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Why some businesses aren’t allowed

#1
We’re building business infrastructure. As with other kinds of infrastructure (like hosting or electricity), we'd like to make it available to as broad a set of users as possible. While we may personally like some businesses on Stripe and disapprove of others, we want to make as few judgements as possible as a company. The world doesn’t need more gatekeepers.
That said, we provide financial services, and there are consequently a non-trivial number of restrictions regarding the use of our products. These restrictions have always been outlined in our Services Agreement, which we’ve tried to make as readable as possible. Given that they’re often a source of confusion, though, we figured it could be useful to try to explain some of the broader context around them and to describe the approach we want to take.
Why can’t we work with some businesses?
Behind the scenes, we work closely with payment networks (such as Visa and Mastercard) and banking partners across more than two dozen countries. Each institution has strict legal regulations that govern them and specific rules about the types of businesses they do and do not work with. Through our partnerships, we are bound to uphold those requirements. In addition, we must also—of course—uphold the laws of the countries we operate in. Lastly, we need to be careful regarding the financial risks that different businesses may pose to their customers or to Stripe.
In software terms, this is a leaky abstraction. In our ideal world, businesses using Stripe needn’t worry about how payment systems are implemented underneath the hood. In practice, however, every payment involves multiple financial companies whose restrictions may manifest themselves in Stripe.
As a result, the decision to support a business is not solely up to Stripe; it involves the various financial companies in the credit card processing chain. Their restrictions tend to be broad and, as a result, often pretty confusing.
Why are entire business categories prohibited or restricted?
Rather than evaluate each business in isolation, many financial institutions choose to make decisions around broad categories of business. Below are a few categories that are often restricted or prohibited from accepting payments. As you can see, the restrictions can function more like hammers than scalpels—tools designed to bluntly manage risk, not support the maximum number of businesses possible.
  1. Illegal businesses
    Examples

    • Counterfeit items (violating IP laws)
    • Illegal drugs
    • Medical marijuana (illegal at the federal level)
    • Pirated music

  2. [size=undefined]
    This one’s pretty straightforward. Quite simply, Stripe can’t support businesses selling or supporting illegal products or services. Many financial institutions enforce a blanket-ban on products that are legal in some states but not others.
    Some businesses exploit short-lived legal loopholes: for example, trivial drug variants that aren’t illegal yet. These are generally more hassle than they’re worth for everyone involved.
    [/size]
  3. [size=undefined]Regulated businesses
    Examples
    [/size]
    • Alcohol
    • Marketplaces
    • Online pharmacies


  4. [size=undefined]
    Some businesses live in heavily-regulated spaces and are only legal if compliant with the industry-specific rules. These rules can at times be difficult to verify and enforce online: for example, are we confident that an online pharmacy is checking prescriptions or whether a liquor store app is carding people? (How do you even card people online?)
    We can often support these businesses! It just takes more work. More on this later.
    [/size]
  5. [size=undefined]Shady businesses
    Examples
    [/size]
    • Multi-level marketing
    • "Get rich quick" e-books



  6. [size=undefined]
    The credit card industry is successful because consumers are confident that using their credit cards will be safe and predictable. By extension, they expect that the product or service they purchase will be of high quality and delivered as promised. Businesses that consistently leave their customers unhappy are bad for the overall integrity of the payment network. Because of that, some consistently-troublesome categories are restricted even though they may be within the law.
    We assess these businesses individually by looking at how the business is marketed, analyzing what is being sold, and by monitoring ongoing dispute rates by customers. We don’t support businesses that consistently deceive customers or leave them unhappy.
    [/size]
  7. [size=undefined]Financially-risky businesses
    Examples
    [/size]
    • Airline tickets
    • Concert pre-sales
    • Pre-order campaigns




  8. [size=undefined]
    If a business becomes insolvent and fails to deliver goods or services it has already sold, Stripe loses money: the business’s customer can initiate a chargeback and Stripe covers the loss. This is a bigger risk in businesses with a very long wait time between purchase and delivery, or in pre-sales of highly speculative or pre-production products.
    We look at businesses individually to determine the overall level of financial risk based on industry, stage of product development and shipment, and overall exposure. We’re familiar with newer business models (like crowdfunding) and do our best to be permissive. If you’re going to be accepting large amounts of money for a product or service that’ll be delivered much later, it’s always better to get in touch with us first.
    [/size]
  9. [size=undefined]Businesses that attract money-laundering or fraud
    Examples
    [/size]
    • Cell phones
    • Drop shipping
    • Stored value or gift cards





  10. [size=undefined]
    Most service providers aren’t required to closely police usage of their services. Financial institutions, however, are obliged under US and international law to actively monitor usage to prevent money laundering and other criminal activity.
    Some types of businesses attract more fraud than others; others accidentally or deliberately mask the origin of funds, making them an easy venue for illegal dealings. Businesses in these categories are not inherently problematic, but might need extra scrutiny or extra help in preventing fraud.
    [/size]
  11. [size=undefined]Businesses that pose a brand risk
    Examples
    [/size]
    • Pornography
    • Sex toy shops






  12. [size=undefined]
    Financial institutions and payment networks care about the brand and reputational risk that associated businesses pose. There are a set of businesses that our financial partners do not want to be associated with even if there is market demand for them. Stripe doesn’t independently reject businesses based on brand risk—we have many unpopular businesses and causes on Stripe—but we’re at times obliged to enforce the restrictions of our partners. This category is highly subjective and therefore the one we like enforcing least.
    We don’t think Stripe should be accepting or rejecting businesses based on a subjective determination of brand impact, and we feel the current brand restrictions (such as on sex toys) are often outdated and overly moralizing. We have only had limited success in supporting businesses in this category; there are many legitimate businesses we can’t support. Over time we hope to broaden the set of businesses in this category that we can support.
    [/size]
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