5964 Direct marketing - catalog merchant

Introduction

• What it is: This MCC covers businesses that primarily sell products through catalogs and direct mail marketing.
• Risk level: Medium — Direct marketing may face chargebacks due to buyer's remorse or fraudulent orders.
• Acceptance difficulty: Medium — While generally accepted, some PSPs may scrutinize marketing practices closely.
• Typical business models: catalog retailers; subscription box services; direct sales companies; mail-order businesses.
• For merchants: Expect moderate MDR; be prepared for possible reserve requirements; approvals may take longer due to risk assessments.
• What PSPs expect: Provide clear product descriptions; demonstrate a consistent sales history; submit return/refund policies if applicable.

Payment Insights & Benchmarks

Merchants in the Direct Marketing - Catalog Merchant category should anticipate unique challenges around payment acceptance and customer interactions. Due to the nature of catalog marketing, understanding how payments typically perform in this sector is crucial for optimizing sales and managing cash flow.

Payment methods

Cards: commonly accepted, but often with higher decline rates due to fraud filters.

• E-wallets: gaining traction for ease of use, especially in repeat purchases.
• A2A transfers: emerging as preferred options for larger orders, offering lower fees.
• Buy Now, Pay Later (BNPL): popular for ticket-size flexibility, leading to increased conversions.
• Checks or money orders: used by some customers, but processing can be slow.

Authentication & security

3D Secure (3DS) is commonly utilized to authenticate transactions, which may impact approval rates.

• Strong Customer Authentication (SCA) is vital, as it helps mitigate fraud but can introduce friction.
• Merchants should be aware that friendly fraud can still occur, even with advanced security measures in place.

Benchmarks (indicative, not guaranteed)

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

• Rolling reserves: may be implemented at levels higher than typical retail environments.
• Settlement cycles: often longer, potentially extending beyond 7 days.
• Chargeback ratios: frequently elevated due to the nature of direct marketing and return logistics.
• Approval rates: tend to be lower for cards but can improve with alternative payment methods.

Key metrics to monitor

Authorization rates by payment method to gauge performance.

• Chargeback rates segmented by reasons to identify potential issues.
• Average order value (AOV) trends for understanding customer behavior.
• Refund and return rates to manage inventory and cash flow effectively.
• Payment friction points identified through customer feedback to refine the process.

Risk & Compliance

Merchants classified under MCC 5964 face particular attention due to risks associated with direct marketing and catalog sales. PSPs and acquirers are vigilant about chargeback rates, potential fraud, and compliance with AML/KYC requirements. It's crucial for merchants to adopt strong measures to mitigate these risks.

Chargebacks & fraud

Common reasons for chargebacks include friendly fraud, where customers claim they did not receive the product, and unauthorized transactions using stolen card details.

• Catalog sales can lead to disputes over non-delivery of items or misrepresentation of products.
• Mitigation tools include transaction monitoring systems, chargeback alerts, and detailed product descriptions to reduce misunderstandings.

AML/KYC expectations

Robust identity verification is expected, including checks against government-issued ID and proof of address.

• Merchants should conduct regular sanctions checks and monitor for unusual transaction patterns that may suggest suspicious activity.
• Triggers for manual review may include unusually high transaction amounts or frequent purchases from the same customer within a short time frame.

Operational red flags

Lack of transparency concerning product sourcing or ambiguous ownership details may raise bets from PSPs/acquirers.

• Not providing clear terms of service or refund policies can alarm compliance teams and lead to higher chargeback risks.
• Traffic sources that are not adequately vetted or come from suspicious channels may also trigger concern and scrutiny.
• Failing to offer a clear, accessible customer support system for handling complaints can exacerbate issues with customer relations and chargebacks.

Onboarding Checklist

Merchants classified under the Direct Marketing - Catalog Merchant MCC should assemble a comprehensive onboarding package prior to engaging with PSPs or acquirers. A meticulously organized submission can significantly enhance approval rates and expedite the review process.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• necessary licenses for direct marketing activities
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for managing payouts
• detailed description of antifraud measures and monitoring system

Product & marketing

demo access or screenshots of your catalog platform

• marketing strategies and overview of traffic sources (catalogs, online ads)
• geographic targeting information for catalog distribution
• KYC flow details, including identification verification providers

Technical integration & security

overview of payment processing architecture and methods supported

• description of security measures including SCA/3DS implementation
• PCI DSS compliance status and policies for data storage

Operations

customer support structure (available languages, support hours)

• SLA for handling disputes and chargebacks
• return and refund procedures and limits
• internal processes for chargeback monitoring and response

Regulation & Licensing

Licensing and certification are essential for merchants operating under this MCC, as they assure compliance with industry standards and regulations. Recognition of licenses by payment service providers (PSPs) often relies on the merchant's jurisdiction and target market.

Operator licenses

Direct Marketing Association (DMA) membership — often required for compliance with ethical marketing practices in some regions.

• Federal Trade Commission (FTC) regulations — important in the U.S. for marketing practices and consumer protection.
• Certain states may require specific business permits for catalog retailers.
• Some countries enforce privacy laws that affect how merchants collect and use consumer data.

Geo-restrictions

Stricter regulations in the EU under GDPR can limit data collection and marketing practices.

• Countries with bans on unsolicited marketing may block operations entirely.
• In the U.S., state-specific laws can restrict catalog marketing activities.
• Merchants targeting international markets need to comply with local marketing regulations.

Certifications & audits

PCI DSS compliance for secure handling of payment card information.

• Regular audits for compliance with consumer protection laws and regulations.
• Data protection audits to ensure compliance with data privacy laws, such as GDPR.
• Certifications related to ethical marketing practices, depending on the jurisdiction.

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 across networks focus on catalog sales, differences may arise in phrasing, such as "retail sales" versus "promotions." Each network may impose specific documentation requirements to validate goods sold and may evaluate associated risks based on patterns of chargebacks and offers. Common reasons for onboarding rejections could include insufficient product clarity or failure to comply with advertising regulations.

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 you primarily sell products through catalogs or online without a substantial physical presence, use MCC 5964. Misclassifying your business type can lead to higher risk of transaction disputes and potential account issues. Always classify accurately to avoid compliance problems.

Best Practices for Merchants

Merchants under the Direct Marketing - Catalog Merchant MCC face unique challenges regarding payment processing and customer engagement. Implementing best practices is essential for enhancing payment acceptance, minimizing risks, and ensuring a sustainable business model.

Classification & transparency

always use the correct MCC; misclassification can lead to account restrictions or closures

• clearly display your business model, including return policies and customer support information, on your website
• ensure that billing descriptors are transparent and match customer expectations

Fraud & chargeback reduction

implement 3DS or step-up authentication for transactions flagged as high risk based on various parameters

• utilize clear billing descriptors and provide instant transaction confirmations via email or SMS
• maintain logs of interactions and transactions to support dispute representments

Payment acceptance optimization

support multiple payment methods including cards, wallets, and buy-now-pay-later options to cater to diverse customer preferences

• route transactions based on geographical location, assessing performance against different PSPs regularly
• consider using separate MIDs for various product categories to better manage risk and compliance

Operational discipline

establish KPIs such as chargeback ratios, refund rates, and average response times to improve operational efficiency

• conduct regular compliance audits and train staff on changes in policies or payment processes
• designate a specific team or individual to handle disputes with predefined response timelines

Payouts & liquidity

create liquidity buffers to manage rolling reserves and ensure you can cover unexpected settlements

• implement automated AML checks for large withdrawals to adhere to compliance and minimize risk
• monitor payout trends carefully, looking for unusual spikes or patterns that may indicate fraudulent activities

Business Scope & Examples

This MCC encompasses businesses that primarily operate as catalog merchants, focusing on direct marketing through printed catalogs or online platforms. Merchants in this category typically provide a wide range of products that can be purchased directly from the catalog, either via mail order or online, and usually feature products that are shipped directly to the customer.

Models

home goods and décor catalog retailers

• fashion and apparel subscription services
• health and beauty product catalogs
• specialty food or gourmet gift catalogs
• hobby and craft supply merchants

Borderline cases

E-commerce platforms — businesses that sell products online through websites but are not primarily catalog-driven. They may not fit this MCC if they don’t utilize printed or dedicated catalog marketing.

• Retail stores — brick-and-mortar establishments that primarily sell products in-store and have minimal to no catalog marketing presence.

Signals for correct classification

business primarily relies on printed catalogs or dedicated online catalog platforms for sales

• customers can order directly from catalog listings with set prices and descriptions
• the majority of sales are fulfilled via mail order or direct shipping