statements that display a zero balance or minimal transactions. As an entrepreneur, you can add funds to your account as an initial investment and use the same funds to buy inventory. A bank statement that shows that the merchant has sufficient funds to start and run the business is a positive sign.

4. Focus on Website Compliance and Design

Your website is the first thing payment processors will look at. It must be professional, user-friendly, and fully compliant with industry requirements. Merchants from the adult industry, such as cam sites, adult toys, and adult dating sites, must have clear terms and conditions, a privacy policy, and age verification mechanisms on their websites.

Tips:

Include Legal Disclaimers: It will definitely help if you add legal disclaimers in visible positions on your website. The footer section of your website is generally the perfect place for disclaimers. To write the perfect disclaimer, you can review top websites in your industry and draft a new one for your site based on their disclaimers.

Easy Navigation: The credit card processor will look at all the pages on your website. They will manually review the pages, or they may also use advanced software to crawl every page, picture, and file on your website. It’s important for you to ensure that your website is easy to navigate. Websites with smooth navigation have increased chances of approval.

5. Mitigate Risk by Reducing Chargebacks

One of the main concerns of payment processors in the adult industry is the potential for high chargebacks. As a merchant, you can implement strategies to reduce chargebacks and improve the chances of your account approval. To do this, make sure you have clear billing descriptions. For privacy, you can keep the billing description as your customer care number and a partial company name or something similar that hides the website information from which the customer purchased the adult toy. This way, if any customer is unclear about the transaction, they can call the support number, and the customer service team can easily handle the situation and verify that it was an e-commerce transaction.

6. Demonstrate Strong Financial Health

As discussed earlier in this post, the financial health of your company is extremely important when it comes to merchant account approval. Entrepreneurs must ensure that their financial records are up to date and should demonstrate regular revenue streams. Having a solid financial foundation not only improves the possibility of account approval but can also help merchants secure lower rates and faster settlements.

Financial Metrics to Highlight:


Consistent Cash Flow: Attach your personal and business bank statements that display regular cash flow. If you own multiple companies, there’s no harm in including the statements of the other companies as supporting documents.

Positive Bank Statements: Bank statements should show regular deposits and a positive balance. Such bank statements help underwriters have more confidence in the merchant.

7. Partner with a Consultant Specializing in High-Risk Merchant Accounts

If you’re new to the process or have faced repeated rejections, then you should partner with a consultant who specializes in high-risk merchant processing. This can be a game changer for you. A consultant can guide you through the application process, help you prepare the documentation, and connect you with the right processor. Along with that, based on their experience, the consultant can also suggest website modifications that can significantly impact your approval.

Final Words for GFY Forum Members

It may seem that getting an adult toys merchant account is tough, but by following the seven steps listed above, you can easily get approved. From choosing the right payment processor to demonstrating strong financial stability, each step brings you closer to your goal. It’s important to always keep in mind that when it comes to adult toy merchant account approval, patience and preparation are key. By understanding how payment processors think, you will be able to act according to their requirements and easily accomplish your goal.

TheLegacy

Banks will admit that they have no problem with taking your money - but the shareholders etc. do not want it shown they are associated with the adult industry.

Make sure to choose a mainstream name for your company like ABC23 Holdings Inc rahter than IFUCKEDYOURMOM.com INC.

One thing that is forgotten here is when creating a website store - make sure it's SEO ready so that your product can be found. If you've imaged it someone else has too. Be creative or get a professional to help you out.

Another point is have a good industry lawyer to help with things too.

There are bank friendly places to go - but always try to have a backup in case.

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