What are MCC Codes all about?
Oct 24, 2024
Merchant Category Codes (MCCs) play a crucial role in categorizing businesses and determining risk levels. Visa and MasterCard, two of the world's leading payment networks, utilize these four-digit codes to classify merchants based on their primary business activities.
Understanding MCCs is essential for both merchants and payment processors, especially when dealing with high-risk industries.
MCC codes serve multiple purposes in the payment ecosystem:
Risk Assessment: They help acquiring banks evaluate the potential risks associated with different business types.
Interchange Rates: MCCs influence the fees charged for processing transactions.
Regulatory Compliance: Certain codes trigger additional scrutiny for regulatory purposes.
Reward Programs: Credit card issuers use MCCs to determine cashback or point rewards for cardholders.
Now, while Visa and MasterCard generally align in their MCC assignments, there are some differences in their classifications. Both networks regularly update their MCC lists to reflect changes in the business landscape
Common MCC Ranges:
5000-5599: Retail outlets
7000-7999: Service providers
8000-8999: Professional services and membership organizations
High-Risk MCCs
Some industries are considered high-risk due to their nature or potential for chargebacks
High-risk MCCs include:
5962: Direct Marketing – Travel-Related Arrangement Services
5966: Direct Marketing – Outbound Telemarketing Merchants
5967: Direct Marketing – Inbound Telemarketing Merchants
7273: Dating and Escort Services
7995: Gambling
As the payment industry evolves, AI-powered solutions like those offered by Pay-Ai (www.pay-ai.io) are revolutionising how MCC codes are used in risk management.
Analyze transaction patterns within specific MCCs to detect anomalies
Predict chargeback likelihood based on historical MCC data
Optimize payment routing for high-risk MCCs to improve acceptance rates
Provide real-time risk scoring for transactions in various industry sectors
By leveraging AI, payment processors can offer more nuanced risk assessments, potentially opening up opportunities for merchants in traditionally high-risk categories to access better payment processing terms.
Speak with the team today