Navigating the Sex Toy Boom & Risk To Your Adult Merchant Account
Sex toys and other adult retailers may face challenges getting an adult merchant account

Navigating the Sex Toy Boom & Risk To Your Adult Merchant Account


The female sex toy market is exploding and like other aspects of adult entertainment, its popularity is affecting banking and adult merchant account solutions. In the past, merchants witnessed significant growth from only porn, but the industry has expanded into a broad range of online products. In fact, sex toys alone are a $15 billion industry with thousands of retailers flooding the market. However, these online adult stores are still categorized as high-risk, which presents challenges for adult merchant accounts. If you want to reduce your risk as a provider of sex toys and other erotic retail products and services in a high-risk category then read on.


The online adult retail boom

Sex toys are not the sole merchandise exploding online for adult merchant accounts. With the advent of mobile phones, these days customers are no longer drawn to just tube sites. Merchants are widening their retail base to include digital products, lingerie, gay underwear, BDSM toys, bondage gear, cams plus dating services for sexual encounters. An overwhelming number of female entrepreneurs operate their own online stores. The merchandise ranges from adult clothing and sex toys to intimate encounters and matchmaking.

Annual attendance at the Adult Novelty Manufacturers Expo reveals that retailers are interested in the latest sex dolls, lubes, vibrators and bondage clothing. They are handling the demands of their customers and business is booming!

Online dating and cams have also replaced initial face-to-face encounters. Busy people like the convenience of finding a mate or interacting with someone solely via the internet. This industry has seen significant growth over the last 10 years that the market has become saturated. That said online dating and sexual encounter sites are the norm, which is why services like this are still popular.


The conundrum of an adult merchant account

Popularity alone won’t make it any easier to secure and manage an adult merchant account. Because of nudity and sexual content, banks assign vendors unique merchant category codes (MCC) that identify them as a riskier account. The risk to you is that your customers’ bank scrutinizes and potentially declines transactions identified with an adult MCC.

Also, adult sellers are likely to face higher chargeback rates. This ultimately drains profits due to loss of sales revenue in addition to the fee that is charged. Higher chargebacks and sexually explicit content subject you to things like merchant reserves, delayed funding and Visa and MasterCard high-risk registration fees. All things considered, it takes a lot of knowledge and dedication to effectively manage an adult merchant account.


What is a merchant category code?

All acquiring banks must assign retailers a merchant category code (MCC) to accept Visa, Mastercard and other credit cards online. Your MCC can affect how acquiring banks determine your fees and the terms for your merchant account. As an online adult retailer, you are assigned a high-risk MCC; which increases your fees due to sexual content and potential reputation risk to the bank.

Basically, the more risqué your industry’s reputation and potential for chargebacks, the higher the risk associated. You’ll notice your fees may vary based on your MCC type and processing partner. In addition, your customers’ bank may decline transactions coming from specific MCCs due to previous fraudulent experience. It’s important to understand all error code messages from your gateway so you can better consider solutions to increase your conversions. Stay tuned for a special blog post on transaction declines this month!


Banks are concerned about legislation and you should be too!

Not long ago, two important bills passed in the US. The first is Fight Online Sex Trafficking Act (FOSTA). The second is Stop Enabling Sex Traffickers Act (SESTA). As a result the landscape of adult entertainment sites is undergoing changes that could affect other online adult stores. While well intentioned, both of these US laws contain flaws that could stifle businesses from selling dating services, sex dolls and toys plus other merchandise.

For example, some financial institutions that once provided business bank and merchant accounts to adult entertainment sellers are suddenly shutting their doors to industry retailers. This is due to fear of fines, accusations of financing human trafficking, money laundering as well as reputational risks.

Reportedly, the UK is now looking to pursue similar legislation as the US in addition to stricter age verification standards. The All-Party Parliamentary Group (APPG) on Prostitution and the Global Sex Trade has formed a bipartisan coalition to review websites and regulations. For adult merchants the end-result of any proposed legislation is bound to not only affect their businesses, but banking and processing solutions also.

Honest, law-abiding businesses are worried about their reputation, government action and the impact on merchant and bank accounts. It’s important to protect minors and eliminate sex trafficking. However, this proposed legislation must keep guidelines for adult business terms, conditions and pricing explicit so that merchants can be compliant with the law.


Reducing the impact of high risk

As an adult merchant you can reduce the risk to your business and your banking and payment solutions through a few ways.

Take the following actions:

  • Respect 2257 regulations. Make sure this mandatory measure is explicitly shown on your website if you are a US adult merchant.
  • Remain PCI compliant. Ensuring protection of cardholder data will keep you compliant and reduce risk to your merchant account.
  • Keep fraud under control. Keep fraud rates low to reduce risk of being shutdown.
  • Search for a knowledgeable payment solutions provider. A partner who understands the adult industry can help you with compliance and negotiating merchant account fees and reserves. As a former executive at MindGeek, I understand the challenges faced by adult merchants.
  • Utilize forced age verification measures. If you are based in or serve customers in the UK, this will help you remain compliant with the law and banks.
  • Display security logos. Demonstrate to processors and customers that you guard against malware and other online threats.


Prepare your adult merchant account and business for the potential changes to US and UK legislation. Rely on the expertise of an educated advocate well-versed in the implications of these types of legislation. I have helped hundreds of adult and other merchants navigate the high-risk label. We are experts in securing payment solutions especially for industries with reputational risk. If you want to bounce back from a terminated adult merchant account, contact us.

At DirectPayNet, we help merchants with compliance, checkout page strategy, offshore processing, and employing tactics that will reduce chargeback disputes. Protect your business and set up a call with DirectPayNet today for expert consultation and to outsource management of all your online payment challenges.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.