Merchant Identification Number

December 13, 2021 | 7 min read

Merchant Identification Number

Merchant Identification Number: What is a MID & Why Does it Matter?

Ever wondered how the funds from a transaction make it from the cardholder’s bank to your merchant account? How do all the different players involved in a transaction make sure that money ends up in the right place? Your MID plays a critical role in that reconciliation process.

In this article, we answer the question "what is a merchant ID number," and explain how it affects your business. We’ll also examine how your MID may be in danger, and look at some steps you can take to protect it against chargebacks.

What is a Merchant Identification Number?

Merchant Identification Number

[noun]/* ˈmər • CHənt • ī • den • (t)ə • fə • kā • SH(ə)n • nəm • bər /

A merchant identification number is a unique code provided to merchants by their payment processor. Often abbreviated as MID, this code is transmitted along with cardholder information to involved parties for transaction reconciliation. The MID can help identify a merchant when communicating with their processor and other parties.

Put simply, your MID is a code used to identify your merchant bank account. When you submit a cardholder’s information following a purchase, the MID is the number used to identify you throughout the transaction process. This helps ensure that the funds go to the correct account.

Without a MID tied to a transaction, the funds would have no destination. The bank would not be able to route the funds to you properly.

Can I Have Multiple MID’s?

The short answer is yes. You can have more than one MID, but a single merchant ID is enough for what most businesses need. To explain, let’s first distinguish between a MID and a TID, or “terminal identification number.”

You have a unique TID for each of your card terminals. If you use three different card readers, each one has a unique TID. However, all of your terminals can still be grouped together under a single merchant identification number. In fact, you can even have multiple merchant accounts, but still group them under the same MID.

So, why do some merchants have multiple different MIDs, then?

Merchants who maintain multiple MIDs generally do so for accounting purposes. Businesses with multiple distinct sales channels like restaurants, hotels, and multichannel retail often have unique MIDs for different revenue streams. This helps separate and track where different revenue comes from. As mentioned before, though, most businesses will only need one MID.

Locating My Merchant ID

So, is it possible to look up your merchant ID online?

No. Merchant ID’s are not public information, and cannot be found anywhere online. There is also no database or list you can view anywhere on the internet that will have this information. The reason for this is simple— Your MID is a private number shared strictly between your business and payment processors, much like an account number for a consumer bank.

There are still a few ways to view your MID, though. Your merchant ID number is:

  • The 15-digit code located in the upper right hand corner of your monthly merchant statement
  • On your credit card terminal, usually on a sticker or label
  • At the top of your credit card receipts, after ‘terminal’

How Does MID Affect My Business?

As a merchant, you receive an MID when you open a merchant account with an acquiring bank. Before you can get a merchant ID, though, you need to verify your business. This involves documentation such as a Taxpayer Identification Number (TIN), names of the principal owners, and other relevant information. In some cases, ISOs (independent sales organizations) serve as a bridge between the merchant and acquirer, thereby playing a role in MID acquisition, as well.

You won’t get an MID if you’re working a with service like Square or PayPal to process payments, as you don’t need a formal merchant account to use them. If you work with a standard merchant acquirer to accept payments, though, you should have an MID.

You can be issued a new MID under certain circumstances. For example, you'll be issued a new MID if you ever switch card processing companies.

In the hands of a fraudster, your MID could be used to run illegitimate transactions, so plan to do everything you can to keep your merchant identification number secure. If a third party ever needs to review your processing statement, for example, it’s a smart idea to black out the MID before copying or faxing any information.

Can I Lose My Merchant ID Number?

Again…the short answer is “yes.”

The most common reason businesses lose their merchant identification number is excessive chargebacks. It’s important to understand the different short- and long-term actions that can be taken against your account due to chargeback activity.


Withheld Funds

Withheld Funds

“The cash is secure…you just can’t have it.”

What is it?:

This describes the process that allows your processor to withhold a portion of transaction funds. This can be done for a variety of reasons; suspicious account activity is a common trigger, as is a sudden spike in chargeback volume.

How to Affects you:

These funds can be held indefinitely while your processor investigates your situation. Your processor could also make this hold permanent in the form of a merchant account reserve. This is a common practice, especially for merchants in high-risk verticals. An ongoing merchant account reserve can be a rolling, capped, or up-front reserve, meaning some portion of your funds are always unavailable.


Processing Freeze

Processing Freeze

“Hitting ‘pause’ on your processing privileges.”

What is it?:

A processing freeze occurs when your processor temporarily shuts down your ability to accept card payments. This can happen if your chargeback ratio gets too close to the chargeback threshold outlined by the card scheme.

How to Affects you:

Even with a hold on your account, you’ll still typically be able to accept new transactions. That’s not the case if your processor puts a freeze on your merchant ID. It’s a very serious matter for eCommerce merchants, as you have very few options available without credit or debit sales. You could accept payments via PayPal…but that’s about it while a processing freeze is in place.


Termination

Termination

“The end of the line.”

What is it?:

This is a pretty simple idea: your processor or acquirer sees you as more of a risk than an asset, so they cancel your merchant ID and close your account. This can be because of a clear or flagrant violation of the bank’s terms of service. More often, though, it’s because your chargeback ratio is consistently over the limit. You’re seeing regular, sustained chargeback activity above what the card scheme says is acceptable, and the bank refuses to cover for you any longer.

How to Affects you:

As dangerous as a freeze is, at least there’s the prospect that it will eventually end. Not so with termination, unfortunately. If this happens, you’ll have to switch over to a high-risk processor, which means higher fees and more restrictions. That’s assuming your business survives, as you can’t accept any cards until you get a MID with a new processor and acquirer.


How Can I Protect My MID?

Chargebacks are the biggest threat to your merchant ID. That means the key to protecting your MID—and by extension, your entire business—is controlling chargebacks.

You have numerous tools at your disposal to prevent chargebacks due to criminal fraud, including:

  • Fraud Filters
  • Address Verification (AVS)
  • CVV Verification
  • 3-D Secure
  • Geolocation
  • Biometric Technology

That makes it sound rather simple, but the fact is, chargeback sources are extremely difficult to identify.

Our research shows that most chargebacks can ultimately be traced to friendly fraud, which relies on passing as a legitimate transaction. If you’re going to stop chargebacks and protect your MID, you’ll need a more comprehensive approach.

Want to ensure your merchant ID against friendly fraud, merchant error, and criminal fraud chargebacks? Click below and get started today.

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