Are you developing an adult oriented business? Before you move forward, you should be aware of some of the difficulties adult businesses face when trying to set up a merchant account. Why are such businesses often considered high risk?

First, what exactly defines an "adult" business? Many adult-oriented companies—such as stores that sell adult toys, erotic novelties, sexy lingerie and related adult apparel—are deemed to be normal-risk businesses and have little trouble acquiring a merchant account. The problems start occuring with businesses that provide hard-core pornography for sale or download, whether full-length movies, shorter videos, or sexually explicit or nude photographs.

Most people know that the pornography industry, whether professional or amateur, is insanely lucrative. But it carries attendant risks and dangers other types of businesses don't normally have to deal with.

For one, pornography has for decades faced the taint of criminality, in part because of obscenity laws and other means used to ban it or reduce its influence. Even though it is a multi-billion dollar industry in the United States, many people consider it immoral and socially damaging. As well, adult sites have to deal with the complications of barring underage people from viewing its content, which can carry further legal risks.

Perhaps because of its shadowy history and the legal and ethical complications surrounding pornography, the adult market can attract scam artists in disproportionate numbers compared to other types of business. Consumers may be more likely to view an adult site as illegitimate or fraudulent, simply because of what it sells. Adult sites have higher levels of chargebacks than other businesses, as well. To use a common example, if a wife discovers her husband's adult website purchases on credit card transaction slips, he could possibly try to claim his card was stolen and attempt chargebacks.

Because of the unique problems adult businesses face and the higher rate of chargebacks, an adult business will likely be considered to require a high risk merchant account. A high risk account, though generally similar to a normal merchant account, will charge much higher fees, may have a large start-up fee, and may demand a quantity of the merchant's funds be held in the event of excessive chargebacks and fraud.

Many so-called adult businesses that sell products like clothes and toys and do not provide pornography will be treated like regular businesses, but some providers will still consider them high risk. If you are operating such an adult business, search around for a provider who will not classify you as high risk. If you are operating a business that sells pornography, on the other hand, you are probably out of luck and will have to acquire a high risk merchant account.