High Risk Processing - Whats The Difference Between Adult/Non-Adult?

[Lee]

I must admit, the past few weeks i have been shopping around and comparing processing rates with a variety of billing companies and, i was really surprised to see the difference in processing fees between adult and non-adult IPSPs.

For example, right now on EC Suite (CCBills non-adult processor) i have a rate of 4.9% for transactions yet, on CCBill true, my rate is 12.5%.

Now, bear in mind, both types of sales we're running through these processors are membership based, it just happens that one type of product is marketed to non-adult surfers (with some adult promotion thrown int he mix) and one type if purely 'porn'.

Why such a huge difference in processing fees? I know we are led to beleive that porn site memberships are considered 'high risk' by these companies but, when running membership sites in both adult and mainstream, would it not make sense for them both to be considered high risk?

Your thoughts? Do you think we get to pay higher processing fees in adult because it is 'porn'?

Regards,

Lee

[basschick]

as i understand it, porn isn't the only high-risk industry, and what makes an industry high-risk is a larger overall number of chargebacks and refunds and a higher than normal amount of handling needed.

[longboardjim]

product , it's hard to "return" a $29.95 adult website membership versus a $14.95 men's board shorts which is the wrong size so the credit card companies in turn charge more for "high risk" buisnesses.
not sure your going to get around it , I tried using the same C.C processer I had for children's clothing to sell "adult clothing" and although their both "clothing" , mainstream doesn't see it that way.

jim

[gaybucks_chip]

I think part of it is risk, part of it is the "unsavory" nature of the business that many mainstream banks and businesses perceive about adult content, and part of it is simple greed.

My understanding is that Visa and Mastercard both limit the total percentage of "high risk" or perhaps even "adult high risk" clients and dollar volume that a given merchant bank can have in its portfolio.

That makes sense from a risk management perspective IF the high risk merchants are really high risk, but I'd argue that fraudulent transactions on high-dollar small items such as cell phones, small computer parts such as processors and ram and hard drives, etc are probably just as much, or more high risk than porn memberships, so I think at least part of the issue is simply that by controlling the supply, the card associations and merchant banks can get away with charging higher fees.

There may be some additional factors at play, because there are only 2 or 3 merchant banks that process online adult in the US, and one would think with competition and greed at work, other merchant banks would have entered into the market if it were easy to do. Perhaps the boards of directors don't want backlash from the right wing loonies?

[GayGeek]

Back in my escorting days, there were two gay bar rags in NYC that accepted escort ads. These were little text ads, maybe a 1 to 1.5 column inches long. They charged exorbitant rates though, much more than putting an identically-sized ad in the column next to it under the "help wanted" ad.

Why? Because they knew they had escorts against the wall with a limited number of places they could advertise. So they bumped up prices to profit at their expense.

So while I am sure there are business reasons for the higher percentages the adult processing companies take, I also put down greed as a significant factor.

--Aaron

PS, Funny story on one of my ads. In the first ad I ever used I wanted to say it was okay for clients to be married or inexperienced. My ad looked something like this:

Aaron Lawrence
24, 5'5", 125lbs.
Cute & boyish
Married / Inexperienced
okay. 24 hours.
(908) XXX-XXXX

Well, I learned two lessons from that ad. First, putting down 24 hours is a BAD idea. I had a crapload of drunk people calling at 3am. Second, people misunderstood the bit about "Married / Inexperienced okay". They thought I was married, and I had quite a few phone calls asking if my wife would join in. Ha!

[Rich]

i think a lot is to do with because it is porn to be honest

i dont really see a different between a non adult membership site like some f the game sites that charge with a credit card and a porn site that charges with a credit card i think both are higher risk because they are rebilling sites just that one is porn and the other one isnt so they can charge more

i have been looking at maybe setting up my first basic pay site in the next few months and have already noticed that a lot of processing needs to have a $750 fee just to accept visa credit card sales but if i was to set up a gaming website i would not have to pay that same fee i dont think it is right at all it is just these companys being greedy for porn money

[gaybucks_chip]

... have already noticed that a lot of processing needs to have a $750 fee just to accept visa credit card sales but if i was to set up a gaming website i would not have to pay that same fee i dont think it is right at all it is just these companys being greedy for porn money

That isn't the processors, it's Visa International itself, and any legitimate processor in the US will charge that fee, because Visa requires it.

The fee, in theory, pays for the high risk registration (bunch of information that Visa tracks and keeps on file about the site owners) and for the compliance review that both the biller/processor and Visa do. Every porn site is reviewed at least twice, sometimes 3 times, before being approved, and it's very common for the processor to come back 3 or 4 times with stupid, niggling changes, not because they're dicks, but because the Visa regs are byzantine and ridiculous.