Online dating merchant accounts: An industry with constant challenges

Online dating merchant accounts: An industry with constant challenges

As if the high risk profile for online dating merchant accounts wasn’t high enough, dating merchants have had to grapple with an industry that has increasingly become a magnet for fraudulent activity. The dating industry has enough challenges with a typically high rate of chargebacks and reputation concerns. Over the last five years, there has been a rash of false profiles on dating websites in an effort to bilk legitimate members out of money, which filters down to the merchants.

Add the task of identifying fake, predatory profiles to the list of issues that dating merchants need to mitigate, along with the aforementioned chargebacks and reputation worries, and performing due diligence is nearly a full-time job within a full-time job.

Fortunately, online dating website merchants are not helpless.

2 problems online dating merchants face

Is there such thing as an industry going from high risk to extremely high risk? We doubt it. Once an industry is labeled as such, that’s that. The elements that make an industry high risk are always there. Over the past decade, however, we’ve seen new issues arise when merchants inquire about online dating merchant accounts.

This is what we’ve seen:

  • Is this really a dating site?

This is a question, sadly, our underwriters pose to ourselves when ‘merchants,’ inquire to us, and their websites appear unconvincing. There will be photos and testimonials of ‘satisfied members,’ who have found life-changing relationships.

Fortunately, since Instabill got its start as an online credit card processor for online dating, gambling and adult merchant accounts, our underwriters have become well-versed in identifying the bad actors from the legitimate merchants.

We’ll often see ‘dating’ sites that look like escort services or, worse, what we feel might be organized prostitution, and we’ll swiftly explain to the merchant that we don’t have a solution for them.

  • Online dating sites for phishing

A while back we published a pair of blog posts (Sept. 15, 2016 and Jan. 3, 2017) about phishing tactics and suggestions as to how businesses can defend themselves. We get phishing e-mails quite often – the majority of them flagged and quarantined by our ace IT provider. Occasionally, we’ll view them and, though we know the signs of bogus e-mails, at times we were amazed at how convincing some of them are.

Fraudsters are using online dating profiles for the same reasons they send phishing e-mails. They attempt to develop correspondence with an unsuspecting victim which eventually becomes a cyber ‘relationship’ of sorts. The fraudster might be from another country or far away state, and eventually seeks money for a ‘visit,’ or perhaps even to help them get out of an entanglement.

Protecting online dating merchant accounts: There are options

We’ve long suggested strategies and third-party providers to online dating merchants to help them mitigate the challenges of fraud and chargebacks. Ninety-nine percent of the time, the merchants collective response centers around affordability.

With this, we suggest a different school of thought.

In a recent conversation with a colleague, who is an expert in chargeback management, I posed the affordability issue to her. Her response could not have been more logical: Merchants should think of it as investing in recovered revenue.

Thus, online dating merchants have several options to weed out the bad actors:

  • AI and machine learning: We know of several proven fraud prevention companies that offer machine learning schemes with custom settings, enabling merchants to flag and identify fraudulent tactics in real-time while keeping merchants’ false decline rate low.
  • IP address geolocation: Without mentioning specific countries, there are regions that are hotbeds for fraudulent activity throughout eastern Europe, Africa and Asia. We’re not advocating the decline of all transactions from these regions, but we do urge merchants to flag them for a closer examination.
  • ‘Report’ options for subscribers: Let’s use Facebook’s ‘Report Ad’ and ‘Report Post’ features. Enabling subscribers to report suspect subscribers and/or activity is a way of getting your online dating business to work for you.

The online dating business is one of the industries which helped launch Instabill as a high risk payment processor, and has since resulted in partnerships with many acquiring banks which welcome high risk industries.

For solutions for online dating merchant accounts, speak with a live representative today at 1-800-530-2444.

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