Merchant Category Codes (MCCs) are a vital part of the system which allows for seamless card payments. An MCC is a four-digit code used by credit card schemes to classify merchants and businesses by the type of goods or services they provide. MCCs can be used to track, categorize, or even restrict transactions.
In light of recent mass shootings in the United States and the difficulty law enforcement faces in tracking suspicious and illegal firearms sales, pressure has increased for the payments industry to lend a hand in tackling the issue.
What role can card schemes play in identifying criminal activity?
The attorney generals of California and New York recently issued a joint statement calling directly on VISA, MasterCard, and American Express to create an MCC for all gun sales, in addition to flagging suspicious activity. The open letter cited examples in which the proper tracking of suspicious credit card usage could have prevented mass shootings and noted the success of this technique when it comes to “identifying other criminal activity, such as terrorism and money laundering.”
The approval of the proposal paves the way for card brands to implement the new MCC and pass on these requirements to their network partners. MasterCard spokesperson Seth Eisen was quoted as saying: "With ISO approving the proposed MCC, we now turn our focus to how it will be implemented by merchants and their banks as we continue to support lawful purchases on our network while protecting the privacy and decisions of individual cardholders."
Compliance with the new MCC will be carefully watched
Payment providers will now need to adapt accordingly and ensure that they can properly identify all firearms and ammunition merchants both for POS and online sales.
With government officials and regulatory agencies having long sought a firearm-specific MCC and the sensitivity and stakes surrounding gun sales, it can be assumed that the proper implementation of the new MCC will be carefully watched. Compliance by all players in the card networks – including the card brands themselves, acquirers, issuers, and PSPs – will be necessary for the change to achieve its desired effect.