Nobody wants to process porn payments. Or, at least, not the big guys. The “potential risk exposure,” is too high, writes Stripe in its FAQ for merchant customers. “Limitations” from the card brands, among others, make it impossible, explains Square.

Processing payments for the adult content industry is a dirty business in more than one sense. With chargeback rates that commonly reach as high as 5%, it’s seven times riskier than processing sales of retail items like clothing and electronics. Then there’s the potential legal liabilities (What if the content involves minors?) and the regulatory hurdles, including an underwriting process that can be 15 times longer than for regular merchants.

Despite the difficult operating environment there are a large number of small and mid-sized “high-risk” payment processors specializing in facilitating transactions for the merchants of guns, tobacco - and adult content. The draw is the chance to earn fees as high as 10% per transaction versus about 2.9% for the typical purchase facilitated by Stripe.

Payment processors coordinate communication between merchants, banks and a customer’s credit card to complete an online transaction. High-risk processors in the adult content industry go above and beyond and act as “merchant of record.” This means their name appears on customers’ credit card statements instead of businesses like Pornhub or OnlyFans (a marriage-saver), and they assume liability for every aspect of the transaction, including chargebacks and regulatory compliance. Forbes estimates that these little known companies specializing in adult content process no less than $100 billion per year globally.

With an estimated $68 million in fee revenues, Florida-based Segpay is one of the bigger companies specializing in payments for adult content websites. Founded in 2005 by industry veteran Cathy Beardsley, Segpay (short for “segregated payments”), was the first to keep website funds separate from the processors operating funds to address what was then a common fear in the adult industry: losing everything when a processor went bankrupt. “Our slogan was ‘’you get paid before we do,’” says Beardsley. Before founding her own firm, Beardsley witnessed unscrupulous processors commingling funds,........

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