Payment Processor Discrimination: How It Affects High-Risk Businesses

Payment processors are a critically important part of the fintech ecosystem. However, all leading payment processors discriminate against sex workers, adult industry professionals and sextech companies, making it difficult for them to operate their businesses. This discrimination can have a number of negative consequences for high-risk industry verticals, including financial hardship, increased vulnerability to fraud and overall fintech & social isolation. 

In today’s globalized economy, businesses of all sizes are operating in increasingly complex and ever-changing regulatory environments. This can make it difficult for businesses to know which industries and activities are considered “gray areas” and which payment providers are willing to work with them.

A gray area is an industry or activity that falls outside of the traditional regulatory framework. This can include things like online gambling, adult entertainment, and cryptocurrency. Businesses operating in gray areas often face challenges when it comes to finding payment providers who are willing to work with them.

How do payment processors discriminate against the adult industry, sex workers, sextech companies?

• According to a report, a customer service employee at a marijuana shop in Oregon, was denied financing for a car loan because of their job in the marijuana industry. Even marijuana is legal in Oregon, it’s illegal under federal law. Banks are thus hesitant to lend money to people who work in the marijuana industry.
• SpankChain, an Ethereum-based blockchain that helped adult content creators in eliminating third-party intermediaries such as traditional banks, closed its crypto payment processor SpankPay after its payment service provider Wyre shut down its services. 
• In 2018, Stripe, a major payment processor, decided to stop serving an adult entertainment company due to the nature of its content. Paypal too is known for banning and holding off the money from adult worker accounts and sextech companies.  
• Many large banks, including Bank of America, refuse to host sex-related accounts of any kind, viewing them as possible exposure to liability for money laundering-related fines, civil or criminal lawsuits and reputational risk.

These examples are a snapshot of financial discrimination practiced by all leading payment processors that high-risk adult companies face when it comes to payment processing. Many payment processors have strict policies against adult content and sextech, which can make it difficult for legit businesses to accept payments. This in return can have a significant impact, as they may lose out on revenue and be unable to pay their bills.

Many mainstream payment processors and financial institutions have written policies that explicitly exclude adult-services, adult wellness products citing concerns about legal and reputational risks. This discrimination faced by sex workers, the larger sextech industry and adult businesses from payment processors can manifest in several ways:

1. Denial of services: When payment processors refuse to provide their services to adult-oriented businesses, it makes it difficult for them to operate and accept digital payments from customers.
2. Account termination: Even if a sex worker manages to secure a payment processing solution, they are often subjected to higher scrutiny and are at a higher risk of having their accounts terminated without warning. This can lead to disrupted cash flow and hinder their ability to conduct business.
3. Rolling reserves and delayed payouts: Payment processors may impose rolling reserves, which means withholding a percentage of each transaction as a security measure. This can significantly impact the cash flow of sex workers, making it challenging to manage day-to-day operations and invest in their business’s growth.
4. Psychological and emotional toll: Constant discrimination and the associated challenges faced by adult businesses & workers from payment processors can take a significant toll on their mental health and emotional well-being. The constant fear of account termination, the stress of finding alternative payment solutions, and the frustration of being excluded from mainstream financial systems can lead to increased anxiety, depression, and overall emotional distress.
5. Legal and regulatory challenges: Payment processor discrimination adds to the already complex legal and regulatory environment that sex workers navigate. Many payment processors cite legal concerns as a reason for excluding adult-oriented businesses. However, this exclusion can make it difficult for sex workers to comply with regulations, such as age verification requirements, as they lack access to reliable tools and services specifically tailored to their industry. This can result in legal non-compliance and potential legal repercussions.
6. Difficulty in building trust and credibility: Payment processor discrimination creates obstacles for adult sex workers and companies to build trust and credibility with their customers. When they are forced to rely on alternative and less-known payment methods, customers may perceive these transactions as less secure or legitimate. This lack of trust can deter potential customers from making purchases, impacting the overall growth and sustainability of sex workers’ businesses.
7. Impaired ability to save and plan for the future: Discrimination in payment processing inhibits sex workers’ ability to save money, plan for retirement, or invest in their future. The lack of access to secure and reliable financial services makes it challenging to establish financial stability and long-term financial well-being

Moving Towards Ending the Financial discrimination

The solution to addressing payment processor discrimination against sex workers lies in advocating for inclusive payment processing solutions and challenging societal biases and prejudices. Here are some key steps that can be taken:

1. Develop specialized payment processors: Creating payment processors specifically tailored to the needs of the adult industry can provide sex workers with reliable and inclusive payment processing solutions. These specialized processors can understand the unique legal considerations of the industry and implement appropriate risk management measures while still ensuring secure and efficient transactions. 
2. Engage in dialogue and education: Encouraging open dialogue and education about the adult industry can help challenge societal biases and misconceptions. This can involve partnering with organizations and advocacy groups to conduct workshops, seminars, or campaigns that shed light on the realities of sex work, emphasizing the importance of fair and non-discriminatory treatment in financial services.
3. Advocate for policy changes: Working with policymakers and regulatory bodies to advocate for fair and inclusive policies can help combat payment processor discrimination. This may involve lobbying for legal protections and regulations that prevent discrimination against adult-oriented businesses in the financial sector, ensuring equal access to essential financial services.
4. Foster partnerships with fintech companies: Collaborating with fintech companies that prioritize inclusivity and understand the unique challenges faced by the adult industry can be beneficial. These partnerships can lead to the development of innovative payment processing solutions that comply with legal requirements while supporting the financial stability and growth of sex workers.
5. Support organizations that champion sex workers’ rights: Partnering with organizations that advocate for sex workers’ rights, such as human rights organizations or sex worker-led groups, can help amplify the voices of those affected by payment processor discrimination. Supporting their initiatives, campaigns, and legal battles can bring attention to the issue and foster change within the industry and society.

It is important to recognize that addressing payment processor discrimination requires a multi-faceted approach involving collaboration between industry stakeholders, policymakers, advocacy groups, and financial institutions. By advocating for inclusive payment processing solutions and challenging biases, we can strive towards a more equitable and supportive financial landscape for sex workers and adult-oriented businesses.

Conclusion

The issue of payment processor discrimination against high-risk businesses, such as adult, sextech and sexual wellness industries, highlights the importance of fighting for fair and inclusive financial services. Discrimination based on the nature of business can have significant consequences, including financial instability, limited growth opportunities, and increased vulnerability for these businesses and their workers. 

By addressing payment processor discrimination, we can directly support economic empowerment, protect the rights and well-being of individuals in high-risk industries, and foster a more inclusive and equitable business environment.

TickleCharge is committed to drive positive change and ensure equal access to financial services for all businesses.

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