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The Basics of Merchant Identification Number Management for Higher Education

5/3/2024 7:00 PM

Payments are complex. Swiping a card to purchase a cup of coffee involves hardware, software, numerous organizations, and multiple processes to complete the transaction–plus accounting and other functions after the transaction is completed.

Learning the complexity of how payments work is a significant task, but knowing a few basic terms and concepts will go a long way to becoming an effective payments professional. One of the most important basics in payments is the merchant identification number that is involved in every payment transaction.

What is a merchant identification number (MID)?

A merchant identification number is a 15-digit alphanumeric identifier used in credit and debit card payment processing. It is also referred to as a merchant ID, merchant number, or MID.

What is the purpose of a MID?

The easiest explanation of a MID is that it is like the mailing address on a package, it communicates where funds should go in the payment process.

The payment processing system involves hardware, software, merchants, acquirers, merchant service providers, card networks, and more. A MID communicates key details about a payment to the various parts of the payment processing system, ensuring that funds are transmitted to the correct destination. This identification also helps with accounting and other aspects of payment processing.

Why is managing MIDs important?

MIDs organize payments and how you organize MIDs affects your payment processes. Smart approaches to managing MIDs can help merchants reap many benefits, including better accounting and reduced costs to their business.

What are the benefits of managing MIDs?

Standardized processes
Knowing which MIDs exist and their key details allows you to take better control of the payments connected to your MIDs and the processes involved in your payments. Implementing standards will increase the efficiency, accuracy, and consistency of processes.

Less compliance overhead and easier compliance reporting
Organizing to decrease the number of MIDs on campus reduces your paperwork requirements for compliance with Payment Cards Industry (PCI) standards and regulations.

Reduced risk
Monitoring your processing statements and keeping an eye out for odd or unauthorized transactions is simplified with thoughtful organization of MIDs. Being vigilant will enable early detection and prevent fraud attacks that lead to excessive chargebacks and jeopardize your MIDs and ability to accept card payments.

Streamlined reconciliation
Organizing MIDs clarifies the identification of payments and accounts, which helps institutions match deposits to the correct department or revenue channel, improving tracking and speeding up reconciliation.

Better data for impactful analysis
Clarifying the identification of payments and accounts also improves your payments data and analysis. Organizing MIDs allow you to track and compare the metrics of payment channels, such as ecommerce websites versus physical retail locations.

Better accounting forensics
Improved identification helps when investigating transactions and accounts, as MIDs provide an audit trail of payments with timestamps and other key information.

Sounds like MIDs are very important. Do MIDs need security, protection, or oversight?

Yes. If a MID is involved in a high number of chargebacks, card brands may revoke your payment processing privileges. Learning how to prevent and respond to chargebacks is a crucial aspect of MID management.

How do I start managing MIDs at my institution?

Identify and work closely with the primary contact for MIDs at your institution. This person is often an administrator in the Bursar’s office or a similar business office. It is critical to keep this person updated as staff assignments across campus evolve. Your merchant services provider (MSP) provides critical updates, chargeback notices, and statements to your primary contact, and this administrator needs to know who should receive these notifications and be involved in issue resolution, training, and other aspects of MID management.

How can I learn more about managing MIDs?

Managing MIDs is an essential part of payments that can help with costs, accounting, fraud prevention, regulatory compliance, and more. To learn more about MIDs and other key aspects of payments, watch our on-demand webinar, “The Basics: Student Finance.” WATCH HERE