In 2023, the global Adult Entertainment market had an estimated value of approximately US$58.8 billion, with that figure only set to rise across the coming decade. As a high-revenue sector, the adult digital media industry is also one of the most susceptible to payment fraud and chargebacks.

As one of the pioneering industries in the digital space, adult media was one of the earliest adopters of online subscription-based financial models. However as technology evolves, so too does the unprecedented risk of increasingly sophisticated fraud attempts.

To maximize revenue in this competitive digital landscape, businesses must adopt robust strategies to combat payment fraud risks effectively. In this article, we’ll explore several best practices that adult digital media companies can implement to minimize fraud, protect their operations and drive growth.

The Scope of Payment Fraud in the Adult Digital Media Industry

The 2024 Payments Fraud and Control Survey Report from the Association for Financial Professionals (AFP) in the US indicates that 80% of organizations experienced payments fraud attacks or attempts in 2023, marking a 15% increase on the previous year. 

As businesses in the adult digital media industry face a disproportionate number of fraudulent transactions compared to other sectors, this figure is likely to be much higher. A combination of customer anonymity, digital-only goods, and global reach makes this industry particularly susceptible to fraudulent activities. 

Businesses in this space face a unique set of challenges due to the nature of their content, high-risk classification and regulatory oversight. Among others, some of the most common fraudulent activities include:

• Chargeback Fraud: Fraudsters complete a purchase using digital payment methods, then dispute the transaction with their bank, falsely claiming it was unauthorized or the product was never delivered. This is also referred to as “friendly fraud”.
• Card-not-present fraud: Misuse of stolen credit card details in transactions where the card isn’t physically presented, such as purchases made online or over the phone.
• Phishing scams: Scammers send fake emails or messages posing as reputable companies, tricking individuals into sharing sensitive personal or financial information.
• Account takeover fraud: Unauthorized individuals gain access to digital payment accounts by using stolen login information, allowing them to make fraudulent transactions.

Best Practices for Businesses in the Adult Digital Media Industry

While the adult digital media sector faces substantial payment processing challenges, following these best practices will help businesses not only survive but thrive in an increasingly complex ecosystem:

Adapt and Diversify Your Payment Methods

Offering multiple payment options can reduce your reliance on credit card transactions, which are often the target of e-commerce fraud. Consider incorporating alternative payment methods such as Pay by Bank or cryptocurrencies. These options often come with lower fraud risks and can appeal to a broader customer base, seeking more privacy. 

Benefits:

• Reduces the risk of fraud and chargebacks.
• Increases flexibility for customers.

Implement Advanced Fraud Detection Systems

Putting in place sophisticated fraud detection systems is crucial for identifying and stopping fraudulent activities before they cause damage. Vendo’s innovative AI-based risk management tools can analyze transaction data in real time, flag suspicious activity such as IP address mismatches, unusual purchase patterns, and multiple transactions from the same card in a short period. Pre-and post-transaction screenings identify potential fraud trends and manage risk exposure.

To effectively protect revenue, businesses should also invest in a comprehensive chargeback management system to help identify the root causes of chargebacks, implement prevention strategies, and streamline the process of disputing invalid chargebacks, which can be costly.

Benefits:

• Reduced instances of fraudulent purchases.
• Faster identification of potentially problematic transactions.
• Lower chargeback rates.

Key Tip: Partner with a payment processor that offers chargeback mitigation support and specialized fraud detection tools that are specifically tailored to high-risk industries as part of their services. 

Prioritize Transparency and Communication

Use Clear Billing Descriptors

A common cause of avoidable chargebacks in the adult industry is simply customer confusion over billing descriptors. Vague or misleading billing descriptors may incite customers to file a chargeback if they don’t recognize the transaction on their bank statement. 

To avoid this, ensure that your company name and product details are clearly listed in the billing descriptor to avoid any misunderstanding. The same can be said for product descriptions, with customers less likely to be dissatisfied if the product is very clearly described up front and they understand what to expect. 

Offer Accessible Refund and Dispute Policies

Detailed billing descriptors can be a delicate balance as some customers may equally file chargebacks to protect their privacy, or from embarrassment due to the sensitive nature of adult content. Ensuring that your business offers clear refund and dispute policies may encourage customers to make direct contact, rather than filing a chargeback and reduce so-called “friendly fraud”. 

Benefits:

• Prevents unnecessary chargebacks.
• Reduces the financial burden of chargeback fees.
• Builds trust with customers by reducing confusion and encouraging direct communication.

Key Tip: Providing easy-to-access customer service channels with a rapid response time will undoubtedly improve customer satisfaction and reduce unnecessary chargebacks. 

Build Relationships with a Reliable Payment Processor

Building and maintaining a relationship with a payment processor that is familiar with the pitfalls of high-risk industries can be of enormous value to businesses operating in the adult digital media space.

Vendo Services is an industry leader when it comes to high-risk businesses, with expertise in risk management, compliance and in-depth knowledge of the adult digital media industry. Vendo’s expert team applies cutting edge technologies to offer tailored payment processing options that support fan sites, cam operators, and streaming services. 

Vendo’s innovative payment solutions are ideal for e-commerce and content platforms in adult digital media looking to grow revenue streams and reduce instances of fraud.

The Bottom Line

Managing payment fraud in the adult digital media industry requires a proactive approach and specialized tools to protect your business from chargebacks and fraud-related losses. 

By implementing advanced fraud detection systems with the help of AI technology, diversifying payment options, maintaining transparent communication with customers and building positive relationships with specialized payment processors, your business can mitigate these risks and focus on growth.