While this is effectively what is happening, and I agree with everything you said, I would like to add the primary reason why I've always heard that payment processors don't want to deal with adult content.
The primary reason is because adult content has a very high percentage of disputed charges.
Typically, it's because some person's partner notices some kind of porn on the credit card statement, and the purchaser claims they were "hacked" or something and then disputes the charge. This doesn't necessarily happen a large percentage of the time, but going from e.g. 0.1% disputes (or whatever the industry norm is) to 0.2% really torpedos profit margins.
There is also some skittishness about local laws regarding morality. Credit card payments cross a lot of boundaries and various localities have wildly differing laws about adult content and so the payment processors simply don't want to risk it.
I guess what I'm saying is: the payment processors seem like the symptom of a larger problem, not the root cause.
Source: I've never worked in payment processing, but I used to run an online business with spicy content, and had to navigate this to an extent.
> The primary reason is because adult content has a very high percentage of disputed charges.
If that was the driving force, the payment processors would be reacting to the businesses on their own initiative from the dispute stats. But that is not what is happening, they are responding to public moral panic campaigns, which indicates that disputes are not the driving force.
> This doesn't necessarily happen a large percentage of the time, but going from e.g. 0.1% disputes (or whatever the industry norm is) to 0.2% really torpedos profit margins.
Then you charge an additional fee in exchange for the MCC risk. This is easy.
It's not clear to me from the post what level this is happening on.
I assume by "payment processor" that they are not talking about Visa et al themselves but their merchant services provider.
The alternative to this is to find a merchant services company that specializes in adult industry. Something like https://ccbill.com/ which is going to end up costing you (or your customers) somewhere around 30% on all payments on your entire platform.
It's likely easier to strong arm these providers as they are typically pretty risk averse.
Then you charge an additional fee in exchange for the MCC risk. This is easy.
Sure, yeah. There are niche payment processors who specialize in such things. They charge exorbitant rates, like 20-30+%. I suspect that itch.io may consider working with somebody like CCBill to allow payments for adult content, and use a "normal" processor for everything else. That is what I would do, or at least attempt to do.
What we're really seeing is moral policing.
Effectively, yes. It is a huge problem.
But I would hope that anybody bothered by the problem would also want to understand the root causes. It's a little bit more complex than credit card companies being a bunch of prudes who think you shouldn't be playing weirdo dating sims.
You have to understand the economics of the payment processing industry, at least in broad strokes. Then you can understand why mainstream processors stay away from adult content.
- Profits are obviously large, but margins on any individual transaction are miniscule
- Disputes and chargebacks involve humans, which blows away the basic economical model there. The cost of 15 minutes of labor from a human being wipes out the profit on the next zillion transactions
- Adult content, while a big business in absolute terms, is a tiny drop in the bucket overall for these companies. They do not want to devote a bunch of resources for something that is, overall, probably like 0.1% or less of their overall revenue
> I suspect that itch.io may consider working with somebody like CCBill to allow payments for adult content, and use a "normal" processor for everything else. That is what I would do, or at least attempt to do.
Except AFAIK Visa/MasterCard are not okay with this. Because it's not actually about fraud or chargebacks.
> The cost of 15 minutes of labor from a human being wipes out the profit on the next zillion transactions
Chargeback fees are paid by the merchant for card-not-present transactions, regardless of outcome. It's not a real reason, regardless, since there'd be no point to go so fine-grained about what adult content is banned if all adult content has chargeback/fraud issues.
OK. So you believe that the credit card industry really really really wants to be in the business of moral policing.
I, on the other hand, have experiences with payment processing for NSFW material, and based on these experiences my understanding is that the CC industry doesn't particularly want to be in the moral policing business, but avoids NSFW stuff because of legal and profitability concerns. However, as an outsider I admittedly have no direct insight into what actually happens inside the CC industry.
So my question to you is -- what are YOU basing your opinion on?
Based on their behavior. Nothing they do makes sense otherwise.
> but avoids NSFW stuff because of legal and profitability concerns
This, for example. They weren't enforcing a law, and there's no "profitability" issue as they could simply make the fees and reserves higher. So they might say that's why, but it obviously isn't the case. If it were, they'd demand a lot more than a few random handfuls of games be removed, and would target a lot more than adult content. They also would be totally fine if you sell that content through another payment method, because it's not their liability or profit at stake. However, if they're trying to censor content that isn't to their liking, this behavior makes sense.
The primary reason is because adult content has a very high percentage of disputed charges.
Typically, it's because some person's partner notices some kind of porn on the credit card statement, and the purchaser claims they were "hacked" or something and then disputes the charge. This doesn't necessarily happen a large percentage of the time, but going from e.g. 0.1% disputes (or whatever the industry norm is) to 0.2% really torpedos profit margins.
There is also some skittishness about local laws regarding morality. Credit card payments cross a lot of boundaries and various localities have wildly differing laws about adult content and so the payment processors simply don't want to risk it.
I guess what I'm saying is: the payment processors seem like the symptom of a larger problem, not the root cause.
Source: I've never worked in payment processing, but I used to run an online business with spicy content, and had to navigate this to an extent.