8351 Child care services

Introduction

• What it is: This MCC covers businesses that provide childcare services, including daycare centers and preschools.
• Risk level: Medium — There are potential risks associated with the care of children and varying state regulations.
• Acceptance difficulty: Medium — While many PSPs accept this MCC, some may require additional scrutiny during onboarding.
• Typical business models: daycare centers; preschools; after-school programs; child enrichment services.
• For merchants: Expect moderate MDR fees; possible reserve requirements; and detailed risk assessments during application.
• What PSPs expect: Documentation of business structure; background checks for staff; clear service offerings on the website.

Payment Insights & Benchmarks

Merchants in this MCC should plan for varying payment dynamics, especially given the potential for higher chargeback rates and the need for user-friendly payment options. Acceptance rates may fluctuate based on customer demographics and preferences.

Payment methods

Cards: widely accepted, though some issuers may flag transactions as higher risk.

• E-wallets: increasingly popular among parents for ease of use and quicker transactions.
• ACH transfers: common for recurring payments but can be delayed in processing.
• Flexible payment plans: emerging as a trend, especially for higher-ticket services.

Authentication & security

Strong customer authentication (SCA) may be required, impacting user experience.

• Fraud risk is present, particularly in subscription models, necessitating vigilant monitoring.
• Consider implementing tools to analyze transaction patterns and flag anomalies.

Benchmarks (indicative, not guaranteed)

MDR: typically higher due to perceived risks associated with childcare transactions.

• Rolling reserves: may be implemented by some processors due to chargeback risks.
• Settlement times: generally longer, potentially exceeding 5-7 days.
• Chargeback ratios: often elevated compared to general retail, necessitating robust dispute management.
• Approval rates: can vary; credit card declines may be more frequent, especially with certain demographics.

Key metrics to monitor

Transaction approval rates segmented by method and service type.

• Chargeback rates and reasons, particularly examining patterns in customer disputes.
• Average transaction values to assess customer spending behavior.
• Monthly recurring revenue (MRR) and its fluctuations for subscription models.

Risk & Compliance

Merchants under the Child Care Services MCC face unique risks that can significantly influence their compliance landscape. PSPs and acquirers expect these merchants to be vigilant in addressing potential fraud, chargebacks, and adhering to AML/KYC regulations.

Chargebacks & fraud

Common forms of fraud include friendly fraud (disputing legitimate transactions) and using stolen payment methods to secure services.

• Chargeback triggers often involve service dissatisfaction or unclear refund policies, leading to increased dispute frequency.
• Mitigation strategies include implementing clear service agreements, utilizing transaction notifications, and employing chargeback management software.

AML/KYC expectations

Rigorous customer identity verification is crucial, including checks against sanctions lists and Politically Exposed Persons (PEPs).

• Source-of-funds verification may be necessary, focusing on payment methods that show consistency with usual service payments.
• Manual reviews are typically initiated for unusual payment patterns, large payment amounts, or discrepancies in customer information.

Operational red flags

Lack of transparency around ownership and operator details can raise suspicion and scrutiny from PSPs.

• Absence of clear communication regarding refund or cancellation policies may lead to heightened chargeback risks.
• High levels of chargebacks or inconsistencies in service delivery can mark merchants as high-risk.
• Failure to adhere to child protection policies or regulations can also alarm PSPs, leading to compliance issues.

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

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for service payments
• description of antifraud setup and monitoring tools

Product & marketing

demo access or descriptions of child care services offered

• marketing plan and traffic source overview (local advertising, partnerships)
• geographic targeting information
• KYC flow details, including any necessary background checks

Technical integration & security

payment architecture overview with supported methods/providers

• description of security measures for protecting sensitive data
• PCI DSS compliance status and data storage policy

Operations

customer support setup (hours of operation, languages spoken)

• SLA for handling customer inquiries and complaints
• fee structures, payment schedules, and refund processes
• internal process for incident management and reporting

Regulation & Licensing

Licensing and certifications are essential for merchants in the Child Care Services MCC, as they ensure compliance with local regulations that protect children and families. The recognition of these licenses often varies based on the jurisdiction in which the service operates, affecting collaboration with payment service providers (PSPs).

Operator licenses

State Child Care Licenses — required in most jurisdictions to ensure facilities meet safety and staffing standards.

• National Association for the Education of Young Children (NAEYC) Accreditation — recognized as a mark of quality in early childhood education.
• Local Health Department Licenses — necessary to meet health regulations applicable to child care settings.
• Background Check Certifications — mandated to ensure all staff members meet safety standards before working with children.
• Zoning Permits — may be needed to legally operate a child care facility within certain areas.

Geo-restrictions

Many regions have varying licensing requirements, which could affect service availability across state or national lines.

• Some countries or regions may have bans or restrictions on specific types of child care services, such as unlicensed home care.
• Licensing reciprocity can differ widely, complicating operations for providers moving across jurisdictions.

Certifications & audits

National background checks for all caregivers to ensure safety compliance.

• Child care quality assessments, often required by state licensing bodies.
• Fire and safety inspections, mandated for licensed facilities.
• Health and sanitation audits to maintain hygiene standards in child care environments.

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 used by the networks is largely consistent, but the specifics of requirements can vary significantly. For example, some networks emphasize the necessity of licensing more than others, which can directly impact merchant onboarding. Furthermore, certain networks might require additional documentation depending on the country or region. Common denial reasons include inadequate licensing, failure to provide necessary documentation, or non-compliance with local 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:

Ensure your services fall strictly under the appropriate MCC based on the type of care and education provided. If you primarily provide childcare services, use MCC 8351; misclassification could lead to compliance issues and potential penalties.

Best Practices for Merchants

Merchants under the MCC 8351 for Child Care Services must navigate a unique landscape with heightened sensitivity to operational standards and consumer trust. By implementing the practices outlined below, businesses can foster secure transactions and build strong relationships with payment service providers.

Classification & transparency

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

• provide clear information about services offered, including age ranges and type of care available, on your website
• maintain transparent business practices and adequately inform clients about fees, policies, and safety measures

Fraud & chargeback reduction

implement 3DS or step-up authentication, particularly for larger transactions or unusual patterns

• use descriptive billing that clearly states the service provided, minimizing confusion for clients
• keep detailed records of services rendered, including session logs for care provided, to support dispute representments if needed

Payment acceptance optimization

offer a variety of payment methods, including cards, direct debits, and e-wallet options, to cater to different client preferences

• assess and optimize transaction routing based on client demographics and payment success rates
• consider using separate merchant IDs for different types of services (e.g., day care, after-school programs) to better manage costs

Operational discipline

establish key performance indicators (KPIs) related to payment processing and client retention

• conduct regular audits of transaction and compliance processes to ensure ongoing effectiveness
• designate a point person or team for resolving payment disputes with defined response timelines

Payouts & liquidity

maintain adequate liquidity buffers to address rolling reserve requirements and ensure smooth financial operations

• automate anti-money laundering (AML) checks for significant or recurring payments to safeguard against fraud
• stay vigilant by monitoring cash flow and identifying patterns that might indicate potential issues with client payments

Business Scope & Examples

This MCC encompasses businesses dedicated to providing child care services, primarily targeting the care and well-being of children. Merchants classified under this category typically offer services ranging from daycare and preschool education to after-school care and nanny services. The focus is primarily on establishments that provide a nurturing environment for children and ensure their safety and development.

Models

daycare centers for infants and toddlers

• preschool and pre-kindergarten programs
• after-school care and activity programs
• in-home nanny and babysitting services
• child care consulting and training services

Borderline cases

Tutoring services — while educational, these often do not provide direct care for children and may fall outside this MCC.

• Summer camps — programs offering recreational activities may overlap but focus more on recreation than daily child care.
• Respite care services — temporary care for children with special needs can sometimes blur the lines with regular child care services.

Signals for correct classification

primary focus is on caring for children during non-parental hours

• services include child supervision and educational activities
• facility is licensed or certified to provide child care services