Why Payment Gateways Refuse Adult Websites?

There must be thousands of people who own an adult website of some sort. And the very reason to start an adult website is to earn money. Whether it’s through subscription services, pay-per-view content, or selling sex toys, the primary goal for these website owners is clear: to turn traffic into profit.

However, while the digital tools for monetization are abundant, converting earnings into bankable revenue often presents a significant challenge. Payment gateways, the backbone for online transactions, frequently refuse to work with adult websites. This creates a frustrating barrier for site owners trying to legitimize their operations and maximize their earnings.

For instance, mainstream providers like PayPal and Stripe have strict policies against processing payments for adult content. This leaves adult website owners scrambling for alternative solutions, which often come with higher fees and stricter terms. Why is this the case, and what can adult site owners do to navigate these hurdles? Let’s dive deeper into the reasons behind this issue and explore strategies to overcome it.

Key Reasons Payment Gateways Refuse Adult Websites

Let us understand why payment gateways refuse adult website payments.

High-Risk Classification

Adult websites are categorized as high-risk businesses due to the nature of their content and the potential for regulatory or reputational challenges. Payment gateways often avoid high-risk sectors to minimize liability.

Legal and Regulatory Concerns

Laws governing adult content vary significantly by country and jurisdiction. Payment processors may refuse services to avoid legal complications, especially in regions with stringent restrictions.

In 2019, PayPal terminated its payment services for Pornhub, citing that the adult website was conducting “certain business payments” through its platform without prior authorization.

Reputation Management

Partnering with adult websites can harm a payment gateway’s image, leading mainstream providers to distance themselves from the industry to maintain credibility with other clients and stakeholders.

Chargeback and Fraud Risks

Adult websites are prone to higher rates of chargebacks, where customers dispute transactions. This increases financial risks for payment processors, making them wary of engaging with such businesses.

Chargebacks—where customers dispute transactions—are especially common in this sector due to unclear billing descriptors, subscription misunderstandings, or “friendly fraud,” where legitimate purchases are falsely contested. Fraudulent activities, including stolen credit card usage, further increase the risk profile.

Chargebacks are a significant challenge in the adult website industry, with rates that often far exceed the average for other online businesses. For example, friendly fraud, where a cardholder disputes a legitimate charge, makes up about 80% of e-commerce chargebacks.

Adult websites are especially vulnerable due to privacy concerns and unclear billing terms, such as confusing subscription details or vague charges.

Compliance with Card Network Policies

Major card networks like Visa and Mastercard have strict guidelines for adult content. Non-compliance can result in hefty fines or the loss of access to card processing capabilities, prompting gateways to refuse adult businesses altogether.

Visa and Master Card have often severed their ties with prominent adult websites like OnlyFans and Pornhub because of the compliance issues. 

Alternative Payment Solutions for Adult Websites

Adult websites often face challenges with traditional payment gateways, but several alternative solutions have emerged to cater to their unique needs. 

High-Risk Payment Processors

As discussed earlier, regular payment processors tend to avoid adult websites because of their nature of business. However, there are a few high-risk payment processors that can be easily used as an alternative.

Specialized payment processors like Verotel, CCBill, and Segpay cater specifically to high-risk industries, including adult content. These processors, which are considered to be some of the best adult payment processors, understand the unique challenges, such as higher chargeback rates and compliance with card network policies.

CCBill, a leading processor for adult sites, serves over 30,000 businesses globally and offers features tailored to the industry, such as fraud prevention and recurring billing management.

The same goes for Verotel and Segpay. They easily serve high-risk adult websites, but of course, this comes with a hefty price tag.

Here is a table of price comparisons for the three prominent payment gateways that have established footholds in adult websites.

Cryptocurrency Solutions

Along with the payment processors mentioned above, cryptocurrency is another mode of payment used on most adult websites. Because of its anonymity, low chargeback and low transaction fees, it is one of the most sought-after modes of payment on adult websites.

So, be it creating an adult toys merchant account for your sex toy business or starting a sex tech business and looking for a payment method, then cryptocurrency can be the go-to option.

Due to their decentralized and anonymous nature, cryptocurrencies like Bitcoin, Ethereum, and stablecoins have gained traction as payment options for adult websites.

Crypto transaction fees for adult websites are typically lower than credit card processing fees, ranging from 2.9% to 10% for high-risk industries. By contrast, crypto platforms often charge minimal fees, like 0.5% on NOWPayments, and eliminate currency exchange fees, making them cost-effective for global transactions.

Adult platforms such as Pornhub and Stripchat have embraced cryptocurrency, highlighting its advantages for user anonymity and security. Stripchat, for instance, reported a 400% rise in crypto transactions since 2020, with 10% of its models using cryptocurrency as their primary payout method. 

Direct Billing Options

Direct billing options, often referred to as direct carrier billing (DCB), allow users to charge purchases directly to their mobile phone bill. This convenient and discreet method is popular for adult content subscriptions and pay-per-view services.

According to a Juniper Research report, global DCB transactions are expected to exceed $75 billion by 2024, with a notable portion attributed to entertainment and adult services.

Platforms like Bango offer DCB solutions, enabling adult websites to expand their reach to users without credit cards, particularly in regions with low banking penetration.

For instance, adult streaming services have successfully used DCB to tap into markets in Southeast Asia and Africa, where mobile payments dominate.

Direct billing ensures customers’ ease of use and anonymity, although merchant fees can be as high as 15%-20%, depending on the carrier.

Best Practices for Adult Websites to Secure Payment Processing

Adult websites face unique challenges in securing payment processing, including regulatory scrutiny, high chargeback rates, and limited support from mainstream gateways. Adopting best practices is essential for long-term success.

Ensuring Compliance with Regulations

Ensuring compliance with regulations is a fundamental requirement for websites, especially adult platforms, to process payments securely and retain the support of payment processors.

Adhering to Know Your Customer (KYC) standards, Anti-Money Laundering (AML), and age verification protocols is crucial before accepting and processing individual payments.

Maintaining compliance for adult websites involves strict adherence to local and international laws, including content restrictions, mandatory age verification systems, and robust AML practices.

These measures uphold legal requirements and reinforce trust with payment processors and end users, reducing the risks of fines, account suspensions, or operational disruptions.

According to a study, non-compliance can result in fines of up to $100,000 for businesses that fail to meet card network or local regulatory requirements.

Websites like OnlyFans use stringent age verification systems to ensure that all creators and users meet the legal age requirements. Plus, they use email verification and accept only valid payment methods to check the authenticity of the users and adhere to the compliance. This helps prevent legal disputes and reassures payment processors of their compliance.

Implementing Fraud and Chargeback Prevention Measures

Adult websites operate within a high-risk industry characterized by elevated chargeback rates and frequent fraudulent activities. These factors significantly contribute to why many payment processors are hesitant to support them. 

To reduce these risks and foster smoother payment processing relationships, adult businesses can adopt several strategies:

Implement Fraud Prevention Tools: Technologies such as address verification systems (AVS), tokenization, and AI-driven fraud detection can help identify and block suspicious transactions.

Improve Transparency: Clear billing descriptors, user-friendly terms, and subscription management options can minimize disputes.

Adopt High-Risk Processors: Partnering with specialized high-risk payment providers ensures access to services tailored to the industry’s unique challenges.

Diversify Payment Methods: Offering cryptocurrency or direct carrier billing provides alternatives that bypass traditional banking concerns.

By proactively addressing chargebacks and fraud, adult websites can enhance payment security and build trust with processors, ensuring sustained operations. Reducing chargeback rates below 0.9% can help businesses avoid penalties or account terminations by payment processors.

Partnering with High-Risk Payment Processors

For adult websites, mainstream payment gateways like PayPal or Stripe often reject their applications due to the industry’s high-risk classification. High-risk payment processors provide a solution by specializing in industries prone to chargebacks, fraud, and regulatory scrutiny, such as adult entertainment.

Benefits of High-Risk Payment Processors

Tailored Services: These processors offer customized solutions, including fraud prevention tools, recurring billing support, and chargeback management.

Greater Tolerance for Risk: Unlike traditional gateways, high-risk processors are accustomed to handling the unique challenges of adult websites.

Compliance Assistance: Many provide guidance on meeting industry-specific compliance requirements to ensure smooth operations.

CCBill, Verotel and Segpay are examples of high-risk payment processors that adult websites can choose from.

FAQs About Payment Gateways for Adult Websites

1. Why are adult websites considered high-risk by payment gateways?

Adult websites are classified as high-risk by payment gateways due to frequent chargebacks, vulnerability to fraud, strict regulatory requirements, and the reputational risks they pose to payment processors. These factors make handling transactions more complex and financially risky for gateways.

2. Can adult websites use mainstream payment processors like PayPal?

No, mainstream processors like PayPal typically do not support payments for adult websites. This is primarily due to concerns over potential reputational damage, as well as the risk of unauthorized or unethical activities that could occur on such platforms. As a result, they often choose to avoid associations with the adult industry.

3. What are the alternatives if a payment gateway refuses service?

Adult websites can process payments through high-risk payment processors like CCBill, Verotel, and Segpay, which cater specifically to industries with elevated risks. Additionally, alternative payment options such as cryptocurrency and direct carrier billing provide secure and privacy-focused solutions for transactions on adult platforms.

4. How can adult websites reduce the risk of chargebacks?

To prevent fraud and chargebacks, adult websites should implement clear billing descriptors to minimize disputes, use fraud detection tools like address verification systems (AVS) and tokenization to secure transactions, and offer flexible refund policies to resolve customer issues proactively.

Conclusion

In conclusion, adult websites face unique challenges when it comes to payment processing due to high risks like fraud, chargebacks, and regulatory concerns. To navigate these challenges, partnering with specialized high-risk payment processors, using fraud prevention tools, and maintaining clear billing practices can help ensure smoother transactions.

Additionally, exploring alternative payment methods like cryptocurrency and direct carrier billing can provide added flexibility. By adhering to best practices, adult websites can enhance financial stability, stay compliant with regulations, and foster positive relationships with payment providers, ensuring long-term success in a high-risk industry.