What is Merchant Category Code (MCC)? - Ikajo Glossary

Glossary

Merchant Category Code (MCC)

Merchant Category Code (MCC) is a code used to recognize the kind of business. Payment structures apply merchant category codes in order to categorize as well as to differentiate merchants along with businesses according to the services/goods they are offering. For instance, retail stores will use one code, while booking platforms completely others. Moreover, standard ISO 18245 defines the business type code.

These codes are also adopted by issuers along with acquirers in order to classify, record and limit transactions as well. Furthermore, they are also applied for collecting data about the customer’s purchasing behavior, tax informing along with interchange PR. Commonly, such codes are identified by PS. Nevertheless, not every system can acknowledge all codes. This happens because systems periodically increase, remove or alter the codes.

Usually, it is a four-digit cipher recorded in ISO 18245 for financial services specializing in retail. The merchant category codes are given according to either the merchant type or name. Every production has transaction conditions which differ as well as different possibilities of the potential fraud.

The codes are applied by issuing financial institutions to decide if they approve or decline the particular transaction. These numeric codes have the ability to influence traders’ processing rates. If the categorization is inappropriate, the merchant will have to pay higher processing charges.

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