ISOs often refuse to do business with gun sellers, medical marijuana shops, pornography sites, bitcoin exchanges and mug-shot galleries whether or not those businesses run afoul of the law.
Even when a potential client can prove it is legal, in many cases, there may be a debate about whether a business is unethical, says Maria Sparagis, sales director for Montreal-based DirectPayNet, which specializes in establishing payment processing for high-risk businesses.
The question came up again this month when The New York Times published a scathing article about websites that post mug shots of people arrested for alleged crimes, removing the photos in exchange for payments of $30 to $400. The article concluded with remarks from the major card networks and PayPal, which all vowed to discourage or sever ties with those sites. A MasterCard representative went so far as to call the sites repugnant.
However, site operators often have a legitimate reason to post mug shots online, Sparagis says.
I have not dealt with these specific mug-shot websites, but the publishing of mug shots is a legal service, Sparagis says. Newspapers have published mug shots of those arrested in the past. So that becomes part of the question.
If the business is legal and meets the requirements of a payment network, then acquirers have to determine their stance on the ethics of the business, she says.
Even for companies like DirectPayNet, which tries to support medium- to high-risk clients that process $50,000 or more a month, the balancing act is not always easy, Sparagis says.
Guns are a hot topic. Some are for it, some are not, Sparagis says. Basically, it becomes a Republicans versus Democrats type of debate.
Indeed, in the wake of a number of high-profile mass murders, licensed gun dealers found it difficult to find processors to work with them.
Some acquirers shun legal adult entertainment merchants on moral grounds, whereas others see such companies as a clear opportunity, Sparagis says.
If PayPal or others shy away [from certain merchant types], there are some acquirers that would capitalize on that and charge premiums to take on those merchants, Sparagis suggests.
When an acquirer or ISO is contemplating a high-risk merchant, that merchants credit history provides some key answers, she says.
Is the merchant responsible, and does he have a past processing history or actually had some success in the past? Sparagis asks. If that merchant has good credit and shows a good financial history, the business may be questionable, but it is legal.
Atlas Payment, a processor with a niche in accepting high-risk transactions, did not respond to inquiries for this article. But the types of merchants Atlas pursues include a range of high-risk segments such as pharmaceuticals, nutraceuticals, adult products, multilevel marketing, business opportunities, electronic cigarettes, debt service, horoscope and fortune-telling, firearms, online auctions, online dating, software downloads, telecommunications, time share advertising, and travel services.
PayPal, which established itself in 1998 as an alternative payment system for merchants that did not accept credit cards, has become much less permissive than it used to be. In its early years, PayPal supported Internet gambling sites, but eBay eliminated that practice when it purchased PayPal in 2002.
Today, PayPal seems more careful about who it does business with. Any merchants that are found to be engaging in illegal activities or scams are immediately shut off from PayPal, PayPal spokeswoman Jennifer Hakes says.
After PayPal was alerted to the business practices of mug-shot sellers, we conducted a thorough review and decided to discontinue support for sites that charge to remove mug shots, she says. We feel this decision is in the best interest of the PayPal community.
MasterCard, however, lets acquirers decide how to handle transactions initiated through those businesses, says James Issokson, a MasterCard spokesman.
Nevertheless, we felt it was prudent to raise this issue to our acquiring banks to review the sites in question, he says.
Visa Inc. is taking a similar stance. In an emailed statement, Visa says it works closely with law enforcement agencies to safeguard the integrity of the card brand and payment system but does not take a position with respect to lawful goods and services bought and sold by the people and the companies who use our payment network.
In the case of the mug-shot sites, Visa says it is asking the responsible acquirers to investigate the merchants business practices to ensure they are legal and compy with Visa operating regulations.
American Express and Discover have severed ties with the mug-shot sites, The Times reports.