Everyone is talking about the new Merchant Category Code (MCC) for sellers of guns and ammunition.
Let’s discuss why we have MCC’s, what they can be used for, and then let you draw your own conclusions about whether this is a meaningful solution for the problem the greater powers set out to solve.
The card brands use MCCs to classify businesses based on the types of products or services they provide. They are set by the International Organization for Standardization.
Card brands, issuers, and acquirers use them to categorize, track, and sometimes restrict transactions. They can be used for tax reporting. They can be used for interchange qualification.
Why would we want to put a certain business in its own category?
➡️ Prohibit a certain business type from accepting payments or categorize it as high risk.
➡️ Issuers can decide they do not want to allow transactions on their card for a MCC and block that transaction from being accepted. The most common example of this is using a health care savings card – you can use it at a qualifying healthcare provider’s practice but not to buy a Big Mac from McDonalds.
➡️ Charge a special interchange rate for that MCC.
➡️ Set special chargeback rules for a given MCC.
➡️ Provide rewards to cardholders based on the type of purchase
➡️ Give certain business types the ability to charge a convenience fee.
And lastly, when we categorize anything at all, we do it for the purpose of data collection and analytics. Previously, we had a haystack full of “sporting good” providers, now we can easily pick out all of the gun and ammo needles within.
But while an MCC can help us categorize the stores that are selling these products, it does nothing to provide visibility into the actual products being purchased. It tells us where a cardholder spends money, but it doesn’t tell us exactly what they purchased. It could be an assault rifle or a child’s BB gun— that type of reporting will not be accomplished with this MCC.
Now you decide… Will there be sweeping changes/impacts for gun dealer payment acceptance?