You and Your Merchant Identification Number
Every day, banks and card networks process hundreds of millions of payment card transactions. These digital exchanges are the lifeblood of eCommerce—and many brick-and-mortar establishments, too. With so many businesses participating in this payments ecosystem, you have to wonder how all of these different entities can tell merchants apart and route their transactions to the right recipient every time.
The answer is that every merchant has a unique signifier that functions as their home address in the payments world: their Merchant Identification Number, or MID. What is the significance of your Merchant Identification Number, and what does it actually do for you?
Nobody likes to think of themselves as just another number in a vast impersonal system, but in this increasingly digital world we’re doing business in, numbers are the universal language. Your MID allows you to be recognized and identified by issuers, acquirers, card networks, payment processors, independent sales organizations, and all of the other behind-the-scenes entities who make electronic payments possible. You might not have to think about it very often, but your MID is a very important piece of data for your business.
You could say that your MID is analogous to a username or phone number. It’s easy to take it for granted, but if it gets compromised or misused, you could be in for some serious headaches. Sometimes, you might even want more than one.
What is a Merchant Identification Number?
Unlike cash transactions, a credit card payment isn’t a discreet handoff between a buyer and a seller. There are many different parties involved in even the simplest card transactions—at a minimum, the payment has to bounce from the merchant to the issuing bank to the card network to the acquiring bank before any money can show up in your account.
Your MID tells all of the players in this process where the transaction originated and where the funds ultimately need to go.
It can be easy to get your MID confused with some of the other identifying numbers assigned to your business. You might have multiple merchant accounts for your business, each with a unique ID, but these aren’t the same as a MID. You might also have one or more of the following:
- Terminal Identification Number (TID): these numbers identify the different payment terminals used by your business.
- Gateway Identification Number (GID): this identifies the network used by your payment gateway.
It is possible for a business to have more than one MID. Some very large merchants have completely different storefronts or brands, and for those merchants it might make sense to use separate MIDs to account for the revenue that each channel brings in.
If you’re not sure what your MID is, you can probably find it on your account statements, or get your payment terminal to pull it up. For most merchants, it will be a 15-digit long code. Just don’t go printing it out on the business cards you hand out—your MID is for the eyes of trusted payment institutions only.
If a fraudsters gains access to your MID, they can potentially use it to impersonate you and steal your payments.
How Do You Get a Merchant Identification Number?
If you’re accepting credit card payments, then you already have a MID, given to you by your acquiring bank when you started working with them. Payment services like PayPal and Square don’t always assign individual merchants their own MID, however—transactions get sent to their MID and they route the money to the right user accounts.
If you need additional MIDs because you’re expanding your business, you can contact your acquirer for information.
What Can Go Wrong with a Merchant Identification Number?
There are two big potential threats to your MID. The first, as mentioned earlier, is fraud. In some ways, an MID is like a Social Security Number. It’s not really a secret in the same way that an account password is, but in the hands of a bad actor, it can be used to steal your identity—and your money. Keep your MID private and if you suspect that it has been compromised, let your acquirer know immediately.
The other danger is that you can lose the use of your MID, or even have it revoked entirely, if the activity on your account is deemed too risky. For most merchants, the biggest risk factors are fraud and chargebacks. If you exceed the fraud and chargeback thresholds imposed by your bank or payment processor, you might have your funds placed on reserve while they verify that your transactions are legitimate, or they might put a hold on your ability to process new transactions.
The worst case scenario, if you let a chargeback problem become too unmanageable for too long, is that they’ll terminate your MID and stop doing business with you. You might be blacklisted for a period of time and be stuck applying for a new MID with expensive “high risk” payment processing services.
The best way to avoid this scenario is to employ effective strategies for preventing fraud and chargebacks:
- Use AVS and CVV when you process transactions
- Implement effective anti-fraud tools like 3-D Secure
- Use clear merchant descriptors
- Have a generous refund policy and top-notch customer service
- Fight every illegitimate chargeback with compelling evidence
Without a MID, you can’t receive credit card payments—so do everything you can to protect it.
A merchant can go a long time without thinking about their MID—or even knowing what it is—but when fraud and chargebacks threaten to take it away, keeping it safe can become a matter of survival. Few ecommerce merchant can afford to go a day without being able to process credit card payments, and high-risk processor fees can cut deeply into profits.
IF you’re not sure what to do about a growing fraud or chargeback problem that’s putting your MID at risk, don’t be afraid to seek out expert advice. The right chargeback management firm can help you put together the right strategies for thwarting fraud and winning disputes.