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Merchant Risk Intelligence: MCC Usage & Compliance
Executive Summary:
- MCC Compliance Enforcement: Visa and Mastercard are reinforcing regulations on Merchant Category Codes (MCCs). Misclassifying transactions can lead to fines, payment disruptions, and reputational harm.
- Locke Bio’s Compliance Support: Through partnerships with LegitScript and CWA Merchant Services, Locke Bio has helped over 60 merchants achieve MCC compliance with streamlined certification and risk management.
- Why Compliance Matters: As telehealth and online pharmacies grow, accurate MCC classification is essential for smooth payment processing and regulatory adherence. Locke Bio provides the tools and expertise to keep businesses compliant and competitive.
Don’t let MCC misclassification put your business at risk. As Visa and Mastercard tighten regulations, ensuring compliance is more important than ever. Locke Bio, in partnership with LegitScript and CWA Merchant Services, provides the expertise and streamlined solutions you need to stay compliant, avoid penalties, and maintain seamless payment processing.
Partner with us today to protect your business and build long-term trust in the digital health space.
Get in touch with our team to ensure your compliance now. BOOK A DEMO HERE.
In the digital health and telehealth industries, compliance with regulatory and payment network guidelines is crucial. A particularly pressing issue is the misuse of Merchant Category Codes (MCCs). As Visa and Mastercard increase scrutiny of MCC compliance, understanding and addressing this issue is essential for businesses operating in these sectors.
What are MCC codes?
Merchant Category Codes (MCCs) are four-digit numbers assigned to merchants by credit card companies to classify businesses based on the goods or services they provide. Visa Supplier Guidelines emphasize that accurate MCC classification is crucial for compliance, as misclassification—whether accidental or intentional—can lead to serious consequences, including penalties or disrupted payment processing.
Unfortunately, in sectors like telehealth and pharmaceuticals, MCC misuse is becoming increasingly common. One of the most frequent errors involves merchants using MCC 5734, designated for "Computer Software Stores," for transactions related to telehealth services or pharmaceutical sales.
Why is this a problem?
- Non-Compliance with Industry Standards:
- MCC 5734 is not applicable for pharmaceuticals or telehealth services. These industries must use MCCs explicitly designated for healthcare-related services, such as MCC 5122 ("Drugs, Drug Proprietaries, and Druggists Sundries") or MCC 8099 ("Medical Services and Health Practitioners Not Elsewhere Classified").
- Severe Consequences for Misclassification:
- Financial Penalties: Misusing MCCs can result in fines of up to $50,000 per transaction for non-compliance with Visa and Mastercard rules.
- Disrupted Payment Processing: Misclassified merchants risk having transactions flagged, rejected, or delayed.
- Account Termination: Acquiring banks and payment processors may suspend or terminate merchant accounts if they detect MCC misuse.
- Reputational Damage: Misuse of MCCs can harm a company’s reputation, eroding trust among partners and customers.
Industry Crackdown: Why This Issue Is Gaining Attention
Visa and Mastercard are stepping up enforcement against MCC misuse. As e-commerce expands into regulated industries like telehealth and online pharmacies, payment networks are taking a closer look at merchant compliance.
The increased scrutiny stems from the growing risks of fraudulent activity, unregulated transactions, and the need to maintain consumer protection. For telehealth providers and pharmaceutical companies, accurate MCC classification is no longer optional—it is a necessity to avoid penalties and maintain operational stability.
Locke Bio’s Role in Ensuring MCC Compliance
At Locke Bio, we are committed to helping businesses in the telehealth and pharmaceutical sectors navigate the complex landscape of regulatory compliance, including MCC usage.
- Partnership with LegitScript:
Through our collaboration with LegitScript, a leading compliance certification organization, we have helped certify over 60 merchants to date. LegitScript ensures that businesses meet regulatory and payment network standards, reducing the risk of fines and penalties.
- Educational Outreach:
Alarmingly, 90% of LegitScript certification applicants are unaware of the implications of MCC misuse. This highlights a significant gap in industry knowledge that Locke Bio is addressing through education and guidance.
- Streamlined Certification Process with CWA Merchant Services:
CWA streamlines the onboarding and certification process. By automating key steps, we ensure compliance while reducing the administrative burden on merchants. CWA operates seamlessly in the background, enabling businesses to focus on growth without worrying about the complexities of regulatory compliance.
- Proactive Risk Management:
Locke Bio provides merchants with the tools and resources to identify and correct MCC misclassification issues before they escalate. This proactive approach minimizes risk and safeguards businesses against financial and reputational harm.
Why Compliance Matters Now More Than Ever
The digital health landscape is evolving rapidly, with telehealth and online pharmacies gaining prominence. As payment networks like Visa and Mastercard intensify their oversight, businesses must prioritize compliance to remain competitive and credible in this space.
By partnering with Locke Bio and LegitScript, merchants can ensure they meet industry standards, avoid costly penalties, and build trust with consumers and partners alike. Our streamlined solutions and expertise in compliance make us a trusted ally in navigating these challenges.
If you’re a telehealth provider, pharmaceutical merchant, or payment processor, don’t risk fines, disrupted transactions, or reputational damage due to MCC misuse. Contact Locke Bio today to learn how we can help you achieve compliance, streamline your operations, and future-proof your business in this ever-changing landscape. BOOK DEMO HERE.
