Most businesses have no trouble signing up with major payment processors.
But for certain businesses, the relationship is not so simple. If you are selling an age-restricted product or service, if your business is considered high-risk, or if you are operating in any sort of legal gray area, it could be very difficult for your business to be approved, and if it does get approved, your account can be frozen later on.
Payment processors — like Stripe and Square — make setting up a store and accepting transactions faster than ever, but because of this, they must assess the legality of a multitude of businesses from many different countries. In so doing, the common practice has been to air on the side of caution. Payment processors are running a business themselves, so they need protection. However, this has left certain merchants in the unfortunate position of being technically legal, but still unable to accept payments from any major processor.
Today, we’re going to look at a variety of businesses that may be banned from PayPal, Stripe, and Square. Inclusion in this list does not guarantee that your business will be banned, and of course, the policies of PayPal, Stripe, and Square are subject to change. This is simply our interpretation of their policies, as they stand in June of 2017.
PayPal is the world’s largest online payment processor, and as such, exclusion from their platform is a major blow for any online business.
The most detailed answer I have found by PayPal about banned businesses comes in their Acceptable Use Policy, last updated in July of 2015.
PayPal’s policy, broadly speaking, prohibits two sorts of transactions:
- Transactions related to dangerous, illegal or violent activities or items, such as:
- Stolen Goods
- Hate speech or Racial Intolerance
- Copyright Infringement
- Sexually-oriented materials or services
- Certain weapons or knives
- Transactions related to scams or high-risk finances, such as:
- Pyramid schemes
- “Get rich quick” schemes
- Multi-level marketing programs
- Off-shore banking
- Currency exchanges or check cashing businesses
- Anything for the purpose of bribery or corruption
PayPal also includes a list of businesses which require approval, such as:
- Charitable donations
- Stock and bonds
- Alcoholic beverages
- E-cigarettes or non-cigarette tobacco products
- Prescription drugs or devices
For a full list of businesses which are banned or require approval, consult PayPal’s Acceptable Use Policy.
Stripe, a viable alternative to PayPal, has risen steadily over the past few years. Stripe is also the first payment processor integrated into Control’s transaction analytics platform. Learn more!
While researching Stripe’s policies, I didn’t find an Acceptable Use Policy written in a similar mode as PayPal’s. However, I did find an article on the Stripe blog called “Why Some Businesses Aren’t Allowed”. While the article does not offer a definitive list of banned businesses, it does offer some interesting insights into why certain businesses are banned.
For example, Stripe points to OMGYes, a business it describes as “a sex-ed startup that conducted the first-ever large-scale research about women’s sexual pleasure in partnership with researchers at Indiana University and The Kinsey Institute.” Stripe claims that they were eager to work with OMGYes, but they ran into a problem. Due to “explicit tutorials” on OMGYes’s website, Stripe was unable to convince its financial partners.
Broadly speaking, Stripe identifies three reasons for banned businesses:
- Legal regulations from payment networks (such as Visa and Mastercard) and banking partners
- Legal regulations from the countries they operate in
- Financial risks that different businesses may pose
The article does not provide a detailed list of every sort of business Stripe bans. But if you are interested in the reason why your business may be banned, it’s certainly worth a read.
To better understand Stripe’s banned business policies, read their full article.
Square is most well known for its easy to use point-of-sale payment system. However, Square has begun to focus more of its attention on eCommerce. Square is also the latest payment processor integrated into Control’s transaction analytics platform. Learn more!
Back in 2013, it was reported that prostitutes in Silicon Valley were using the Square app. I don’t know what the policy was at the time, but today this practice is definitely illegal.
“Escort services” is one of the 31 categories Square explicitly prohibits in an article called “Prohibited Goods and Services with Square Point of Sale”.
The article is quite short and easy to read, so there is no need to summarize it here. (What else would you expect from a company founded by the creator of Twitter?)
It’s fair to say though that the categories are (for the most part) aligned with the sorts of businesses mentioned by PayPal and Stripe.
However, a couple of differences that I noticed are:
- Square bans “occult materials”, a category that is not specifically mentioned by PayPal or Stripe.
- Square bans “Adult entertainment oriented products or services (in any medium, including Internet, telephone or printed material)”. This is a very broad statement that could potentially target more sexually-explicit content than PayPal or Stripe.
Of course, this is only speculation. For more information, contact Square directly, or consult their article “Prohibited Goods and Services with Square Point of Sale”.
Why Are Certain Businesses Banned?
In the Stripe section of this article, I referenced the fact that Stripe felt obligated by their financial partners to ban certain sorts of businesses. I feel it’s necessary to point out that their financial partners may not necessarily agree with this assessment. As a matter of fact, there is a lot of finger-pointing between the payment processors, the credit cards, and the banks, when it comes to who is most responsible.
To dig deeper into this issue, I highly recommend an article by investigative journalist Violet Blue called “PayPal, Square and Big Banking’s War on the Sex Industry”. It’s a complicated issue that is out of the scope of this article to discuss. But if you are running a business that is at risk of being banned, it’s worth your time to get a better understanding of the factors that are at play.
Whether you run a sex-inspired startup or an online pharmacy, your business is at risk of being banned by PayPal, Stripe, Square, or any of the other major payment processors.
The unfortunate reality is that even if your business is legal, if it is controversial or high-risk, you will have a much harder time getting approval than the average business.
If you run the sort of business that could be banned, we recommend accepting multiple payment processors. This multi-channel approach will diversify your revenue, thereby preventing any single processor from ending your business.
At Control, we offer aggregated payment analytics for PayPal, Stripe and Square. Our omni-channel dashboard is available on the Web, Android, and iOS.