High-Risk Merchant Category Codes (MCCs) & Their Risks
Blog post from Basis Theory
Merchant Category Codes (MCCs) are four-digit classifications assigned by acquiring banks to merchant accounts based on the goods or services sold, and they help payment processors set fees, card issuers determine reward eligibility, and organizations meet tax and other operational requirements. Visa and Mastercard generally use standardized MCCs, although merchants may receive multiple codes or dedicated codes for particular industries. Certain MCCs are treated as high risk because they can involve greater dispute rates, financial exposure, regulatory concerns, or brand risk, particularly in card-not-present transactions. Visa replaced its Global Brand Protection Program with the Visa Integrity Risk Program (VIRP) on May 1, 2023, introducing three risk tiers: Tier 1 includes areas such as adult content, gambling, dating services, and pharmacies; Tier 2 covers crypto, cyberlockers, and card-absent skill games; and Tier 3 includes financial trading platforms, telemarketing, negative-option subscriptions, and cross-border tobacco sales. VIRP reframes these businesses as legal categories that may facilitate illegal activity without adequate controls, requires certain Tier 1 and Tier 2 acquirers to undergo Visa control assessments, and encourages affected merchants to strengthen refund policies, protect payment data through tokenization, and maintain flexibility through multiple payment service providers.
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