Comprehensive Guide: Adult Toy Merchant Account Solutions.
Adult toy stores, whether ecommerce or retail, all play an important role in promoting sexual wellness and destigmatizing discussions about adult toys. Popular stores offer options for individuals with disabilities, LGBTQ+ communities, and menopausal women. Sometimes these stores also provide free resources on sexual health, safe practices, and body positivity. Intimacy products sold at these stores may sometimes help reduce stress, improve sleep, and strengthen relationships among couples. These adult toy stores also help break societal taboos and by normalizing conversations about sexual choices.
As a multibillion-dollar industry, the adult toy market generates massive employment opportunities across sales, marketing, manufacturing, and logistics. Businesses often face problems in getting approval for adult toy merchant account solutions.
The team at QuadraPay specializes in assisting almost all types of merchants in the adult industry, including those in adult toys, adult streaming, adult entertainment, escort services, and adult dating sectors. This guide is created by QuadraPay experts to help businesses easily get approval for adult toy credit card processing accounts. Let’s begin.
What is an Adult Toy Merchant Account?
An adult toy merchant account is a credit card processing account that enables online and retail adult toy store businesses to accept card payments. With this type of merchant account, businesses can facilitate both local and international card transactions. Depending on the merchant’s needs, additional payment methods may also be available.
Although adult businesses work pretty much like a Novelty Store, sponsor banks and payment processors categorised these businesses as high risk. This is primarily because of the nature of the business. Another reason for such a categorization is the negative reputation of the industry. Many banks honestly realize the financial strength of this industry but still refrain from working with such merchants because of reputational reasons. Let us look at in detail why Adult toy stores and ecommerce sites are high risk any why they need specialised adult toy payment processing solutions.
Why Are Adult Toy Stores Considered High Risk for Banks and Sponsor Banks?
Businesses operating in the adult industry are generally categorized as high risk by payment processors and other financial institutions. These businesses face critical challenges when it comes to opening a merchant account, and some even face difficulties in opening adult business bank accounts. There are a variety of reasons behind this corporate discrimination.
The industry is known across the payment sector for attracting higher-than-average chargebacks. It’s quite common to see customers raising disputes and asking for refunds for various reasons, including product quality concerns, privacy fears, and more. High chargebacks and refunds increase the credit risk for payment processors. If merchants fail to control these parameters, it becomes extremely difficult for payment processors to continue supporting the account.
Another key challenge is the ever-changing legal and regulatory landscape. Laws governing the sale and purchase of adult products vary across jurisdictions. For payment processors, underwriting such accounts while ensuring compliance in multiple regions is both time and resource-consuming. This often leads financial institutions to deprioritize adult toy merchants as customers.
Sponsor banks are highly concerned about their reputation, and the adult industry as a whole is considered a significant reputational risk. It’s natural for most payment processors to take a cautious approach when onboarding merchants selling adult toys.
Apart from these reasons, there have been various instances in the past that have made anything related to the adult industry particularly difficult to approve for payment processing. For example:
In July 2024, Etsy banned the sale of adult toys and related accessories, which affected a large number of sellers. The platform took this initiative to “make the platform safe for users.” (Source BBC)
In 2013 and 2014, a well-known U.S. based bank used its “morality clause” to shut down numerous merchant accounts, including those of companies selling adult-oriented products. Merchants from other industries like gun accessories and cannabis were also affected.
More recently, low-risk payment processors have systematically started denying applications from merchants selling adult products. This is also true for businesses in related sectors like adult streaming and entertainment. A review of their acceptable use policies clearly shows that these processors are not very willing to support the adult industry.
These instances create hurdles for adult businesses, sometimes resulting in sudden account shutdowns, freezing of funds, or outright bans. Such disruptions can significantly impact the stability and growth of any organization. However, there are various high-risk payment processors that support adult toy and related businesses. Their requirements, however, are typically more stringent than conventional processors. This includes mandatory high-risk registration and thorough account reviews.
Benefits of Adult Toy Merchant Account
Our payment processing partners provide robust adult toy merchant accounts designed to meet the unique needs of these businesses. The solutions come with a variety of advantages that can help you grow your business. Let us quickly explore some of these key benefits that can significantly impact your everyday business operations and overall revenue.
While there are various high-risk payment processing solutions available in the market, not every high-risk processor is comfortable working with the adult toy industry. However, our payment processing partners have experience supporting similar merchants and can easily underwrite more accounts. The availability of such accounts through our partners helps businesses reduce delays in account approvals.
Credit card processing partners evaluate each application individually and closely examine KYC documents and other parameters to ensure they onboard only safe accounts that are fully compliant with the requirements of various regulatory bodies. Once the account is onboarded, it works seamlessly for a long time.
A regular processor working with an adult toy merchant for the first time may not emphasize much on the descriptor. However, an experienced statement processor, like our partners, advises merchants to use customized descriptors such as a toll-free 1800 number or a combination of the company name and a toll-free number. This helps reduce the risk of chargebacks and protects customers’ privacy.
With the rise of international e-commerce in the adult sector, it is essential for payment processors to support both local and international transactions. Our payment solutions come with various payment methods, in addition to credit and debit card processing. These alternative payment methods allow merchants to collect payments from customers in different countries.
Being a direct partner of high-risk processors gives us an advantage when it comes to fast account approval. We aim to get your account approved within 3 to 4 business days to ensure minimal disruptions to your business operations. However, it is important to note that the timeline may stretch in case of unavailability of KYC documents and other required information.
With the right high-risk adult toy merchant account, you can start processing at reasonable transaction fees. It is a known fact that high-risk processing is more expensive than low-risk processing. Still, our solutions are competitively priced. Our payment processing partners offer three types of pricing models for adult toy merchants: fixed pricing, tiered pricing, and interchange pricing models.
Apart from these, there are various other benefits you can enjoy while working with a specialized payment processor for your adult toy and novelty business.
Types of Adult Toy Merchant Accounts
Adult businesses operate in different formats. Some operate over the internet, and these are called online adult toy stores, adult novelty websites, and online adult novelty stores. Some businesses operate from retail locations like brick-and-mortar stores; these are called retail adult toy stores or adult novelty stores. In general, these businesses are called adult novelty businesses. Our payment solutions are available for both types of businesses. Let us look at these in detail.
Retail Merchant Accounts for Adult Novelty Stores
A retail merchant account is basically a hardware terminal that is used by a merchant at a physical store. With these terminals, the merchant can take face-to-face transactions. Our brand-new credit card terminals can be easily integrated with popular adult POS systems. These terminals support a wide variety of payment options, including contactless payments like NFC (Near Field Communication) and traditional magnetic stripe cards.
The terminals are powered by high-speed internet connectivity and come with a built-in advanced central processing unit (CPU) module, allowing transactions to happen very quickly. This solution is highly secure, as the merchant can immediately verify the cardholder’s identity in a face-to-face manner. Any business with a physical store selling adult toys, adult novelty items, or personal wellness products can use such specialized credit card terminals. These are a must-have for businesses with walk-in customers. Transactions are generally settled into the merchant’s business account within 1-2 business days.
Online Merchant Accounts for Adult Toy and Novelty Stores
Our e-commerce payment processing solutions are ideal for businesses that sell products over the internet. The e-commerce payment processing solution is easy to integrate with any website or mobile application. Our payment processing solutions are compatible with popular shopping carts, payment gateways, and e-commerce platforms, including Shopify, WooCommerce, and Magento.
The ability to accept multiple currencies helps businesses grow without worrying about real-time currency conversion hassles. Our payment processing partners are well-experienced in handling high-risk merchant accounts for various industries, making them adept at managing risks associated with adult toy merchants. A fully responsive integration module allows businesses to offer a user-friendly checkout experience on desktop, mobile, and smartphone platforms.
With an e-commerce merchant account, adult businesses can accept orders 24/7 without any holidays. Although it is rarely requested, we can also provide recurring billing facilities to select merchants.
Website Compliance for Sex Toys High-Risk Processing
Operating an adult toy business requires the merchant to adhere to strict compliance standards. This is especially important when the merchant approaches a payment processor for account approval. For this, the merchant must ensure that the website or retail business meets these requirements.
Any business looking to sell adult content or toys must have a robust age verification mechanism to prevent minors from accessing the website content. The age requirement can vary depending on the jurisdiction of operation and other factors, but the payment processor you are applying with will be able to suggest these requirements in detail. In general, you should have a mechanism in place that can be configured as per the requirements of the payment processor.
To ensure customer privacy and reduce potential chargebacks, it is important to use a clear yet discreet billing description. It is common practice in the adult industry to use a discreet descriptor that hides the nature of the merchant’s business. This protects customer privacy as the descriptor appears on the credit card statement. Many merchants also include a customer care number in the descriptor. Customer service teams are trained to avoid using any industry-recognizable call opening. All this is done to protect customer privacy.
Some payment processors may offer a full-stack payment gateway that ensures PCI DSS compliance. However, some acquirers may require the merchant to undergo full PCI DSS compliance independently. Regardless of the option, the merchant must implement these standards, as non-compliance can result in account shutdowns and may also attract penalties.
The terms and conditions on your website should be clear regarding shipping, returns, and privacy policies. Use simple English so that your customers can easily understand their refund rights. Keeping a complex terms and conditions page without a clear shipping policy can lead to disputes.
Ensure that the content on your website complies with legal standards and does not violate any regulations. If your website includes user-generated content, it must be moderated regularly. There are various tools available that can automatically scan your website and notify the webmaster if any risky content, image, video, or link is detected. You should have a robust content removal policy in place.
By implementing these measures on your website, you will improve your chances of account approval.
KYC Documents for Adult Toy Merchant Account
When applying for an adult toy merchant account solution, you generally need to provide various documents known as Know Your Customer (KYC) documents in the payment industry. These documents verify your business’s legitimacy as well as the identity of the ultimate beneficiary owners. Let’s look at some of the important KYC documents that you must have for making an application.
The national ID of the directors is required to identify the business owners and the authorized signatory of the company. This can be your driver’s license, passport copy, or any other national ID.
The proof of address includes utility bills for business premises as well as the directors’ home addresses. Payment processors must know from where you are operating the business. For a retail store, the payment processor may also need a merchant site inspection, meaning someone will visit your store to inspect the business.
You will also have to share your business registration documents. Depending on the type of business structure, these documents can vary. However, in general, you will provide the certificate of incorporation, the articles of organization, or any other business license.
The payment processor will hold your transaction amount and then send it to your business bank account. Keep in mind that a merchant account cannot work without a regular business bank account. You need a bank account where the payment processor can send the funds. For that, the payment processor must verify if this account is capable of receiving the funds. For this, you can submit a voided check or a letter from the bank confirming the bank account details.
You will also need to submit the domain registration proof. This could be the WHOIS registration screenshot or the receipt of the domain purchase. This is the website where all of your products must be listed. The underwriters will evaluate it from every standpoint. The website must also have a shopping cart and should be eCommerce ready.
Your website must also have the required disclaimers as per the nature of the business. Depending on where you are operating the business, this requirement may vary. It is a good idea to evaluate the disclaimers and warnings on top websites in your sector and then adopt something similar that keeps you protected from a regulatory point of view.
Keep in mind that because of the nature of the business, the requirements can change at any time. The payment processing company will ask for additional documents as and when required.
FAQ Adult toy Payment Processing
What are the common types of adult sex toy stores?
An adult toy store, whether e-commerce or retail, refers to a business that sells products specifically designed for adult entertainment, intimacy enhancement, and sexual wellness. These stores offer a variety of products aimed at enhancing individuals’ personal lives in a private, safe, and consensual manner.
E-commerce adult toy stores operate via websites or mobile applications, allowing customers to browse and purchase adult toys discreetly from the comfort of their homes. This model caters to a large customer segment globally, as sales can be conducted across the world. Most adult toy stores sell products such as vibrators, dildos, lubricants, lingerie, bondage gear, and other sexual wellness items. They take extreme care to ensure privacy and discretion, emphasizing secure payment processing, discreet packaging, and highly confidential transactions.
Retail adult toy stores, on the other hand, operate from brick-and-mortar locations. These stores allow customers to visit in person, view products, and sometimes even test their functionality. Retail stores often provide in-person assistance, advice, and recommendations tailored to customer needs. They typically serve a local or regional customer base.
Hybrid Model Adult Toy Stores. Some businesses adopt a hybrid model, operating both retail stores and e-commerce platforms.
Why are offshore merchant accounts beneficial for adult toy businesses?
An automatic merchant account should be your number one priority, but if that is hard to get, you can also approach an offshore payment processor to onboard your adult toy business. Sometimes, offshore merchant accounts can be significantly beneficial for businesses. This is because many payment processors allow merchants to accept payments in multiple currencies and have high success ratios for international transactions. Along with that, offshore merchant accounts may also reduce the risk of account termination due to local legal restrictions. Sometimes, offshore solutions may offer slightly higher chargeback tolerance levels, which can ensure smoother processing for businesses in the adult toy industry.
What are common fees for adult toy merchant accounts?
The most common fees you will see on your adult toy merchant account statement include a monthly account fee and a transaction fee. In general, the transaction fee ranges between 3% to 5%, and the chargeback fee can be between $20 to $50 per incident. Some payment processors may charge a setup fee. Keep in mind that adult toy credit card processing generally requires merchants to accept a rolling reserve of 5% to 10%. This amount is used by the processor as collateral to mitigate credit risk.
What does the term “hedonism and teledildonics” mean, and how is it related to adult toys?
Hedonism is a term that signifies that pleasure is the primary goal of life. Here, pleasure is referred to in terms of sensual and intimate experiences. Teledildonics, on the other hand, is a newly coined term involving technology-enabled devices that allow individuals to experience intimacy remotely. These terms are quite commonly used in the adult industry, primarily because modern devices focus on enhancing pleasure by utilizing the power of technology and connectivity.
How did the COVID-19 pandemic impact the adult toys market?
The COVID-19 pandemic resulted in a huge spike in the demand for adult toys, primarily due to lockdowns and social distancing measures worldwide. These restrictions drove people to find alternative forms of intimacy and personal fulfillment. Businesses selling adult toys during that time saw phenomenal growth. Before the pandemic, this industry was primarily retail-driven; however, during and after the pandemic, it shifted significantly to e-commerce, with the majority of sales now occurring via websites and mobile applications.
Do adult books and magazines also require high-risk merchant accounts?
Any product that is sensual or erotic in nature may require specialized high-risk merchant accounts, including adult books and magazines. These items generally fall into the broader category of adult entertainment. Merchants in this industry face risks such as high chargebacks, reputational concerns, and societal sensitivities. This is one of the key reasons why most payment processors are not suitable choices for such merchants. With specialized payment processing solutions, adult magazine and ebook stores, as well as erotic stores, can easily accept payments.
What responsibilities do adult toy merchants have in managing payment processing?
When the account gets approved, the entire ownership and responsibility lie with the merchant. This includes ensuring that the account is used per the merchant account agreement. Merchants are required to pay fees on time. Keep chargebacks below the prescribed limit. Inform the payment processor in advance about any significant changes in traffic volume. Notify the payment processor immediately about any risks, such as potential data theft. Implement effective fraud prevention measures and stay updated with industry regulations.
What should merchants do if a sex toy payment processor shuts down their account?
If a payment processor shuts down an account, the merchant should first attempt to renegotiate with the payment processor to get the account reactivated and the funds settled. If that is not possible, the merchant can approach other processors to find a payment solution as soon as possible to avoid business losses. Sometimes, when a payment processor shuts down an account, they report the merchant to the TMF list/MATCH list. However, this only happens in rare scenarios. If that occurs, it becomes extremely difficult for the merchant to get approval from other providers. In such situations, merchants should explore alternative payment methods like e-checks, ACH, bank transfers, cryptocurrencies, and more.
Proactive merchants often maintain at least two merchant accounts active on their website, with the second one serving as a backup in case the first one is unavailable.
What criteria do underwriters consider for approval of an adult toy merchant account?
Underwriters ensure that the merchant complies with regulations and meets the internal policies of the payment processor. They evaluate various aspects of the business, including merchants credit history, business model, financial stability, chargeback ratio, compliance with local and international regulations. Underwriters also check if the products sold on the merchant’s website fall within the approved category list of the payment processor. They verify that the content on the website is valid, legal, and does not violate any regulations.
What is MCC, NAICS, and SIC for adult toy merchants?
Businesses selling adult novelty items are generally categorized under MCC 5947. However, the actual category might differ depending on the business model, product variations, or the payment processor’s decision. Keep in mind that businesses in this industry may require mandatory high-risk registration, which has an annual recurring cost. The corresponding SIC is 2771, and the NAICS is 323111.
References
https://www.huffpost.com/entry/chase-condom-payments_n_5051636
