Businesses operating subscription payment models often do well financially. Paying money every month is often more palatable for many customers than a lump sum, and also provides a regular, steady income for merchants. 

This strategy is particularly effective in the adult industry. 

Visa has reclassified MCC 5968 (subscription content) as a high-risk merchant category code (MCC). This classification applies to all businesses that offer recurring subscriptions, including digital content providers, box subscriptions, and adult content providers.

For many years, adult businesses have benefited from subscription-based pricing models. Customers who pay monthly can help keep a merchant’s cash flow buoyant, present a higher lifetime value, and reduce your income volatility. 

In this article we will examine the potential impact on adult subscription businesses with this new classification.

What does VISA’s high-risk designation mean for adult subscription businesses?

Visa’s introduction of the new Merchant Category Code (MCC) 5968, specifically for adult content subscription providers, could significantly impact how these businesses operate and are perceived. 

This dedicated MCC allows financial institutions and adult business payment processors to better categorize and monitor transactions related to adult content. 

More transparency. 

For subscription providers, the change adds a layer of transparency, as transactions are now explicitly identified within the adult content category, which can improve clarity in payment processing and reporting. This increased visibility may lead to expanded reviews from financial institutions and regulators, requiring businesses to ensure strict compliance with legal and ethical standards.

Stricter enforcement.

One of the key implications of MCC 5968 is the potential for stricter enforcement of rules and policies by banks and payment processors. 

These entities may implement additional verification steps or impose higher fees on adult content providers to mitigate risks associated with the industry, such as chargebacks or fraudulent activity. 

Providers must be prepared to handle these potential costs and operational adjustments, as they could affect profit margins and customer experience. Ensuring compliance with Visa’s requirements and maintaining robust payment processing systems will be critical to minimizing disruptions.

User behavior.

On the consumer side, the new MCC may also affect user behavior, as transactions labeled under the adult content category could raise privacy concerns for some individuals. This labeling may appear on credit card statements, potentially deterring some users from subscribing due to fears of judgment or breaches of confidentiality. 

To address this, subscription providers might explore offering alternative payment options, such as digital wallets to maintain customer trust.

Be proactive.

Finally, MCC 5968 underscores the importance of proactive business practices for adult content providers. Businesses should prioritize transparency, compliance, and customer privacy while strengthening relationships with payment processors and financial institutions. 

By doing so, they can mitigate risks, adapt to regulatory changes, and continue to thrive in a challenging but lucrative market. 

How to adjust your payment processing strategy

To adjust your payment strategy based on the updated MCC 5968 classification, adult content providers can implement several key measures.

Work with a high-risk payment provider

Strengthen your relationship with your high-risk payment provider, focusing on compliance with all regulatory requirements while maintaining open communication. 

Providers can proactively work to meet enhanced standards for transparency and accountability, which may include stricter identity verification processes for both content creators and subscribers.

Alternative payment methods.

Offering alternative payment options is another critical step. By integrating digital wallets, prepaid cards, and other forms of alternative payment, providers can address perceived consumer privacy concerns associated with the explicit categorization under MCC 5968. 

These options allow customers to complete transactions more discreetly while giving providers additional channels for revenue.

Minimize financial risks. 

Additionally, providers should invest in fraud prevention and chargeback mitigation tools to minimize financial risks often associated with adult content transactions. 

Advanced security measures, such as tokenization and strong encryption, help to build trust with both consumers and payment processors. Maintaining accurate and detailed records of transactions can also assist in resolving disputes quickly and effectively.

Maintain compliance.

Finally, adult content providers should regularly review and update their payment processing agreements and policies to ensure compliance with industry standards and evolving regulations. 

By staying ahead of potential challenges, these businesses can protect their revenue streams, maintain customer trust, and adapt to the shifting landscape introduced by MCC 5968.