Tattoo Studio
Merchant Account

Tattoo shops have been around for centuries, helping people get the ink of their dreams. Tattooing is a multi-billion dollar industry, and projections show that it’s only expected to grow in the next few years.

However, despite this anticipated growth, the tattoo industry faces real problems. Chief among them is gaining access to necessary financial services. Despite its popularity, the tattoo industry is often classified as high-risk. This classification means it struggles to gain affordable access to many business basics, like credit card processing. So how can tattoo studios get access to financial services? Find an excellent company that specializes in services to help businesses in high-risk industries, like those offered by Zenti.

What Is a Tattoo Small Business?

The tattoo industry is much broader than it may first appear, and people need to understand just what is considered part of the tattoo industry.

There are some obvious answers, of course. Tattoo artists that work in tattoo parlors are part of this industry. These businesses provide tattoo, piercing or other forms of body art services. Surprisingly, many related businesses may also be categorized as a tattoo business, including piercing shops and shops that give other forms of body art, like henna tattoos.

Unfortunately for these shops, real challenges exist in being a tattoo shop. Merchant account processors find most small tattoo businesses to be high-risk businesses. Being classified as a high-risk business can negatively impact your ability to do business, take credit card payments, and have an adequate cash flow. 

What Is a High-Risk Business?

In this particular context, a high-risk business is a business that has a higher-than-average risk to credit cards, debit cards or merchant account processing organizations. There are many reasons businesses fall in the high-risk category, and it’s essential to understand that these risk factors can vary between merchant account processors. There is no legal definition of what makes a business high-risk, and different processors can have other metrics that determine whether a business is high-risk.

Generally speaking, a few factors can cause a business to be considered high-risk. Chief among them is the risk of having chargebacks. A chargeback happens when a credit card company must refund the purchase made – when fraud occurs on the otherwise unauthorized use of a credit card. Chargebacks are more likely to occur over the internet, as the internet runs card-not-present charges in which a credit card can be charged without having to be in front of a staffer. This makes fraud much easier.

Chargebacks are not a small problem. According to the United States Chamber of Commerce, each chargeback can cost a business between $20 – $100, adding up quickly.

That’s not all. Vendors may also be less than willing to work with certain industries in many cases. These industries include those with reputational issues, like adult shops or products. It may also be those with questionable legality or products that have only recently been legalized, like CBD. In these instances, merchant account processors may refuse to offer their services within their legal rights. In other cases, they may do business with them but charge them extra for processing and other account services. However, an excellent high-risk merchant account processor, like Zenti, can help a tattoo shop find ways to reduce their risk, keep costs to a minimum and still gain access to the services that they need to process credit cards. 

Why Is a Tattoo Business Considered High-Risk?

Tattoo shops do have some reputational issues. As noted by many tattoo artists, this makes it more difficult to access financial services and can increase the price of doing business. Some payment processors fear — however unjust — that people who get tattoos are more likely to use stolen credit cards or engage in other illegal activity when making purchases, leading to increased fraudulent charges and chargebacks. 

Some believe tattoo shops have a negative connotation: they’re seedy or only for criminals. This stereotype is false, of course. The tattoo industry is growing because tattoos are becoming more mainstream. However, the reputational issues surrounding the tattoo industry remain. Negative reputations turn off merchant account processors. As such, they categorize tattoo shops as being high-risk, making it more expensive for these shops to do business. 

How Does Being a High-Risk Business Impact a Tattoo Shop?

Many tattoo shops unfamiliar with merchant account processing may fail to realize just how significant being a high-risk business is. It can cost a considerable amount of money for tattoo shops to maintain a merchant account processor, resulting in many shops taking cash or check payments only. 

There are many specific ways tattoo shops pay due to being a high-risk business. These costs include: 

• Higher percentage: Businesses pay two types of fees when they charge a credit card or debit card. The first is a percentage of every transaction. Lower-risk businesses typically pay no more than 1.5% to 2% of all transactions. For tattoo shops, that number can double.
• Higher flat fees: Every business also pays a flat fee per transaction. But, again, this flat fee will be more expensive for a higher-risk business like a tattoo shop. 
• Higher rolling reserves: All businesses must keep a rolling reserve with any merchant account processor. The maintenance of this reserve ensures that the company is held responsible for any refund or chargeback. Depending on numerous factors, you may need to keep a significant amount of money locked in a rolling reserve, damaging your cash flow and costing you money. 
• More hoops: Want to start your business quickly? You’re probably out of luck. A high-risk business will have to jump through more hoops to get started as a business. Merchant account processors are more likely to ask for various information lower-risk businesses would not have needed to provide. This information includes additional bank statements, personal credit history, and business documents that can verify the ability to make payments. This information is usually available but can be both challenging and time-consuming to compile. 

More often than not, this means that a tattoo shop will need to do business with a specialized high-risk merchant account processor who has a history of doing business with high-risk clients and understands their specific needs. Specialized companies, like Zenti, often perform better than massive conglomerates, as they have more hands-on experience working with high-risk clients. This experience gives them the perspective they need to help your business succeed.

What Can Tattoo Shop Owners Do to Mitigate This Risk?

Every high-risk business wants to reduce risk to have more affordable access to various financial services. It isn’t easy to move from a high-risk to a low-risk business. However, reducing risk can also save a business money, as it can reduce fees. At the same time, many risk-reduction measures that a high-risk business can take will result in happier customers, as risk reduction also means fraud prevention.

Tattoo owners can also work with merchant account providers to identify business-specific ways to reduce risk. Good merchant account providers, like Zenti, can help businesses find customized ways to minimize risk and save money.

Some risk reduction methods include:

• Using the latest security: Credit card fraud cost businesses more than $20 billion in 2020, which continues to rise. Fraud is possible if your business does not have the latest POS devices and security measures to process credit cards securely. Merchant account providers should be able to help your business identify the latest and best forms of security that you need on your credit card and customer database.
• Chargeback reduction: There are many reasons why chargebacks may occur, but all businesses strive to keep their chargebacks low. The fewer chargebacks, the better: you can keep your chargeback ratio low and reduce chargeback fees. Your business should work closely with your merchant account provider, who also has a financial interest in maintaining fewer chargebacks. The merchant account provider can help your business identify ways to reduce chargebacks. 
• Increase transparency: Make sure your customers know what and why they were charged and under what circumstances they can seek a refund. Typically, you want to balance making refunds unnecessary while ensuring that your customers have the option. 
• Increase customer service: Customers are more likely to seek a refund on their credit card purchase if they are unhappy with the customer service they received or worried about having to speak with a business about questions they may have. Increasing customer service can help customers feel comfortable coming back to you and asking questions. It also helps to guarantee that they are less likely to seek a chargeback.

What Other Financial Services Might a Tattoo Shop Need?

Like any other business, a tattoo parlor might have challenging and evolving business needs regarding its financial services. After all, tattoo shops are very trendy, and the financial world is constantly changing. They must continuously adjust how they take card payments, manage walk-ins and integrate new payment methods.

Fortunately, if done correctly, a tattoo shop can appropriately integrate various financial services and even use the information gleaned from their payment to expand marketing opportunities. In addition, businesses like Zenti can ensure that these integrations happen quickly and appropriately.

Other services you might need:

• Retail services: You can’t get a tattoo over the internet, and this means that you may need to be able to take payment in person. Accepting in-store payments requires you to have the latest point-of-sale devices to process all forms of credit card and debit card payments. You’ll also want to ensure that you have POS devices that can take contactless payment, Apple pay and other services. Further, many tattoo businesses sell gift cards, which need to be integrated into the POS system to offer them in-store.
• Marketing integration: These days, it has become easier than ever to integrate payment methods and marketing. People want to share what they bought from you on social media, and you want to collect email addresses and other contact information. A good merchant account service should be able to easily capture this information for you and ensure that you can use contact information to market to your customers. 
• Zero-cost processing: The cost of processing for merchants can be high. With zero-cost processing, you can pass that cost along to customers. It’s important to let them know they will be charged the fee for processing a credit card before you complete the transaction. This option allows them to select another payment method if they prefer to avoid incurring such a charge.
• Cryptocurrency: Cryptocurrency is rapidly expanding in popularity. Many shops — particularly those catering to younger people — accept it as payment. Depending on your targeted demographic, it may be worth paying for cryptocurrency access.

Tattoo shops deserve the best when it comes to financial services, but if you own a tattoo shop, you may struggle to find the financial services you need and deserve. Zenti is here, and we have years of experience that can help take your business to the next level. We offer a variety of services specially designed for businesses like yours. It doesn’t matter if you’re a new or long-established business: We’re ready and able to help your shop grow and thrive.

Want to find out more about how we can help? Contact us today, and learn how Zenti can help you grow your tattoo business.