Will Merchant Category Codes Help US Online Poker?

Published May 3, 2015 by Elana K

Will Merchant Category Codes Help US Online Poker?

The introduction of new Merchant Category Codes for online poker is one way that the iGaming industry is seeking to tackle one of its biggest technical issues.

Last week saw the much-anticipated launch of new Merchant Category Codes (MCC) for online poker transactions in the United States. MCCs have long been thought to be the answer to the issues that arise when players use credit cards to make payments at online casinos, but Matthew Katz, CEO of player verification software company CAMS, has warned the iGaming industry that MCCs are not the “silver bullet” it has been looking for.

What are MCCs?

An MCC is a four-digit number assigned to a business by credit card companies like Visa and MasterCard when the business first starts accepting one of these cards as a form of payment. The MCC is used as a quick way for financial institutions to classify the business type.

Credit Card Companies versus Online Gambling Sites

As of now, credit card acceptance rates have been one of the biggest challenges facing the online poker industry since it launched in 2013 in the U.S. Many credit card companies have refused to process transactions, probably because memories of the Unlawful Internet Gambling Enforcement Act (UIEGA) of 2006.

The UIEGA prohibited all US financial institutions from processing online gambling transactions; and even though individual states have now been allowed to legalize online gambling, many of these financial institutions are still wary.

How Will MCCs Help?

The idea behind the MCCs is that new codes will replace the umbrella 7995 MCC for online gambling that automatically generated a rejection from credit card companies. Currently, only 73 percent of Visa and 44 percent of Mastercard transactions on New Jersey’s online gambling sites actually go through. It is hoped that MCCs will increase those numbers.

Unfortunately, as Katz pointed out, there is little incentive for banks to change their systems to incorporate the new MCCs. The United States online gambling industry is very, very small, which means that re-configuring large financial systems seems like a waste of time.

“The banks are not set up to operate on a state-by-state basis, and the potential liability it creates for them is not much greater than the revenue,” Katz said. “It’s not a priority.”

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