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Comment by chris_overseas | Hacker News Reader

Here's another data point confirming the "regular world" issues you mention: http://recode.net/2014/10/17/its-hard-out-there-for-a-sex-to...

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Rybchin said she suspects it has something to do with tech being dominated by men, who might be nervous about working with a sex-toy startup: “All these companies are run by men, and they don’t appreciate a woman’s pleasure.”

I don't know whether this really is the underlying issue, but damn, it's unfortunate how plausible it is. And the reaction from Stripe to the reporter's request for comment all but confirms.

IMHO the problem is not that men "don't appreciate a woman's pleasure" - that is some serious bullshit in my opinion. Most men love it when their SO enjoys sex.

The problem (to me) is the criminalization of porn and prostitution in the US. Just think about what kind of outrage it would cause if Stripe had a single prostitute or porn website use their service to receive payments. (For the sake of argument assume the prostitute is located in a jurisdiction that does not prohibit the practice, IIRC it is allowed in parts of Nevada)

Now Stripe gets flack for being overly cautious - there's just no way to do this without provoking a shit storm from one group.

As someone who is trying to a create a new, unique, non-janky, adult website I have learned a lot in the last 10 months. And I have never worked in this industry so it has been a serious learning experience.

The biggest issue for me has been the banks. My assumption is that Stripe and other players would be "ok" accepting payments from "High Risk" merchants. But they cannot, their partner bank will not allow it.

I later found an article by Cindy Gallop raging against this.

http://www.inc.com/welcome.html?destination=http://www.inc.c...

"A whole range of banks turned us down, including the startup banks, Silicon Valley Bank, Square 1 Bank. We finally got a banking account at CHASE, and we were extremely relieved, thrilled to get a check book that said Make Love Not Porn on it. And so, when... I began encountering enormous problems putting a payments infrastructure into place, because we are what the world deems adult content, we couldn't work with PayPal, couldn't work with Amazon, couldn't work with Google Checkout, couldn't work with any of the main merchant partner gateways. So, we thought, let's go back to CHASE, we have a business banking account there, let's apply for a commercial account. Unfortunately, that application surfaced the nature of our business within higher levels at CHASE. And it resulted in a meeting with a more senior guy, who essentially said to us, not only can we not give you a commercial account, but you now need to close your business bank account and take your business away, because we can't handle it."

I had a conversation about this over on Reddit that was fairly interesting.

https://www.reddit.com/r/Entrepreneur/comments/2co0r6/anyone...

I know you've probably learned this already from your experience, but for other readers:

The (possibly) surprising thing here is that banks aren't moralizing here. You can walk into any adult bookstore and pay with a regular old credit card just fine, thank you. Visa and Mastercard are not averse to allowing you to pay for porn.

The reason why banks and credit card companies don't want to be involved with online porn because there's an incredibly high rate of chargebacks. People pay with stolen cards, and people pay with their own cards and then claim that they were "hacked" when their wife wonders why there's porn on their credit card bill.

All of this creates a certain amount of work for them, and it's unprofitable.

So in a sad way, the banks' distaste for dealing with online porn payments is a just sad reflection of our society's attitudes about porn. If we weren't a bunch of weirdos who caused a lot of chargebacks and, instead, paid for porn like actual grownups... banks would have no problem servicing this industry.

A startup idea: create a "dynamic pricing" adult payment processor that would try to undercut the competition by adjusting the amount they charge merchants depending on their chargeback history. You know, sort of like the insurance companies do (insurance is cheaper for those without claims). This way you differentiate between the true high risk merchants and those that are labeled as such just because they are adult.

Undercut the competition which charges upwards of 15%, using that process. Make a killing.

As per my commment below, we get virtually no chargebacks at http://makelovenotporn.com/ because we are a different kind of business operating in a different kind of way - out in the open, socially acceptable/shareable - but the financial institutions' compliance departments won't even have that conversation. :(

You're absolutely right there. You can purchase adult DVDs with Mastercard/Visa at brick and mortars. Once it's online, that's when you get hit with not only the higher rates but the strict yet frustratingly vague content restrictions. Which are applied inconsistently across industries and companies, might I add. For example, as an adult app store, my company can't sell any apps that reference drugs, but you can buy GTA on Play.

Banks are quick to penalize merchants for CB fraud. I wish they would take more action against the individuals who commit it.

yep--ditto for online gaming (eg, online poker, casino, sportsbook). The chargeback rate is outrageous--thought i put the decimal in the wrong place first time i prepared a monthly report. The credit card owner of course claims fraud--ie, someone stole his credit card data & played online poker and lost a fortune all on an account liked to the poor guy's visa. As anyone can guess, a large fraction of this cases are 'remorse fraud'--ie, the card holder had began losing, kept playing and kept losing and panicked at what his wife will do when she sees the $5,000 partypoker charge on his card, he does some research, learns that a "CNP" transaction has certain protections, and in this case means the he can blame someone else and the merchant has to prove otherwise.

The banks LOVE adult high risk. The discount rates, the volume, the transaction fees are very seductive. If the banks could wholly control their own destinies, they’d all be processing adult online transactions—with joy and abandon.

The big BUT is that they fear retribution from the card schemes (Visa & Mastercard). Either of them can and do impose enormous penalties on the banks when they exceed the card schemes’ chargeback thressholds. Worse, they can ban the banks from issuing cards with their logos. This would be catastrophic for any bank.

Parenthetically, I was contacted by a bank recently, requesting that I remove a hentai scene that referenced 'pointy ears' (think Mr. Spock) in the meta data. Pointy ears, they said, was a feature of a 'hybrid human'. Hybrid humans having sex with humans, they said, was bestiality. And Visa would not process payments for anything promoting bestiality. This is just one illustration of how paranoid they are.

So that’s the rub on the processing side, but there are many, many banks that will board adult online merchants, in both the US and the EU. As well, there are numerous IPSPs (Internet Payment Service Providers) for adult merchants, ideal for companies just starting out, or companies not interested in sacrificing time and energy managing a private merchant account.

On the settlement side, that’s a new issue.

Banks are less and less keen to open business checking accounts for adult online merchants. They’re nervous about these transactions settling to one of their accounts.

This is largely the result of paranoia about new banking regulations in the wake of the mortgage-backed securities debacle. They are now (rightfully) under a great deal of scrutiny from regulators which translates to onerous judgement calls from banks.

> The problem (to me) is the criminalization of porn and prostitution in the US.

Porn is illegal in the US?

It's not ouright illegal, but it's becoming more and more onerous to work in the adult industry because of things like this: http://www.thedailybeast.com/articles/2014/05/07/the-banks-w...

IANAL(hehehe), but prostitution is illegal, but if you film it and sell it for profit than it's legal.

You are right. I should have said "stigmatization".

We at MakeLoveNotPorn are working to change that. My piece for the UK Independent on 'It's Not That Porn Degrades Women, It's That Business Degrades Porn':

http://www.independent.co.uk/voices/comment/its-not-that-por...

You are rare because most men don't understand the first thing about a woman's pleasure.

Regardless, as an adult retailer, we don't have anything to do with porn or prostitution. Stripe and their bank shouldn't put all adult businesses into 1 box.

I think men are just wary of being seen as creeps. At a recent job search lecture at my uni we were told to never have a picture on your CV, with this as example of how it goes wrong: "Let's say you're a beautiful woman and you send a company your CV with pic on it. Now, the reviewer of your CV is male and if he asks you in for an interview the other employees at the company might suggest he did it because of the way you look. The reviewer will avoid this awkward situation by throwing your CV in the trash. Do not have a picture on your CV."

Basically, the expectations of a modern man's sexuality are pretty fucked up and contradictory and most prefer to avoid the entire thing in public.

Especially so with something as big and public as backing or working with a sex toy company. No matter what way you go with it, somebody's going to try to jump down your throat. Often several different groups, for contradictory reasons. Is it any wonder that most men, and anybody whose job involves making sure your company isn't the target of a negative media frenzy, doesn't want to touch this stuff with a 10-foot pole?

You know, it just hit me that having an all-female company would be really advantageous in this way. The grass is always greener etc. but from this side of the fence it looks like it makes you bulletproof to this kind of things.

Alas no, but I can tell you that many of the entrepreneurs doing really interesting things in this space are female :)

Interestingly, the public perception that you're tainted can make your company a good investment for the savvy (/thick-skinned) investor:

http://www.canadianbusiness.com/investing/investing-in-sin-s...

Since a lot of people wont touch sex (or tobacco, oil, military, etc.) investments, you can get these at a discount compared to other companies with similar numbers but in a more mainstream category.

I work at Stripe. Some details in the article aren't very accurate.

But, more broadly, we actually work hard to push against the rules in many cases. (Cindy Gallop, mentioned earlier in the thread, can attest to this -- we spent ages trying to figure out a way to accept payments for her startup.)

Hi Pc,

Do you think BTC or Stellar will help put downward pressure on the pricing model that Banks currently use for "High Risk" Merchants? My rate is essentially 15% because I'm a startup and my volume is so low.

In the end Stripe could not work with her or other startups that feature "a naked person" on the product they're selling (the article seems to claim), is that correct? I'm assuming then pay-for-porn sties are not permitted business with Stripe either?

They are not, anything classified as "High Risk" cannot be serviced by Stripe, Balanced, Braintree, etc.

Again, from my research, it is because the partner banks will not allow them to.

Hm, okay. Though, it's not clear to me why porn sites en masse would be classified as "High Risk"? Are you sure this is always the case? How are current popular porn sites doing this?

And, now that Stripe is quite big, don't they have some leverage over the banks to be able to say they do want porn sites et al. to be able to work with Stripe?

That makes two of us! Porn en masse shouldn't be, but it is.

As for Stripe's size, they are a tiny, tiny drop in the bucket compared to the world markets. Heck compared to a U.S based hedge fund they'd be tiny. I'm guessing they have very little leverage.

The porn sites are classified as "high risk" because the banks believe/know that type of business has above average chargebacks. Apparently banks want to keep their chargebacks to a minimum.

Irony: http://makelovenotporn.com/ wants to make sex and the discussion around it socially acceptable and socially shareable - our mission is to change the way the world has sex for the better, via socially-shared #realworldsex. As such, we operate completely openly, transparently, legally and ethically, and I can count the number of chargebacks we've had in 20 months of operating on the fingers of one hand (couples watch our videos together, our community isn't hiding etc etc). But the financial world refuses to even have a conversation about the fact we do business differently and don't encounter the same risks. Which is why people regularly tell me we need to find a politician/lobbyist who'll support us, a la bitcoin/Uber lobbying, to redefine what constitutes 'adult content' and the legislation around it.

It's not just porn sites that are classified as "high risk". Adult retailers are also put into that category.

We rarely get chargebacks. Maybe that's because we focus on a different kind of customer.

Absolutely - I am enormously grateful to Patrick and the team for doing everything you possibly could to persuade your bank to change their mind. Still gutted we couldn't make it work, and determined to generate as much social acceptability and revenue as we can to change their POV :)

What details in the article are you referring to?

Unfortunately, we didn't have the same Stripe experience as Cindy Gallop. We were never given the chancee to explain that we are a different type of business.

She's trying to fix the wrong problem.

The men in charge of those businesses don't care what you sell. They only care not to get in trouble with the businesses they work with up the line. She should make her business acceptable to the banks... and I guarantee the tech companies will be HAPPY to take her money.

Um - I've been battling the 'no adult content' clause for several years now, and unfortunately I can tell you that's not the case. I can't even open a business bank account for http://makelovenotporn.com/ - I've been turned down by everyone including the startup banks (I met with both Silicon Valley Bank and Square One Bank and they refused to let us bank with them).

This is the post I had to write to our members on 'Why We Make It So Hard For You To Give Us Your Money':

http://talkabout.makelovenotporn.tv/2013/07/30/why-we-make-i...

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