3707 Shoney's inns

Introduction

• What it is: This MCC code represents businesses providing lodging and meals under the Shoney's brand.
• Risk level: Medium — Hospitality businesses often face higher chargeback rates.
• Acceptance difficulty: Medium — Many payment processors are familiar with this category but may require additional documentation.
• Typical business models: Shoney's restaurants; casual dining establishments; hotel chains with onsite dining; inns offering meal services.
• For merchants: Expect moderate merchant discount rates (MDR); potential for reserves during initial onboarding; ongoing compliance with payment processor requirements.
• What PSPs expect: Comprehensive business documentation; proof of adherence to health and safety standards; clear categorization of services offered.

Payment Insights & Benchmarks

Merchants in this MCC should plan for higher payment friction compared to standard e-commerce. Acceptance often depends on method mix, fraud controls, and PSP risk appetite.

Payment methods

Cards: commonly used but may face restrictions based on customer location and transaction history.

• E-wallets: growing in popularity for convenience and instant transactions.
• Prepaid cards: provide a discreet payment option, often limiting chargeback risks.
• Mobile payments: increasingly adopted, yet may have varying acceptance depending on the technology used by the merchant.

Authentication & security

Strong customer authentication (SCA) measures are often required, particularly for online bookings.

• These security measures help prevent unauthorized transactions but can lead to higher cart abandonment if not implemented seamlessly.
• Monitoring fraud patterns is essential, as the hospitality industry can be prone to both friendly fraud and identity theft.

Benchmarks (indicative, not guaranteed)

MDR: typically higher than standard e-commerce due to perceived risk factors.

• Rolling reserves: often require a percentage of sales, which could be notable.
• Settlement cycles: generally longer, potentially taking 7-14 days.
• Chargeback ratios: likely above e-commerce norms due to service disputes.
• Card approval rates: may be lower, especially for certain card types; e-wallet transactions may have higher acceptance rates.

Key metrics to monitor

Authorization and approval rates segmented by payment method.

• Chargeback and dispute reasons categorized to identify patterns.
• Average transaction value and frequency of bookings.
• Customer feedback and service-related claims to optimize operations.

Risk & Compliance

Merchants under this MCC are closely scrutinized due to elevated financial and reputational risks. PSPs and acquirers typically apply stricter controls, expecting merchants to proactively address fraud, chargebacks, and AML/KYC compliance.

Chargebacks & fraud

High incidence of friendly fraud (“I didn’t authorize this transaction”), particularly in hospitality-related transactions.

• Guests may dispute charges for perceived non-delivery of services or improper billing.
• Mitigation tools include automated chargeback alerts, robust booking confirmations, and transaction tracking.

AML/KYC expectations

Strong customer identity verification (IDV) including checks against sanctions lists and politically exposed persons (PEPs).

• Source-of-funds verification for large transactions, especially from high-risk regions.
• Manual review triggers for frequent bookings, large group reservations, or transactions made using multiple credit cards from the same IP address.

Operational red flags

Lack of transparency regarding ownership, especially in franchised or white-label setups.

• Excessive cancellations or no-show rates that hint at fraudulent practices.
• Traffic generation from unverified third-party booking sites or suspicious online promotions.
• Absence of clear policies on refunds, cancellations, and charges to customers.

Onboarding Checklist

Merchants under the MCC code 3707 (Shoney's Inns) 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 and withdrawal 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

State-level business licenses — generally required in the U.S. for operation; recognition varies by state.

• Health department permits — necessary for establishments serving food, ensuring safety and compliance with regulations.
• Alcohol licenses — needed if establishments serve alcohol; varies significantly by state and locality.
• Fire and safety permits — often required to ensure facilities meet local codes, especially for public accommodations.

Geo-restrictions

Different states may have unique requirements for lodging and service providers; compliance is mandatory for operation.

• Some local jurisdictions have restrictions on the types of accommodations allowed, impacting merchant operations.
• Countries with strict hospitality regulations may limit U.S.-based hospitality brands from operating without local licensing.

Certifications & audits

Compliance with health and safety regulations, including routine health inspections.

• Fire safety audit certifications, ensuring compliance with local safety codes.
• Insurance claims audits may be required to operate risk and liability assurance effectively.
• Training certifications for staff to ensure adherence to health, safety, and customer service standards.

Official Definitions & Network Comparisons

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

Explanation:

The definitions across networks highlight similar services but use varying terminologies such as "lodging" vs "accommodations." Some networks may impose stricter requirements based on the type of lodging, while others focus on service quality. Common reasons for merchant denial can include non-compliance with local regulations, inadequate business licenses, or poor service ratings.

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 involves hotel-like accommodations, ensure you're using MCC 3707. Misclassifying your business type can lead to compliance issues and potential financial penalties, including account closure. Always choose the most accurate code that reflects your services.

Best Practices for Merchants

Merchants under the MCC code 3707, which covers services related to Shoney's Inns, must prioritize effective management of their payment processes and customer interactions to enhance acceptance and minimize risk. The following best practices will help ensure compliance and strengthen relationships with payment service providers (PSPs).

Classification & transparency

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

• clearly disclose information about the lodging services offered on the website, including pricing and terms
• maintain transparency in billing descriptors to avoid confusion for customers

Fraud & chargeback reduction

implement 3DS or step-up authentication methods for online bookings, especially for larger transactions

• use clear and concise billing descriptors on customers' statements to aid recognition and reduce disputes
• log all transaction activities and customer interactions to strengthen cases for representments

Payment acceptance optimization

support a variety of payment methods, including credit/debit cards, mobile wallets, and local payment options

• optimize routing of transactions based on customer location or payment method to improve acceptance rates
• consider using separate Merchant Identification Numbers (MIDs) for different service offerings or geographic areas

Operational discipline

monitor key performance indicators (KPIs) such as authorization rates, chargeback ratios, and customer satisfaction scores

• establish regular compliance audits to ensure adherence to internal policies and industry regulations
• designate a team or individual responsible for managing disputes to streamline responses and resolutions

Payouts & liquidity

set aside adequate funds to cover potential rolling reserves or chargeback transactions

• utilize automated checks for anti-money laundering (AML) during withdrawal processes, especially for significant amounts
• track payout patterns for anomalies to ensure financial stability and mitigate risks related to withdrawals

Business Scope & Examples

This MCC covers businesses that are primarily engaged in the provision of lodging and accommodations. Merchants classified under this category usually provide services for travelers seeking short-term stays, and the scope includes various types of accommodation options, from hotels to inns and motels.

Models

traditional hotel chains (full-service hotels)

• budget motels (economy accommodations)
• inns and bed-and-breakfast establishments
• vacation rental services (short-term rentals)
• extended-stay lodging services

Borderline cases

Hostels — budget accommodations with shared facilities; may fall under this MCC but could also be classified under youth or specialty lodging.

• Camping sites — while they provide accommodation, they may be classified under recreation or outdoor services rather than lodging.
• Time-share properties — can be ambiguous as they offer accommodations, but may also have different management and ownership structures.

Signals for correct classification

primary business model focuses on providing overnight stays for guests

• charges based on nightly rates for accommodations
• facilities include features common to lodging (e.g., reception services, cleaning services)