And they don't allow things like porn, gambling, and guns. I'm OK with payment processors setting their own rules based on their own ethics, but its a problem if all we have is this little oligopoly of choices. We need more choices.
What's the reasoning for not allowing those things? Does it bring additional legal problems or something? I could see the issue with potential child porn or something like that but shouldn't a payment processor be siloed from any legal issues there?
The biggest thing payments processors are concerned about is fraud. Certain lines of business are risky because they simply result in more fraud, plus there's a whole other level of restrictions enforced by the banks themselves. I don't know what the exact reasoning was behind the ban in the article, but there are entire teams dedicated to developing risk models that attempt to identify merchants that will end up resulting in a loss before it happens.
Payments processors like PayPal may just be middlemen between banks, but if the merchant owes the bank money and is suddenly nowhere to be found, the processor is the one who takes the hit.
> there are entire teams dedicated to developing risk models that attempt to identify merchants that will end up resulting in a loss before it happens.
And yet they are unable to distinguish a legitimate and widely popular blog hosting site which does not intend to defraud anyone but allows people to host erotic fiction, from a shady porn site. Makes you kinda question what those teams are doing the whole day, doesn't it?
Contrary to popular belief, gambling is not illegal under US law.
In fact, certain types of gambling (horse racing) are explicitly protected by federal law, and generally gambling laws are up to the states (online gambling of all kinds is perfectly legal in NV and NJ).
Betting online on horse races is explicitly legal in 30+ states, and not explicitly illegal in several more. Certain jurisdictions disallow online betting on horse races if you live within some radius of a local horse track.
[Edit: to clarify, some forms of gambling are explicitly disallowed across state lines, but that ban does not have any impact within state lines]
Porn would change the status of their merchant account to 'high risk' which means higher fees. Gambling is illegal in many jurisdictions. Guns may be their own decision.
I'm not certain on their reasoning for banning payments related to guns, but for porn and gambling they have a very good business case for denying it. Both of those verticals have astronomically higher chargeback rates compared to other verticals, and that's just bad for the bottom line.
