3670 Arcade hotels

Introduction

• What it is: Establishments that combine arcade gaming facilities with overnight accommodations.
• Risk level: Medium — These businesses face fluctuating income based on seasonal demand and entertainment trends.
• Acceptance difficulty: Medium — Payment processors may scrutinize due to entertainment associations and variable customer flow.
• Typical business models: Hotels with gaming rooms; arcade-themed resorts; family entertainment centers with lodging; motels featuring gaming amenities.
• For merchants: Expect moderate MDR; potential for holdbacks during peak season; thorough financial reviews may be required for approvals.
• What PSPs expect: Detailed business plan; proof of booking and gaming operations; clear descriptions of amenities and services offered.

Payment Insights & Benchmarks

Merchants in the Arcade Hotels MCC should anticipate unique payment challenges compared to standard e-commerce. Acceptance often hinges on the types of payment methods preferred by customers and the inherent risks associated with the hospitality industry.

Payment methods

Cards: frequently used, but can face scrutiny based on travel trends and origin.

• E-wallets: essential for convenience, especially for last-minute bookings and international guests.
• Loyalty points and vouchers: common in hospitality for minimizing chargebacks and enhancing customer retention.
• Direct bank transfers: favored for larger transactions but may experience longer processing times.

Authentication & security

Strong customer authentication (3DS, SCA) is generally required for online bookings.

• These measures enhance security but may impact conversion rates if not well-integrated.
• Fraud detection tools should assess booking patterns and cancellation rates for suspicious activity.

Benchmarks (indicative, not guaranteed)

MDR: typically higher than standard e-commerce, reflecting industry risk.

• Rolling reserves: often required to mitigate chargeback exposure, potentially in the low double digits.
• Settlement cycles: usually longer (5-10 days), particularly for non-refundable bookings.
• Chargeback ratios: likely above average for the e-commerce sector due to the high-ticket nature of travel bookings.
• Approval rates: card approvals may be lower, with higher success seen in e-wallet transactions.

Key metrics to monitor

Booking conversion rates segmented by payment method.

• Chargeback rates, categorized by reasons to distinguish between legitimate and fraudulent claims.
• Decline reason codes, ensuring a thorough understanding of payment failures.
• Average transaction value, critical for assessing risk exposure and cash flow.

Risk & Compliance

Merchants operating under the MCC 3670 (Arcade Hotels) face various risks that can significantly impact their financial health and compliance standing. PSPs and acquirers maintain stringent oversight, emphasizing the necessity for these merchants to effectively manage chargebacks, fraud prevention, and adhere to AML/KYC standards.

Chargebacks & fraud

Common challenges include friendly fraud, where customers falsely claim they did not authorize the charge, as well as bonus abuse tactics, which exploit promotional offers for unwarranted financial gains.

• Fraud patterns may include unauthorized multiple bookings and account sharing among users exploiting promotional offers.
• Effective mitigation strategies include implementing velocity checks on bookings, utilizing device fingerprinting to detect unusual patterns, and monitoring for abnormal account activity.

AML/KYC expectations

Merchants are expected to perform robust customer identity verification, including thorough ID checks and sanctions screening to prevent illicit activities.

• Source-of-funds documentation may be required for higher-value transactions or when customers display unusual betting behaviors.
• Manual reviews are triggered by activities such as frequent high-value transactions, new and rapidly activated accounts, or instances of users accessing the platform through VPNs.

Operational red flags

Lack of transparency regarding ownership or operations can raise concerns, especially if the entity operates under ambiguous or hidden ownership structures.

• Unverified promotional channels, such as traffic sources from blacklisted regions or affiliate partners with unclear practices, can signal risk to PSPs.
• Merchants must ensure they have clear policies on refunds and promotional terms to maintain compliance and uphold customer trust.
• An absence of responsible gaming measures, such as options for self-exclusion or setting betting limits, can attract scrutiny from acquirers.

Onboarding Checklist

Merchants under the Arcade Hotels 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 the relevant business activities
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for payouts
• description of antifraud setup and monitoring tools

Product & marketing

demo access or screenshots of the live platform

• marketing plan and traffic source overview (affiliates, SEO, PPC)
• geographic targeting information
• KYC flow details, including IDV providers and thresholds

Technical integration & security

payment architecture overview with supported methods/providers

• description of SCA/3DS flows, retry logic, and tokenization
• PCI DSS compliance status and data storage policy

Operations

customer support coverage (languages, 24/7 if available)

• SLA for dispute handling and chargeback response
• deposit, bet, and payout limits; self-exclusion mechanisms
• internal process for chargeback investigation and documentation

Regulation & Licensing

Licensing and certification are critical for merchants in this MCC, as PSPs and acquirers will require proof of compliance before onboarding. Recognition of licenses depends heavily on the merchant’s jurisdiction and the markets they target.

Operator licenses

Local gaming authority licenses — required for operations and often necessary for legitimate gaming establishments; recognition varies by region.

• UK Gambling Commission (UKGC) — highly recognized, especially in the UK; essential for any gaming activity targeting British consumers.
• Malta Gaming Authority (MGA) — widely accepted for online gaming across the EU and respected by many PSPs.
• State gaming licenses in the US — important for compliance with local regulations; these vary significantly from one state to another.
• Some jurisdictions may require additional licenses for operating gaming machines or offering lotteries.

Geo-restrictions

Countries with strict gambling regulations may block transactions or refuse licensing for arcade hotels.

• In the US, regulations are state-dependent; arcade operations that include gaming must comply with state laws.
• Many PSPs will not service merchants that operate in grey markets or without appropriate local licenses.

Certifications & audits

PCI DSS compliance for handling payment card data securely.

• Regular audits for gaming integrity, such as RNG (Random Number Generator) testing.
• AML (Anti-Money Laundering) compliance audits to ensure adherence to financial regulations.
• Local regulatory audits may be required based on jurisdictional standards.

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 are broadly similar, differences such as the emphasis on "entertainment" versus "gaming" can impact classification. Networks may require additional documentation or licensing to ensure compliance with local and state laws. Common challenges in onboarding include the need for clear operational descriptions and adherence to regional restrictions.

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 primarily operates as an arcade with gaming elements but lacks standard hotel services, use MCC 3670. Misclassifying it under 7011 or 7995 can lead to compliance issues and potential account suspension. Always ensure to clearly define your primary service type.

Best Practices for Merchants

Merchants under the arcade hotels MCC need to maintain a careful balance between operational efficiency and risk management. Implementing best practices can lead to improved transaction acceptance and reduced chargebacks, fostering a sustainable relationship with payment service providers.

Classification & transparency

always use the correct MCC; misclassification can lead to intensified scrutiny or account closure

• clearly display licensing information, geographic limitations, and responsible gaming policies on the website
• ensure business practices and transaction descriptors are transparent to customers

Fraud & chargeback reduction

implement 3DS or step-up authentication for transactions that trigger high-risk signals (e.g., large amounts, unusual geo locations)

• use clear billing descriptors to help customers recognize charges and reduce disputes
• log gaming events and transaction data to provide evidence for dispute representments when necessary

Payment acceptance optimization

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

• employ geo-routing for transaction processing to optimize performance based on customer location
• consider utilizing separate merchant IDs (MIDs) for different product categories to streamline operations

Operational discipline

monitor KPIs such as authorization rates, chargeback ratios, and customer lifetime value closely

• conduct regular compliance audits and keep internal policies updated to reflect best practices
• designate a team member specifically responsible for dispute management to ensure prompt and effective responses

Payouts & liquidity

establish liquidity buffers sufficient to cover rolling reserves and manage cash flow effectively

• automate anti-money laundering (AML) checks for all withdrawal requests, particularly for larger sums
• keep an eye on withdrawal patterns to identify and address any suspicious activities prompt

Business Scope & Examples

This MCC is focused on businesses that primarily offer arcade gaming experiences in conjunction with hotel accommodations. Merchants under this classification typically provide services where customers can enjoy various arcade games while having access to lodging facilities. The scope encompasses not just the gaming aspect, but also the hospitality services that complement the arcade experience.

Models

arcade-themed hotels with extensive gaming facilities

• resorts with gaming rooms and video game arcades
• family entertainment centers that include arcade games and lodging
• destination hotels featuring arcade attractions

Borderline cases

Standalone arcades — establishments that only provide gaming without lodging; categorized differently.

• Gaming lounges — spaces focused on video gaming and social interaction without lodging; often confused with arcade hotels.

Signals for correct classification

hotel services are integral to the business alongside arcade offerings

• combination packages available for arcade gaming and overnight stays
• arcade games are a primary attraction to visitors staying at the hotel