The possibility approval by Paypal seems to only apply to US merchants and for very specific goods only: https://www.paypal.com/us/cshelp/article/what-is-paypal%E2%80%99s-policy-on-tran...
Agreed on the hypocrisy of it all. But it seems safer for credit card companies to just sweep all adult content under the same rug and be done with it.
CCBill and Epoch are high-risk payment processors for merchants. As a customer you pay with your credit card or Paypal account, CCBill/Epoch handles the transactions and any risks attached and the merchant (that would be me, or any other adult content developer) receives the funds after they deduct various costs. The subscription fees for merchants are very high, unfortunately.
As you say, itch.io could indeed do a lot better. I believe several people have pointed out other payment options for them to implement, but they don't seem to be interested.