3398 Econo-car rent-a-car

Introduction

• What it is: This MCC covers businesses primarily engaged in renting cars and other vehicles.
• Risk level: Medium — Car rentals can involve high-value transactions and potential fraud risks.
• Acceptance difficulty: Medium — Some processors may be cautious due to the nature of rentals and associated charges.
• Typical business models: car rental agencies; truck rental services; van rentals; recreational vehicle (RV) rentals.
• For merchants: Expect moderate MDR rates; potential reserve requirements for vehicle damage; prompt approval processes are common.
• What PSPs expect: Valid business registration; proof of insurance; clear rental terms and conditions available online.

Payment Insights & Benchmarks

Merchants in the car rental industry should prepare for unique payment challenges that differ from standard e-commerce. Acceptance often hinges on the payment methods used, risk mitigation tactics, and customer demographics.

Payment methods

Cards: primary method for transactions, but often require pre-authorization holds, affecting available credit.

• E-wallets: gaining popularity for ease of use, but not universally accepted for deposits.
• Debit cards: commonly used but may have additional verification or restrictions compared to credit cards.
• Fleet cards: specific to businesses, useful for corporate rentals but not typically used by individual customers.

Authentication & security

Strong Customer Authentication (SCA) measures, including 3DS, are generally required for online bookings.

• These security protocols help mitigate fraud risk but can lead to increased cart abandonment if not implemented smoothly.
• Continuous monitoring of transaction patterns is essential to identify potential fraud without impacting legitimate customers.

Benchmarks (indicative, not guaranteed)

MDR: generally higher than the average e-commerce rate due to risk factors involved.

• Rolling reserves: often set in double digits to manage potential chargebacks.
• Settlement times: typically longer, often extending beyond standard e-commerce norms (7+ days).
• Chargeback ratios: may be elevated due to dispute frequency from customer dissatisfaction or unauthorized transactions.
• Card approval rates: lower than standard e-commerce, while alternative payment methods may have better acceptance.

Key metrics to monitor

Authorization rates across different payment methods and transaction channels.

• Chargeback reasons categorized by frequency and type to identify trends.
• Abandonment rates during the checkout process, particularly linked to payment authentication.
• Average rental duration and transaction volume for cash flow management.

Risk & Compliance

Merchants in the car rental industry (MCC 3398) face unique challenges that can lead to significant financial and reputational risks. Given the nature of their transactions and customer interactions, PSPs and acquirers impose stricter oversight, necessitating a proactive approach to managing fraud, chargebacks, and compliance with AML/KYC regulations.

Chargebacks & fraud

Common issues include friendly fraud, where customers dispute legitimate charges, and cases of stolen card usage.

• Rental agreements can lead to disputes over damage claims or service quality, increasing chargeback rates.
• Mitigation strategies include implementing robust fraud detection tools like behavioral analytics, requiring deposits to reduce risk, and using device fingerprinting to track user behavior.

AML/KYC expectations

Strong customer identity verification is crucial, with stringent checks against sanctions lists and PEP screenings.

• Monitoring source-of-funds is essential, particularly for high-value rentals or unusual payment behavior.
• Manual review triggers may include high deposit amounts, frequent rentals by the same customer, or suspicious payment methods.

Operational red flags

Lack of transparency in ownership or hidden operators can raise concerns for PSPs and acquirers.

• Inconsistent policies regarding refunds and damage claims can lead to customer disputes and chargebacks.
• Traffic from unverified affiliates or locations with high levels of fraud can increase scrutiny.
• Absence of clear terms for rental contracts and customer responsibilities can exacerbate disputes.

Onboarding Checklist

Merchants under this MCC should prepare a complete onboarding package before approaching PSPs or acquirers. A well-structured submission improves approval chances and shortens review times.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• valid licenses for vehicle rental and other relevant activities
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for vehicle inventory and customer reservations
• description of antifraud setup specific to rental transactions

Product & marketing

demo access or screenshots of the live booking platform

• marketing plan and traffic source overview (online ads, affiliates)
• geographic targeting information for service areas
• KYC flow details, including ID verification processes for rentals

Technical integration & security

payment architecture overview with supported methods/providers

• description of SCA/3DS flows for online bookings
• PCI DSS compliance status and data storage policies

Operations

customer support setup (available languages and hours)

• SLA for dispute handling and customer complaints
• vehicle rental policies including deposit requirements and cancellation terms
• internal process for chargeback investigation and resolution

Regulation & Licensing

Licensing and certification are essential for merchants in this MCC, as payment service providers (PSPs) and acquirers require proof of compliance to ensure adherence to local regulations. Recognition of licenses varies significantly based on the merchant’s jurisdiction and the specific markets they target.

Operator licenses

Local business licenses — necessary for general operation in most jurisdictions, often issued by city or county authorities.

• Vehicle rental licenses — may be required in certain regions to operate a rental car business specifically.
• Environmental permits — may be necessary in areas with strict environmental regulations affecting vehicle emissions.
• Insurance provider licenses — companies must have proper liability insurance recognized by local regulatory bodies.
• Recognition of these licenses varies; some PSPs require additional verification based on target markets.

Geo-restrictions

Rentals often prohibited in high-risk countries or regions with extensive regulatory requirements.

• State-specific regulations may apply, particularly in the US, affecting how rental operations can proceed.
• Some countries have limitations on foreign-owned rental businesses, impacting how they can operate and accept payments.

Certifications & audits

PCI DSS compliance is crucial for managing payment card data securely.

• Regular audits for insurance coverage to ensure adequate risk management practices.
• Local tax compliance audits may be required to verify tax obligations related to vehicle rental operations.
• Environmental compliance reviews, especially in jurisdictions with stringent eco-regulations regarding vehicle emissions.

Official Definitions & Network Comparisons

This section shows how major card networks define this MCC and highlights practical differences that affect merchant onboarding.

Explanation:

While the definitions appear similar across networks, the emphasis on different aspects, like online bookings or specific vehicle types, can affect merchant categorization. Additionally, each network may have unique requirements regarding licenses and geographic restrictions. Common denial reasons can include compliance issues, improper licensing, or business location risks.

Alternative MCC Codes

Merchants often confuse this MCC with other categories. The table below shows which codes are related, why they are confused, and what risks misclassification brings.

Rule of thumb for merchants:

If your business involves renting passenger vehicles, it should be classified under MCC 3398. Using another code may lead to compliance issues and potential penalties, so always ensure your services align with the correct classification.

Best Practices for Merchants

Merchants in the car rental industry, identified by the MCC 3398, must navigate specific challenges related to payments, risk management, and customer service. Implementing best practices is crucial to ensure smooth operations, enhance customer trust, and mitigate financial risks.

Classification & transparency

always use the correct MCC as misclassification can lead to penalties or account closures

• fully disclose rental policies, insurance options, and geographic restrictions on the website
• ensure clear business descriptors that represent your services accurately

Fraud & chargeback reduction

implement 3DS or step-up authentication during high-risk transactions, especially for online bookings

• provide clear and recognizable billing descriptors to minimize confusion and disputes
• log all rental agreements and relevant events to support representments in case of chargebacks

Payment acceptance optimization

offer multiple payment methods (credit cards, debit cards, digital wallets) to cater to diverse customer preferences

• test different payment service providers (PSPs) for performance and customer experience optimization
• consider setting up separate MIDs for online bookings versus in-office transactions to better manage risk

Operational discipline

monitor key performance indicators (KPIs) like booking cancellation rates, payment decline rates, and customer feedback scores

• conduct regular compliance audits and keep internal training updated to ensure adherence to policies
• designate a specific team for handling disputes and set service level agreements (SLAs) for response times

Payouts & liquidity

establish liquidity buffers to handle rolling reserves and variable transaction highs during peak seasons

• automate anti-money laundering (AML) checks for payment withdrawals to ensure compliance and minimize fraud risk
• regularly assess withdrawal patterns for any suspicious activities that could indicate potential fraud

Business Scope & Examples

This MCC encompasses businesses that primarily focus on vehicle rentals, allowing customers to rent cars, trucks, and other vehicles for short-term use. Merchants classified under this category typically facilitate transportation services to individual customers and businesses on a rental basis.

Models

traditional car rental agencies (e.g., airport rentals)

• peer-to-peer car sharing platforms
• truck rental services for moving and transport
• motorcycle and scooter rental businesses
• luxury or exotic car rentals

Borderline cases

Ride-sharing services — apps offering peer-to-peer transportation (e.g., Uber, Lyft); these are generally classified separately as transportation services.

• Car leasing — longer-term vehicle leasing agreements usually differ from short-term rentals and are not included in this MCC.
• Limousine services — while providing transport, they often fall under separate service categories focusing on chauffeur-driven vehicles and special events.

Signals for correct classification

vehicle is rented for a period typically less than a month

• customer pays based on time of use (daily/weekly rates)
• rental agreements include terms for insurance and liability coverage