Why Adult Entertainment Retailers Have High Risks for Chargebacks

The adult entertainment industry is growing more every day, but so is the number of chargebacks that’s haunting adult entertainment retailers around the world. In fact, adult businesses have some of the highest chargeback rates and most of it can be traced down to one reason: fraud.

“Friendly fraud” or the deliberate act of filing a chargeback to defraud a business makes up for 70% of all fraud cases today. A good chunk of these victims are adult businesses that are more likely to attract a suspicious clientele than the typical companies.

This prevalence has grown even more now that adult entertainment retailers are expanding into the digital marketplace where higher risks are almost outweighing the higher rewards.

Why Adult Businesses Are More Prone to Chargebacks

There are many reasons adult entertainment retailers have a higher chargeback ratio than their mainstream counterparts. For one, there’s the fact that some clients may deny charges from adult entertainment businesses to their credit cards because they’re afraid to let other people know of their activities.

It’s not uncommon for a customer to call his credit card provider to deny the charge as unfulfilled or fraudulent even if he did meet up with an escort, for instance, and completed the appointment with her.

A lot of customers also raise the red flag at the slightest sign of suspicion about the adult business, especially since this industry is known for having companies that are used as fronts for illegal activities.

For instance, if a client notices that the business name that appeared on his credit card statement is different from the name he remembered when he booked your service, he could think of this as a sign of fraud prompting him to call his credit card provider right away to ask for a chargeback.

Of course, there’s the case of friendly fraud. Some adult entertainment customers may be satisfied with the service that they got but would pretend that their expectations weren’t met and they need a chargeback for it. They use this strategy to get their money back, which is a win for them and a loss for the company since the services incurred can’t be returned anymore.

How Adult Businesses Can Protect Themselves Against High Chargebacks

1% is the industry wide maximum for chargeback rates and more often than not, adult businesses go beyond this percentage, which makes them a high-risk business.

But more than the chargeback ratio, reviewers also look into a company’s records and credibility to determine if these high chargebacks are backed up with facts or not.

So if you’re an adult entertainment retailer, it’s very important to implement preventive measures to help protect your business against these high chargebacks.

A clear and concise policy is your most important weapon as well as proper setting of expectations between the service provider and the client.

You should also employ technological measures like proper credit card verifications to ensure that no fraudulent activities go through your system. If you see anything suspicious about a transaction, inform the bank right away so you can conduct an investigation before a client files for a chargeback to defraud you.

Ready to apply for your adult industry merchant account? Call First Card Payments today: (877) 441-6801