The hair and skin care industry has transformed into a business juggernaut. Estimates vary, but the entire sector likely has an overall economic impact well north of $140 billion. The fact that this industry can impact every human being on the planet – and its recession-proof nature – helps to drive home why it’s such a valuable industry.

The figure above is a massive number, and it speaks to the importance of ensuring that individuals and businesses who participate in this industry have access to the financial tools that are necessary in order to be successful. This is not always the case. As many individuals in the hair and skin care business know, there are some unique challenges that occur in this industry. One such example is that starting skin and hair care merchant accounts can be a challenge.

Hair and skin care merchant accounts can be challenging to set up. These accounts are usually classified as high-risk accounts by payment processors and merchant account vendors. This is not a small issue: Being classified as high risk can dramatically increase the cost of doing business for these merchant accounts. Merchant accounts are essential in order to take payments, either in person or online.

It should be clear that a high-risk classification is not fatal to a business. With enough effort, any skin or hair care business can find a payment processor who can help them with their payment systems. One such example is Zenti, a payment processor that has decades of experience in working with an array of high-risk industries. If you need to set up skin and hair care merchant accounts, you should look at Zenti to handle your high-risk processing needs.

Why are Hair and Skin Care Merchant Accounts High-Risk?

Skin care and hair care are considered high-risk businesses. A high-risk account is an account that has been flagged by a payment processor as potentially having a high risk of problems. This encompasses many types of businesses, including hair and skin care merchants.

The primary source of these businesses issues typically comes in the form of high risks of fraud or chargebacks. Chargebacks are particularly problematic for businesses. A chargeback occurs when a charge on a credit card is refunded. This means that the merchant will lose money on the payment. Costs are then incurred by the vendor and the payment processor. Too many chargebacks can indicate a problem with your industry or business model, and they are known to occur within the skin and hair care industry. Chargebacks can lead to lost revenue and a high-risk classification.

There are many business models that are likely to get tagged by vendors as high-risk. These include businesses that have high risks of chargeback, fraud, questionable legality, or otherwise problematic reputations. They also include certain kinds of businesses models, like businesses that operate with subscriptions.

The skin and hair care industry is susceptible to a high-risk classification for many reasons.

First, there are reputational issues. In many cases, the beauty, hair care, and skin care industries have been damaged by outlandish claims of others within their industry. Indeed, many anti-aging creams, lotions, soaps, and hair care products have been cited by governmental officials as making claims that are not supported by science. This often results in fines or worse.

These reputational issues can lead to broader problems with customer satisfaction, with customers expecting that beauty products will be able to work wonders that are just not possible. When this happens, customers will be upset. As a result, customers may be more likely to seek refunds or express dissatisfaction with the beauty products sold. This can lead to chargebacks, which is precisely what your business is trying to avoid incurring.

Many of these products are sold over the internet. Internet-based credit card purchases are more likely to be fraudulent because of the high amount of card not present transactions. These transactions occur when a credit card is used, even if the business in question can’t see the card. As a result, it’s easier to fraudulently use a card.

Finally, there are also problems associated with subscription business models. These models – usually found with internet purchases – often result in consumer confusion. People may take out these subscriptions, only to forget that they did so, then become upset when charged for something they didn’t want.

What Does the High-Risk Classification Mean?

The high-risk classification that skin and hair care merchant accounts usually have will have multiple impacts on your business. These include:

• Increased processing expenses: Under normal circumstances, low-risk businesses can expect credit card processing to cost them between 1.3-3.5% of a transaction fee, in addition to a flat-rate fee on each transaction. High-risk merchants have higher processing costs.
• Increased documentation: You may be required to provide additional documentation. This may include more lengthy credit history, bank statements, information about previous processing, and more. You may also be required to provide additional documentation on a more frequent basis.
• Increased cash reserve requirements: Most merchant account providers will hold back on some payments. This is done in order to ensure that a credit card company has a sufficient balance to pay back any chargebacks. High-risk businesses may keep a higher cash reserve. You will eventually get all of the money that you are entitled to, but a larger percentage in reserve means cash flow challenges for your business.
• Higher fees: Higher fees are another fact of life for high-risk businesses. These fees may come in many forms. On one hand, you may have higher flat-rate fees when it comes to each transaction. You may also face higher fees with chargebacks. There may be ways that you can negotiate lower fees, but these may come with certain tradeoffs, like loss of access to certain services.

As you can see, this high-risk classification can be a major deal for your business. It means more work, more fees, and less flexibility. It can put a variety of additional burdens on your business. There are companies that have experience in this area and can ensure that your high-risk payment processing needs are met. One such example is Zenti. Zenti knows what it’s like to do business with retail or Internet businesses. It can work with you to ensure that a high-risk classification is something that your business can manage.

Can I Avoid a High-Risk Classification within the Hair and Skin Care Industry?

It’s difficult, if not impossible.

In order to avoid this classification within your beauty business, you will have to find a processor who can work with you to ensure that your beauty merchant account can be set up the right way. This may involve taking many restrictions, including limits on transactions. This can damage your functionality, ability to take credit cards, and overall bottom line. In many cases, being classified as a high-risk vendor early is preferable. This eliminates any surprises, ensuring that you won’t ever be moved from low risk to high risk.

What Services Does a Hair and Skin Care Merchant Accounts need?

There are many services that your hair and skin care merchant account will need in order to survive and thrive in the retail, Internet, or beauty industry space.

Chief among them is a high-risk credit card payment gateway. This means that your merchant account processor should be easily able to handle making any credit card payments. It should be able to handle any credit card and manage all payment processing options.

Many hair and skin care businesses have online components to their business. These websites – which may supplement a business, or make up the entire business – can sell and mail products. An online business is typical these days, and your payment processor must have options to support these efforts. This means that they should also have eCommerce options. A high-risk payment processor must be able to process a credit card over the Internet. It should also be smoothly able to integrate into your already existing online store, thus minimizing the extra work that you will need to do in order to get it up and running.

If you sell products out of a retail location, you will also need to make sure that your payment account processor can handle the sale of any personal care or cosmetic products. This means that they can sell or give you the point-of-sale devices that can allow you to process these payments.

Furthermore, how diverse is their offering of payments when it comes to payment processing solutions? In addition to processing credit cards, do they also process alternative payment methods? This may include integration with Stripe, Square, PayPal, and more. Indeed, depending on the nature of your customers, you may also have to go one step further: Does your business offer cryptocurrency payment processing? Does it even need to?

What Other Services Does My Skin and Hair Care Business Need?

The above products are an excellent starting point to find out what can support your business. They are just that – a starting point. Your business may need more.

A chief consideration when selecting a high-risk merchant processor must be the provision of customer support. How often is the processor available to answer questions? What happens if you have website issues and your online shopping portal needs to be reconfigured? If POS equipment breaks, can they provide you with alternatives or make the necessary repairs, or does a high-risk merchant account somehow mean you don’t get the quality services that you may need? How quickly can you get the customer support that you need, and what sort of charges might you face if you need immediate or emergency assistance?

You also cannot underestimate the importance of integration, and properly integrating your merchant payment processing into your business. This integration means many things. First, if you already have certain accounts set up – like through PayPal. Shopify, Woocommerce, or other online vendors – then your new processing must easily integrate with these already existing services. It also needs to integrate with your accounting software. Any sales made should come to you in a format that you need. This will allow you to properly export data for accounting or tax services and ensure that you can accurately make the payments that you need. You will also have to ensure that your processing software will easily be able to make payments into your bank account.

Remember, you also need to ensure that your payment processing can do more than just collect payments. What sort of analytics does your payment processor provide with you? Can you generate reports that show sales data, including data that breaks down how much of a product was purchased and where the product was purchased from? What other sales analytics are available to you?

Payment processing can also be a marketing boost to your business. Can a customer easily share information about their purchase to social media? Does the payment processor give you contact information about a customer, including their address, cell phone, or Email address? Can you then allow the customer to opt-in to future marketing efforts? Can you link to your own social media when someone makes a payment on your website?

Your skin and hair care business needs and deserves a merchant account processor who can suit your needs and make sure that you are able to process payments at an affordable price. Zenti is there to handle all of these needs and more. If you want more information on how Zenti can help you, reach out today.