Mastercard is introducing revised standards for those who acquire adult merchants, effective 15 October 2021. Some of these new requirements are significant and will impact how acquirers on-board and monitor their adult content merchants, as Markus Prause, Chief Risk Officer of Web Shield explains.
The internet is for porn. At least that’s the view of Trekkie Monster from the Broadway musical Avenue Q in a song of that name. Whether he’s right or not is debatable though.
Online businesses look to the porn industry for ideas on new technologies and how to monetise them. The appetite for online porn drove better modems, faster connections, and higher bandwidth.
The porn industry pioneered technologies, such as file compression, video calling and user-friendly payment systems. And business models such as affiliate marketing, pop-up, and banner ads.
Sex sells. Annual revenue from the porn industry worldwide has been estimated at up to USD 90 billion. To put that into context, Hollywood makes about USD 10 billion a year.
The COVID-19 pandemic has also been good for porn. Worldwide traffic to PornHub increased 25 percent in mid-March 2020 after it offered free PornHub Premium to encourage people to stay indoors and social distance.
Meanwhile OnlyFans, a platform where users charge fans for content, had a COVID-19 subscription boost from 20 million to 120 million globally. Transactions on the site increased more than 600 percent in 2020, generating GBP 1.7 billion (USD 2.3 billion), the founder revealed in an interview with the Financial Times.
The risks of the adult sector
When it comes to risk exposure, the simple ‘follow the money’ principle holds true. Where there are high online sales and visitor numbers, so there are higher risks for acquirers and payment service providers.
The adult content sector attracts its share of rogue operators and fraudsters, looking to deceive customers, card issuers and acquirers. This may culminate in higher chargebacks for acquirers.
Affiliate marketing models are also a popular way of acquiring new customers in the adult sector. Affiliates may earn commissions of up to 100-300 percent of the price of a monthly subscription, which attracts fraudulent affiliates.
Merchants may also create acceptance risks for acquirers, by selling goods or services that are illegal, such as copyright-infringing content. Or that which is restricted or prohibited by the card schemes, including child abuse, rape, violence, or other non-consensual content.
The new Mastercard requirements
From 15 October 2021, acquirers will need to certify that their adult content merchants have effective controls in place to monitor, block and, where necessary, take down all illegal content.
Merchants must only permit uploads from verified content providers. They must have a robust process for verifying the age and identity of the content provider by means of government-issued ID.
Similarly, individual content providers must verify the age and identity of all persons depicted in the content, to ensure everyone is an adult. And be able to provide supporting documentation on request.
Merchants will be required to enter into written agreements with each content provider. Individual content providers will be required to obtain and keep on file written consent from all persons depicted in the content.
Mastercard has also introduced a pre-screening requirement for adult content merchants. All uploaded content must be reviewed prior to publication to ensure that it is not illegal and does not otherwise violate Mastercard’s standards. Real-time monitoring and content removal is also required for live streaming.
There are also requirements around how adult merchants market their content, administer complaints and takedown requests, and report activity to their acquirers.
How Web Shield can help
Web Shield’s InvestiGate solution allows underwriters to take quick, effective on-boarding decisions via a single automated platform and integration. The system comprises more than 25 modules, which organisations can select and customise, depending on their portfolio and risk appetite.
InvestiGate now includes a High-Risk Verification for on-boarding adult content merchants. This allows underwriters to make go/no-go on-boarding decisions with confidence, in accordance with Mastercard requirements.
The new service reviews know-your-customer (KYC) and content upload processes. It performs a detailed review of the merchant’s website, for example scrutinising content, live streaming, complaints, and takedown policies. And finally, it reviews marketing and traffic generation techniques and performs automated content scans for potential violations.
Risk and reward are completely intertwined. You can’t have one without the other. And nowhere is this truer than in the high brand-risk adult content sector.
Yet it’s only those with robust risk management structures and confidence in them, who can be more enterprising and entrepreneurial. In short, take more calculated and controlled risks to boost their business, reputation, and bottom line.
Web Shield has released a free Onboarding Guide for High-Risk Merchants to help you better understand and implement the new Mastercard rules for adult content merchants. You can download it here.
About Markus Prause
Markus Prause, Web Shield’s Chief Risk Officer, is responsible for the areas of online investigation, merchant monitoring and client integrity. Before joining Web Shield and building its underwriting team from the ground up, Markus worked for a German financial institution and two merchant acquirers in the field of risk and compliance. He is specialised in the area of onboarding and non-compliance investigations, client integrity retention and risk consulting. Markus is a Certified High-Risk Underwriter (WSA) and an instructor at the Web Shield Academy.