5817 Digital goods - applications (excludes games)

Introduction

• What it is: This MCC covers merchants primarily selling digital applications, excluding games, such as software and mobile applications.
• Risk level: Medium — Digital goods sometimes face chargebacks and fraud risks.
• Acceptance difficulty: Medium — Approval can vary depending on the PSP's appetite for digital goods.
• Typical business models: app developers; software-as-a-service providers; mobile application publishers; e-learning platforms.
• For merchants: Expect moderate MDR rates; potential for holds on funds; and varying approval processes across PSPs.
• What PSPs expect: Clear business model presentation; evidence of intellectual property; and transparent refund policies.

Payment Insights & Benchmarks

Merchants in the digital goods sector, particularly applications (excluding games), should anticipate unique challenges when it comes to payment processing. The landscape is characterized by varied acceptance rates and potential higher risk due to the nature of digital transactions.

Payment methods

Cards: widely used, but often face higher scrutiny, leading to increased declines.

• E-wallets: popular for quick transactions and refunds, offering flexibility for digital purchases.
• Direct bank transfers (A2A): convenient for larger transactions but may introduce longer settlement times.
• Subscriptions: recurring billing can enhance retention but may lead to unexpected chargebacks if customers are dissatisfied.

Authentication & security

Strong Customer Authentication (SCA) is typically required for many transactions, enhancing security but potentially impacting the approval rate.

• Fraud detection tools are essential as digital goods can attract higher instances of unauthorized chargebacks.
• Implementing 3D Secure can help mitigate fraud, but it may also add friction to the checkout process.

Benchmarks (indicative, not guaranteed)

MDR: generally higher than traditional e-commerce segments.

• Rolling reserves: often necessary to protect against chargebacks and may average over 10%.
• Settlement times: usually longer, averaging 7 to 10 days due to the digital nature and potential for disputes.
• Chargeback ratios: can be significantly above industry average, particularly if subscription models are employed.
• Card approval rates: often lower than physical goods categories; e-wallets may see better performance.

Key metrics to monitor

Payment method performance: track approval rates and declines by method.

• Chargeback rates: separate by reason to identify fraud versus customer service issues.
• Subscription cancellation rates: to avoid unexpected revenue loss and identify potential pain points.
• Lifetime value of customers: assessing the profitability of digital offerings over time.

Risk & Compliance

Merchants under this MCC deal with various digital goods transactions, which inherently carry significant risks related to fraud and chargebacks. Given the virtual nature of the products and the low-cost entry points, PSPs and acquirers closely monitor these transactions to uphold compliance and reduce financial exposure.

Chargebacks & fraud

Common issues include friendly fraud where customers dispute legitimate transactions claiming they did not authorize them, as well as bonus abuse through exploitation of promotional offers.

• Digital goods are often targets for stolen credit card use, with key abuse patterns including account sharing and unauthorized reselling.
• Effective mitigation tools for merchants include implementing device fingerprinting, velocity checks to monitor purchase patterns, and purchase limits to reduce exposure to high-risk transactions.

AML/KYC expectations

Strong customer identity verification processes are essential, including thorough checks against sanctions lists and politically exposed persons (PEPs).

• Merchants should conduct source-of-funds checks, especially for higher-value transactions or inconsistent purchasing behavior.
• Triggers for manual review might include rapid succession of purchases, unusual patterns of product access, or the use of VPNs which can obscure the buyer's true location.

Operational red flags

Lack of transparency in ownership and operations, especially in cases of white-label setups that obscure beneficial ownership.

• Concerns over traffic sources, particularly if derived from unverified or questionable affiliates, can raise flags with PSPs.
• Absence of clear and effective refund policies or terms of service can create trust issues and amplify chargeback risks.
• Insufficient measures to prevent unauthorized account access, such as multi-factor authentication or robust password policies.

Onboarding Checklist

Merchants under the MCC 5817 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 application 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
• details on subscription management (if applicable) and refund processes
• internal process for chargeback investigation and documentation

Regulation & Licensing

Licensing and certification play a significant role for merchants within this MCC, especially since payment service providers (PSPs) require compliance to mitigate risks associated with digital transactions. The recognition of licenses heavily depends on the merchant's jurisdiction and the geographical markets they operate in.

Operator licenses

Electronic Arts (EA) License — often recognized for developers offering digital applications but not universally required.

• Apple App Store Developer License — essential for distributing applications through Apple’s platform.
• Google Play Developer Console License — necessary for distributing apps on the Google Play Store.
• Some jurisdictions may require specific business permits depending on the type of application being sold.

Geo-restrictions

Some countries impose regulations that restrict access to certain digital goods or applications, leading to transaction bans.

• Regional content laws may limit the distribution of applications based on localization or content appropriateness.
• International sanctions can heavily impact the acceptance of payments from countries with trade restrictions.

Certifications & audits

PCI DSS compliance is crucial for handling payment card data within these applications.

• GDPR compliance for applications targeting or collecting data from users in the EU.
• Regular compliance audits to ensure data protection measures are in place, particularly when managing user data.
• App Store security assessments may be required to maintain platform credibility and access.

Official Definitions & Network Comparisons

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

Explanation:

The terminology differences, such as "applications" vs "goods," could impact how offerings are categorized during onboarding. Networks may apply different levels of scrutiny based on product specifics, with some requiring clear refund and licensing policies. Reasons for denial commonly include lack of license, unclear business models, or insufficient documentation on digital product functions.

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 sales involve digital applications excluding games, it’s crucial to use MCC 5817 accurately. Misclassifying your digital goods can lead to compliance issues, including transaction rejections and potential account penalties. Always evaluate the core function of your products.

Best Practices for Merchants

Merchants under the Digital Goods - Applications (Excludes Games) MCC must navigate unique challenges related to payment acceptance and fraud management. Implementing best practices is essential for fostering long-term relationships with payment service providers (PSPs) and ensuring smooth operations.

Classification & transparency

always use the correct MCC to avoid penalties or account suspension

• clearly disclose business models and refunds policies on your website
• ensure transparency regarding subscription terms and conditions

Fraud & chargeback reduction

implement 3DS or step-up flows for higher-value transactions to verify identity

• use clear billing descriptors that accurately reflect purchases to minimize chargebacks
• maintain thorough event logging to support dispute resolution off the transaction history

Payment acceptance optimization

offer multiple payment methods, including credit cards and e-wallets, to cater to diverse customer preferences

• optimize payment routing based on geographic location or user profile to enhance approval rates
• conduct A/B testing with different PSPs to identify the most effective payment solutions

Operational discipline

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

• perform regular compliance audits and reviews of payment processes to minimize risk
• establish dedicated processes for handling disputes and responding within set timeframes

Payouts & liquidity

prepare for rolling reserves and extended payout timelines by maintaining adequate liquidity

• automate anti-money laundering (AML) checks for withdrawals, particularly for larger sums
• track payout patterns and adjust to ensure funds are available for operational needs

Business Scope & Examples

This MCC encompasses businesses that primarily sell digital goods, specifically applications that do not include games. Merchants in this category usually offer software services or products that customers can purchase and download directly, with no physical delivery involved.

Models

mobile app stores (selling apps for downloadable software)

• software as a service (SaaS) platforms (subscription-based tools for productivity, collaboration, etc.)
• digital content providers (e-books, music, videos)
• educational course platforms (offering online learning modules)
• productivity and utility applications (task management, photo editing, etc.)

Borderline cases

Game applications — any apps that include games are classified separately under gaming MCCs; even if they mix other functions, their primary purpose may dictate classification.

• In-app purchases — while apps with in-app purchases may belong here, if they are primarily game-related, they may fall under gaming MCCs; the core offering matters.

Signals for correct classification

the primary product is a downloadable app or software, not a physical item

• purchases are made directly for software delivery and not bundled with gaming content
• the app or software provides users with utilities or content not primarily focused on entertainment gaming