Behind the Scenes: Why do banks and online platforms care about NSFW art?
I've been working to try and setup an arrangement for https://art.page to properly support NSFW art, with clear and defined rules about what we're willing to accept, and I've learned a lot about the industry in these negotiations that I thought a lot of artists would be interested in.
Merchant Accounts
When selling online there's generally 3 types of accounts you can have:
Low risk: The kind you'll get with Stripe/PayPal, used for businesses selling every day goods/services
High risk: This includes other areas like Dating or hookup sites
Adult: Sites generally dedicated to NSFW content such as porn sites, or NSFW oriented platforms such as OnlyFans or Fansly.
Why is Adult the highest risk category?
To put it bluntly, the major reason for this is due to horny customers paying for something then regretting it and submitting a chargeback to their bank saying it wasn't them/they were hacked/someone stole their card.
Why do chargebacks matter?
They cost money.
Banks need to spend time investigating them and reviewing evidence, which they pass on to payment processor partners via fees & increased rates for transaction fees, which payment processors very much want to avoid.
So in order to work with any of them, you need to keep your chargeback rate below a certain percentage of revenue/transactions processed.
Adult oriented businesses tend to have a high rate of chargebacks, so there's additional fees/checks to make up for that.
Underwriting
When you apply for a merchant account, or setup a relationship with a payment processor who will let you use their merchant account, you undergo a process called underwriting.
This is basically where they look to understand your business including:
Are you a legitimate business? Eg not a fraudster looking to funnel illegal money through the financial system.
How reliable is your business? Eg you sell goods/products/services which they can verify you sell, that they perform as advertised and you're not just trying to mislead customers.
What risk category you come under.
Costs
Transaction fees can vary from 1% - 10%
Additional fees for adult accounts: Charged by Visa/Mastercard add up to $1450/year.
Rolling Reserves can vary 0-10% of revenue, and held for 0-26 weeks.
What is a rolling reserve?
This is where funds are withheld from being paid out for a set period of time.
Banks want to guarantee the ability to pay customers back against chargebacks, and the only way they can do that is by holding the funds themselves rather than try to claim them back after paying out.
For online platforms where the creators want paid out asap it's a big issue, especially when the reserves can actually be larger than the platforms cut from a sale, they would need a large reserve of cash on hand in order to wait for the payment to make their way.
But my art isn't pornographic, it just includes nudity, why does this matter?
Would you describe a painting on a wall in a museum that happens to include some minor elements of nudity as pornographic? Probably not.
Would you describe a digital drawing of an orgy showing multiple scenes in graphic detail as pornographic? Probably.
There's a very large grey area in between these where what someone would call pornographic can vary significantly, and this is where the confusion and inconsistencies in enforcement of rules can happen.
Some places would classify anything with any nudity whatsoever as adult, other places will be willing to accept some nuance and still permit it as a low risk account.
Are there any workarounds to this? Why don't online platforms try to support both?
A platform could have multiple merchant accounts & payment processing partners, it's definitely an option.
However, unless the platform is focussed on supporting adult content, it's a significant amount of extra work involved. If the NSFW community is a minority, it might simply not be worth the extra hassle.
So it's not really about moral ethics or anything, it's just about money?
Not exactly, all of these online spaces are private businesses and their owners might simply not want to support NSFW content.
That could be due to their own personal morale code, a desire for a certain kind of brand image, or due to the above mentioned fees/work involved.
Additionally, countries are starting to impose stricted regulations restricting access to NSFW content (eg recently in the UK), and imposing fines on platforms which are non-compliant which will push more businesses away from supporting NSFW content.
So... what's next?
I think there's still demand for a true safe space for NSFW artists, what I'm not sure is whether artists & creators would be willing to pay the extra costs to make that happen.
It's definitely annoying that they get lumped in with all other adult content, and I'm still trying to negotiate with various providers to see if there is an option that will let nsfw creators sell online without ridiculous fees.
Happy to answer any questions in the comments below!
