How to Secure the Best Credit Card Processing for Your Skincare Business - DirectPayNet

How to Secure the Best Credit Card Processing for Your Skincare Business


Business has been booming for online skincare retailers. It’s yet another one of those industries that has benefitted from the outbreak of the pandemic.

But nutraceutical skincare businesses are still considered high-risk by payment processors. Worse, many payment service providers are refusing to work with merchants selling skincare products.

With that in mind, let’s take a look at the current state of the skincare industry, why it’s so challenging to set up favorable payment processing arrangements, and how you can secure one or several dedicated high-risk merchant accounts to scale your business.

Skincare Products Sales Skyrocket During Lockdowns of the Early 2020s

So far, the 2020s have been characterized by COVID and lockdowns. While traditional beauty retailers relying on physical stores have struggled, small businesses with e-commerce stores have benefitted from the boom in online shopping.

While many analysts may have expected sales of beauty products to decline due to people not interacting with each other as much, the focus the pandemic has brought to our health has seen skincare products soar in popularity.

The recent explosion in demand for nutraceutical skincare products, in particular, has come off the back of effective ad campaigns emphasizing the need to look your best on Zoom, Microsoft Teams, or whichever videoconferencing you use for work and personal virtual meetups.

The recent success of skincare products has revised up growth estimates for this market. In 2018, the global skincare industry was worth $134 billion. But analysts predict that by 2025, this market will be worth just under $200 billion thanks to huge increases in demand.

In essence, there’s never been a better time to be in this space as a merchant. However, some issues make securing cost-effective processing for credit card payments challenging. Namely, acquiring banks view the whole nutraceutical and topical beauty industry as high-risk.

Are you in the hair care vertical? Most of the issues that face skincare merchants trouble hair care merchants too. Make sure to read our step-by-step guide to overcoming payment processing difficulties in the hair care sector

Why Securing Reliable and Cost-Effective Credit Card Processing is So Difficult for Online Skincare Brands

Numerous perceived risks are plaguing legitimate skincare merchants trying to sell their products online. Let’s take a look at a few of the most prominent reasons why it’s so difficult to win the approval of merchant service providers within the skincare nutraceuticals niche.

Skincare Has a Reputational Problem

Skincare nutraceuticals suffer an image problem in the eyes of card processors. As is the case with hair care and weight loss supplement merchants, a few bad actors have ruined thousands of legitimate online businesses’ reputation in this space.

For instance, one skincare brand (Sunday Riley) wrote thousands of fake reviews praising their products on retailer websites such as Sephora. Other brands have made the mistake of making promises to cure or eradicate skin conditions such as psoriasis or eczema.

In some related missteps, the FTC has clamped down on merchants making baseless claims about their anti-aging products. Some of the wildly inaccurate claims made included repairing cell damage, heart attack damage, brain damage, blindness, and deafness — and even preventing aging itself!

With these underhanded tactics in play, many underwriting teams simply wash their hands of the problem by refusing to process payments in this space.

Banks Shy Away from the Risk of Chargebacks

One of the most significant issues you will face as a high-risk merchant is chargebacks. Unfortunately, chargebacks in the beauty industry are higher than in other similar markets. Firstly, there is the issue of marketing we’ve already spoken about, causing customers to issue chargebacks and refund requests when their products don’t magically solve the issues they bought them to solve.

Next, skincare products’ ingredients pose a risk. Merchants in this space need to ensure everything in the products is approved by the FDA or face potential legal action. Claims about their performance must be corroborated by clinical evidence. Many merchants fail to do their due diligence and find out the hard way, knocking the industry’s credibility and attracting a mountain of chargebacks in the process.

The ingredients issue often rears up in cross-border e-commerce. What may be approved for consumption in the United States might be banned or illegal in the EU, for instance. But potentially illegal ingredients aside, long shipping times between the EU and the US, and vice versa, is another magnet for chargebacks and refunds.

Big Name Third-Party Merchant Service Providers Shy Away from The Beauty Sector

Another than skincare merchants struggle is because most of the big-name all-in-one payment service providers such as PayPal and Stripe refuse to provide their services to this sector.

Don’t believe us? Just read this story of the owner of organic skincare brand Bella Vérité, who spent over a year building up their skincare website on the Shopify e-commerce platform, only to find her credit card processing pulled without warning. Of course, Stripe is the underlying card processor for Shopify’s payment gateway. Once they got around to reviewing the site, that was it. The rug was pulled from under her.

She is just one of the THOUSANDS of business owners who’ve had to shut down for over a week while they source a new payment gateway and processor to accept popular payment methods such as Visa debit cards and Mastercard credit cards. For some merchants, that downtime will represent five figures or more down the drain.

However, the good news is that you can take advantage of the current uptrend in the skincare market despite these challenges. By working with a skilled team of experts such as DirectPayNet, you can secure not one but several merchant accounts to grow your skincare business.

Secure a High-Risk Merchant Account To Secure Cost-Effective Credit Card Processing with Built-in Scalability

Many mainstream banks turn their nose up at the whole nutraceutical skincare business model. However, we have relationships with several financial institutions in this space that have the experience to operate in this high-risk vertical.

With a dedicated skincare merchant account, not only can you accept card payments via a payment gateway or a virtual terminal, but you can also diversify and benefit from alternative payment methods such as ACH and eCheck.

So what do you need to have in place to obtain better credit card processing for your business?

Prepare All Necessary Documentation for Your Merchant Account Application

You’re not going to get very far with an acquiring bank if you don’t have the necessary documentation for their underwriting team to evaluate. So here’s a list of what you’ll need ready for your merchant account application:

  • A valid government-issued ID
  • A bank letter
  • At least 3 months of your most recent bank statements
  • At least 3 months of your most recent processing statements
  • A Social Security Number or Employer Identification Number
  • Proof that your chargeback ratios are under 2% (ideally, they should be even lower)
  • Website URL and all associated marketing materials

You may be asked to provide further evidence that you operate a legitimate, law-abiding business. However, the above documents are usually required across the board, no matter your specific niche within the beauty industry.

Once they receive these items, they can begin reviewing your application. But this is only the documentation element of your application. There’s plenty more you’ll need to get in order before they even start the process.

Audit Critical Areas of Your Skincare Business to Ensure They Impress Credit Card Processors

The first step in the process is making sure that your skincare products are compliant. It’s one thing to operate in a high-risk industry, but having products, marketing materials, or a website that breaks laws or regulations is bound to have your merchant account application denied.

Start by performing a thorough audit of your skincare business and look for any areas where credit card processors feel you have crossed a line.

Avoid Making Baseless Medical Claims

Perhaps the best place to start is with your product claims. Avoid making any of the mistakes made by those merchants mentioned above. Do not make any claims that your product can heal medical conditions or guarantee results (e.g., don’t promise to remove all facial wrinkles).

Step Away from the Free Trial Business Model

Assess your business model and pricing policy. Are you asking customers to sign up for a subscription in exchange for a free batch of skincare products? This could land you in hot water with card issuers. Read more about the Mastercard, Visa, and other credit card company rules surrounding free trials to ensure you are compliant.

Make All Company Policies Transparent and Easily Accessible

One of the biggest reasons for chargebacks is customers not understanding they could obtain a refund. Thus make sure all of your return and refund policies are clear and easily accessible. You could even send a follow-up email to remind them of what to do if they are unhappy with their purchase. Make it easy to contact customer support and resolve issues quickly.

Ensure Your Website is Compliant

Merchant account applications can fail on compliance issues alone. Ensure that if you intend to sell in the EU that your easy-to-read privacy and cookie policy are no more than one click away from your homepage, as is the law. To protect customer card information, you’ll need to ensure that your current shopping cart, checkout page, and payment gateway arrangements are PCI-DSS compliant.

Once you’ve taken the above steps, you’ll be ready to face the underwriters and successfully make the case that your company deserves to be processing high-risk credit card payments.

Want to Grow Your Nutraceutical Skincare Business? Speak to the Payment Experts at DirectPayNet!

There’s never been a better time to be an e-commerce business in the skincare sector. However, payment processors are making it difficult to accept credit cards with reasonable processing fees. Some of the biggest providers won’t even take you on you as a merchant.

The solution? Speaking to the high-risk payments experts, of course! We have helped dozens of brands in the skincare and nutraceutical space to sell their anti-aging and wellness products over the last 15 years.

So if you’re fed up with your current credit card processing situation, why not speak to our team today to see how we can dramatically improve your bottom line with specialist high-risk merchant accounts designed for the skincare industry? 

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.