3671 Arctia hotels

Introduction

• What it is: This MCC covers businesses that provide lodging and accommodation services, specifically in hotels.
• Risk level: Medium — Hotel transactions can be high-value and may involve cancellations, increasing fraud risk.
• Acceptance difficulty: Medium — While hotels are common, they often have diverse payment scenarios that may complicate acceptance.
• Typical business models: hotels; boutique hotels; motels; resorts; extended-stay facilities.
• For merchants: Merchants may face moderate MDR; potential for reserve requirements during peak seasons; and specific fraud monitoring.
• What PSPs expect: Business licenses; property insurance documentation; and transparent cancellation and refund policies.

Payment Insights & Benchmarks

Merchants in this MCC should anticipate unique payment challenges that are common in the hospitality sector, including greater management of chargebacks and varying acceptance rates. Payment dynamics in the hotel industry often involve a mix of customer preferences and fraud mitigation strategies.

Payment methods

Cards: typically accepted but can face higher decline rates, especially for international transactions.

• E-wallets: increasingly favored for online bookings, offering flexibility but may have varying availability based on the region.
• Direct debit: practical for repeat customers and loyalty programs, though setup can be cumbersome for first-time users.
• Prepaid cards and gift vouchers: effective for reducing chargebacks and enhancing customer privacy.

Authentication & security

Strong customer authentication (SCA) is commonly required, especially for card-not-present transactions.

• 3DS can help mitigate fraud but may also contribute to higher cart abandonment if not properly implemented.
• Ongoing fraud detection is essential; vigilance is needed against both friendly fraud and cyber threats during high booking seasons.

Benchmarks (indicative, not guaranteed)

MDR: generally higher than typical e-commerce sectors.

• Rolling reserves: may exist but not always standard; can vary significantly by provider.
• Settlement cycles: often longer than average, possibly exceeding 7 days.
• Chargeback ratios: can be elevated compared to retail due to booking disputes and no-shows.
• Card approval rates: lower within hospitality; e-wallet and direct debit options may see better acceptance.

Key metrics to monitor

Daily authorization rates segmented by payment method and client type.

• Chargeback distribution by reason to identify trends and address root causes.
• Customer booking patterns to analyze growth opportunities and address any friction points.
• Average booking value to help manage revenue forecasts and cash flow dynamics.

Risk & Compliance

Merchants classified under the MCC 3671 are often subject to increased scrutiny due to their involvement in the lodging and hospitality sector. PSPs and acquirers focus on mitigating risks tied to chargebacks, fraud, and compliance with AML/KYC regulations, making proactive risk management essential.

Chargebacks & fraud

High instances of friendly fraud, where customers dispute legitimate transactions claiming they did not authorize them, as well as bonus abuse related to promotions and discounts.

• Common fraud tactics include using stolen credit cards for bookings and manipulating reservation systems.
• Mitigation tools such as velocity checks, device fingerprinting, and robust fraud detection systems are critical to identifying suspicious activity and preventing losses.

AML/KYC expectations

Strong emphasis on customer identity verification (IDV) to confirm guest identities, including real-time checks against sanctions lists and PEPs (Politically Exposed Persons).

• Monitoring of source-of-funds to track unusual or high-value transactions, particularly for high-end bookings or last-minute reservations.
• Manual review triggers occur for large bookings, unusual payment methods, or when customer profiles exhibit suspicious behavior.

Operational red flags

Lack of transparency regarding ownership of booking platforms, especially in cases of white-label setups or operators disguised as agents.

• Traffic sources originating from high-risk or flagged countries can raise alarms for PSPs.
• Absence of clear cancellation and refund policies can lead to increased chargeback rates, signaling a lack of operational integrity.
• Missing controls for customer feedback or complaints, which could reflect poor service practices and heighten dispute potential.

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 operating hotels and related services
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

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

Product & marketing

demo access or screenshots of the hotel booking platform

• marketing plan and traffic source overview (affiliates, SEO, PPC)
• geographic targeting information for hotel services

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 setup including response times and available languages

• SLA for handling disputes and customer inquiries
• policies for cancellations, refunds, and booking modifications
• internal process for managing customer complaints and chargebacks

Regulation & Licensing

Licensing and certification are essential for merchants in this MCC, as payment service providers (PSPs) and acquirers often require proof of compliance to mitigate risks. Recognition of licenses can vary greatly depending on the merchant’s jurisdiction and the specific markets they are targeting.

Operator licenses

Local business licenses — required to operate legally in specific jurisdictions, often confirmed by local government authorities.

• Hotel and lodging licenses — issued by municipal or regional authorities to ensure compliance with hospitality regulations.
• Health and safety certifications — often required by local health departments to certify sanitary conditions and safety standards.
• Tourism and hospitality permits — may be needed depending on local laws especially in tourist-heavy areas.
• Some jurisdictions may require specific licenses for alcohol service if the hotel has bars or restaurants on-site.

Geo-restrictions

Certain countries may impose restrictions on foreign-owned hotels and require local partnerships.

• Areas with specific hotel capacity limits may restrict new hotel licenses, limiting expansion for existing operators.
• Regulatory differences by region may affect the ability to market services or operate certain activities within hotels.

Certifications & audits

Health and safety audits to ensure compliance with local regulations.

• PCI DSS compliance for any handling of payment card information through hotel booking systems.
• Customer satisfaction assessments may be mandated by tourism boards or local jurisdictions.
• Environmental certifications (e.g., Green Key, LEED) to support sustainability initiatives and marketing efforts.

Official Definitions & Network Comparisons

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

Explanation:

While definitions across networks are similar, the emphasis on specific business requirements varies. For instance, American Express often demands more stringent compliance documentation than its peers. Additionally, differences in terminology or scope can affect how accommodations are classified, impacting the onboarding process. Common rejection reasons include lack of proper licensing, insufficient business documentation, and failure to meet regional compliance requirements.

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 provides temporary lodging, ensure you classify under MCC 3671. Attempting to use a different MCC can lead to compliance issues, causing processing disruptions and potential account closures.

Best Practices for Merchants

Merchants in the hospitality sector face unique challenges regarding payment processing and customer interactions. Following the best practices outlined below can help enhance sustainability, reduce risks associated with chargebacks, and foster positive relationships with payment service providers (PSPs).

Classification & transparency

always use the correct MCC to avoid classification disputes that may lead to account issues

• clearly display policies, including cancellation terms and fees, on your website
• maintain transparent communication regarding services provided and any additional charges

Fraud & chargeback reduction

implement 3DS or step-up authentication for reservations made online, especially for high-risk bookings

• use clear billing descriptors to help customers recognize charges and reduce unnecessary inquiries
• log all booking transactions and customer communications to support dispute resolution

Payment acceptance optimization

support multiple payment methods, including credit cards, digital wallets, and local currency options, to accommodate diverse customers

• route transactions based on geographical data to minimize declines and optimize processing times
• conduct A/B testing with different payment providers to uncover the best performance metrics for your transactions

Operational discipline

establish KPIs such as booking success rates, chargeback ratios, and customer satisfaction scores

• regularly conduct compliance audits to ensure adherence to industry standards and internal policies
• designate a team or individual responsible for handling disputes efficiently, with set response times

Payouts & liquidity

keep liquidity buffers available to manage rolling reserves and ensure timely payouts to stakeholders

• automating anti-money laundering checks for customer transactions to minimize risk exposure
• regularly assess payout processes for speed and reliability, addressing any anomalies proactively

Business Scope & Examples

This MCC encompasses businesses involved in providing accommodations, primarily hotels and other lodging facilities. Merchants classified under this category typically offer services that include room rentals and related amenities to travelers and visitors seeking temporary housing.

Models

full-service hotels (offering dining, room services, etc.)

• boutique hotels (unique style and personalized service)
• motels (drive-up accommodations)
• budget and economy hotels (affordable lodging options)
• vacation rentals (short-term rentals like apartments and homes)

Borderline cases

Hostels — low-cost lodging primarily targeting young travelers; can be categorized differently based on amenities and services offered.

• Bed and breakfasts — smaller, often family-run guest accommodations with breakfast; may vary in classification based on operations.
• Campgrounds and RV parks — facilities providing space for camping or RVs; typically not included unless part of a larger hospitality offering.

Signals for correct classification

business provides overnight accommodations for guests

• services include room cleaning and check-in/check-out processes
• establishment has a physical presence with defined lodging spaces