5198 Paints, varnishes and supplies

Introduction

• What it is: This MCC covers businesses that sell paints, varnishes, and related supplies essential for various applications.
• Risk level: Medium — Fluctuations in demand and inventory can impact profitability.
• Acceptance difficulty: Medium — Some PSPs may have specific criteria for this category due to potential recalls or inventory issues.
• Typical business models: hardware stores; paint retailers; home improvement centers; specialty paint shops.
• For merchants: Expect moderate MDR rates and possible reserve requirements; tangible inventory may lead to additional scrutiny during onboarding.
• What PSPs expect: Merchants may need to provide valid business licenses, inventory lists, and a clear coverage of offered products on their website.

Payment Insights & Benchmarks

Merchants in the paints, varnishes, and supplies sector should anticipate unique payment dynamics that differ from standard e-commerce, influenced by product pricing, industry regulations, and buyer characteristics. Understanding these aspects can help merchants better navigate their payment strategies.

Payment methods

Cards: often subjected to scrutiny based on transaction size and risk profile, impacting approval rates.

• E-wallets: gaining popularity for convenience, but not universally accepted across all platforms.
• Purchase orders: commonly used in B2B transactions, requiring robust invoicing and payment reconciliation.
• Bank transfers: prevalent in larger transactions, but can introduce longer settlement times and delays.

Authentication & security

3DS and strong customer authentication (SCA) tools are becoming standard to mitigate fraud risks.

• While these measures enhance security, they may lead to increased friction during the checkout process.
• Regular monitoring of transaction behavior is essential to identify and respond to potential fraud patterns.

Benchmarks (indicative, not guaranteed)

MDR: generally higher due to increased risk associated with the goods sold.

• Rolling reserves: may be applied, especially for high-ticket items, often in double digits.
• Settlement cycles: typically longer, averaging 5-10 days compared to standard e-commerce.
• Chargeback ratios: can be above average; attention to product delivery and customer satisfaction is critical.
• Approval rates: likely lower compared to other sectors, particularly for card transactions.

Key metrics to monitor

Authorization rates segmented by payment method and transaction size.

• Chargeback trends and reasons focusing on product-related disputes.
• Payment conversion rates, particularly for high-value transactions.
• General customer feedback and service-related issues to refine operational practices.

Risk & Compliance

Merchants operating under the MCC 5198 are subject to significant risk considerations due to potential fraud and compliance challenges. PSPs and acquirers maintain a rigorous approach to monitoring transactions in this sector, emphasizing the need for merchants to implement robust risk management practices.

Chargebacks & fraud

Common types of fraud include the use of stolen cards and chargeback fraud, where customers dispute legitimate transactions.

• Merchants may encounter issues with customers claiming items were not received or were not as described.
• Effective mitigation tools include velocity checks, device fingerprinting, and thorough tracking of delivery confirmations to prevent disputes.

AML/KYC expectations

Strong customer identity verification (IDV) processes should be in place, including checking against sanctions lists and politically exposed persons (PEPs).

• Merchants are expected to monitor the source of funds, especially for larger transactions or unusual purchasing behavior.
• Triggers for manual review might include multiple purchases from the same account in a short period or patterns suggesting reselling or fraudulent activity.

Operational red flags

Lack of transparency regarding the ownership of the business, including identification of hidden operators, can raise suspicions.

• Unusual traffic sources, such as transactions from unverified networks or regions known for high fraud rates, may alarm PSPs.
• Inadequate customer service responsiveness and absence of clear return/refund policies may lead to increased chargebacks.
• Failure to maintain quality assurance processes for products sold can result in higher customer disputes and dissatisfaction.

Onboarding Checklist

Merchants in the paints, varnishes, and supplies sector must assemble a comprehensive onboarding package prior to engaging with PSPs or acquirers. A well-organized submission not only enhances the likelihood of approval but also expedites the review process.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• valid licenses for selling paints, varnishes, and related supplies
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for managing inventory and payouts
• description of antifraud setup and risk management strategies

Product & marketing

demo access or product images of paint and varnish offerings

• marketing plan detailing traffic sources and promotional strategies
• geographic targeting information for sales and distribution

Technical integration & security

payment architecture overview outlining supported payment methods

• description of security measures for online transactions (e.g., tokenization)
• PCI DSS compliance status and data storage policy

Operations

customer support coverage details (languages, operating hours)

• SLA for customer inquiries, order handling, and dispute resolution
• policies regarding returns, refunds, and product warranties
• internal processes for handling customer complaints and feedback

Regulation & Licensing

Licensing and certification are essential for merchants in this MCC, as they assure compliance with industry standards and regulations that govern the sale of paints, varnishes, and related supplies. Recognition of licenses can vary significantly based on the merchant's jurisdiction and the markets they intend to serve.

Operator licenses

Environmental Protection Agency (EPA) — regulates the sale and use of hazardous materials, including certain paints and chemicals.

• State-level environmental permits — required in many regions to ensure compliance with local pollution control laws.
• Chemical registration certificates — necessary for the sale of certain chemical components used in paints and coatings.
• Occupational Safety and Health Administration (OSHA) certifications — important for ensuring workplace safety standards are met in handling hazardous materials.
• Some regions may require additional local business licenses depending on the business structure and location.

Geo-restrictions

Different countries have varying regulations on the sale of hazardous materials, leading to restrictions on international trade.

• The EU has stringent regulations under REACH (Registration, Evaluation, Authorisation, and Restriction of Chemicals) that affect the sale of chemical products.
• Certain states in the US prohibit specific chemicals in paints, which can limit product offerings.

Certifications & audits

ISO 9001 certification for ensuring quality management processes in manufacturing.

• VOC (Volatile Organic Compounds) compliance certifications for environmentally friendly paints.
• Safety Data Sheets (SDS) compliance to provide essential information on handling chemicals safely.
• Regular audits for compliance with OSHA standards and environmental regulations.

Official Definitions & Network Comparisons

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

Explanation:

Although the definitions broadly cover similar products, variations in phrasing can affect onboarding conditions and compliance expectations. Factors like inventory transparency and adherence to environmental regulations are critical for acceptance. Merchants may face rejections if they cannot provide proper documentation or if they operate in high-risk regions.

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 primary products are paints, varnishes, or supplies, ensure you use MCC 5198. Attempting to classify under a broader or unrelated MCC can lead to compliance issues, account disputes, and potential financial penalties.

Best Practices for Merchants

Merchants dealing in paints, varnishes, and related supplies must prioritize operational excellence and risk management to foster positive payment experiences. By adhering to the best practices outlined below, merchants can enhance transaction acceptance while mitigating potential issues with disputes and chargebacks.

Classification & transparency

always use the correct MCC; misclassification can lead to account limitations and closures

• clearly display product safety information, usage guidelines, and responsible policies on the website
• maintain transparent and accurate billing descriptors to help customers recognize transactions

Fraud & chargeback reduction

implement 3DS or step-up authentication for transactions that trigger high-risk indicators (amount, customer location, device change)

• ensure clear billing descriptors and proactive customer notifications (e.g., order confirmations via SMS/email)
• log transaction details and support interactions to gather evidence for potential disputes

Payment acceptance optimization

diversify payment methods (credit/debit cards, e-wallets, payment plans) to minimize reliance on any single type

• route transactions based on customer location or preferred payment method, assessing performance periodically
• consider utilizing separate Merchant IDs (MIDs) to manage different product lines or categories effectively

Operational discipline

monitor key performance indicators (KPIs) such as transaction approval rates, chargeback ratios, and average transaction values

• perform regular compliance audits, review internal policies, and conduct test transactions to ensure system reliability
• designate a specific team or individual for handling disputes with established response time frames

Payouts & liquidity

maintain sufficient liquidity to manage rolling reserves, extended payout cycles, and unexpected chargebacks

• automate anti-money laundering (AML) checks for all withdrawal requests, especially those surpassing certain thresholds
• actively monitor withdrawal patterns to identify suspicious activities and mitigate risks of fraud

Business Scope & Examples

This MCC encompasses businesses that primarily sell paints, varnishes, and related supplies. Merchants in this category typically offer products used for various applications, including residential, commercial, and industrial purposes.

Models

retail stores specializing in paints and varnishes

• online suppliers of craft and industrial paint products
• wholesalers distributing paint and coating materials
• shops offering painting tools and accessories (brushes, rollers, sprayers)

Borderline cases

Home improvement stores — while these may sell paint, their broader product range means they often fall under a different MCC focused on general retail; usually, it's important to assess the primary business focus.

• Art supply stores — these may include specialty paints for artists; if the main offering is art materials rather than paints for construction or maintenance, classification might differ.

Signals for correct classification

the primary revenue source comes from selling paints and varnishes

• business specifically promotes paint-related products over other home improvement items
• products include a wide array of paint-specific supplies and tools