What is a MID?
MERCHANT IDENTIFICATION NUMBER (MID) – An identification number assigned to each member merchant of an acquiring organization, such as a financial institution, Independent Sales organization (ISO), Merchant Service Provider (MSP) or processor.
A merchant identification number (MID) is a unique number assigned to a merchant account to identify it throughout the course of processing activities.
When merchants process credit-card transactions over a computer network, those networks are interconnected with a credit card front-end processing center and a back-end settlement network via a network gateway. The merchant account comprises a merchant identification number (MID), one or more terminal identification numbers (TID), and a gateway identification number (GID).
In particular, the MID uniquely identifies the merchant, while the TID specifies a particular profit center, location or facility from which credit-card transactions are being processed. The GID identifies the particular network gateway through which credit card transactions from the merchant will be routed (to the front-end processing center and back-end settlement network). The MID specifies the merchant, but all of the identifiers taken together will confirm each facet of the transaction for greater security.
The MID is generated by a processor or acquirer and is specific to each individual merchant location. This number is used to identify the merchant during the normal processing of transactions, adjustments, chargebacks, end-of-month fees and so forth. It is vital not to confuse the MID with other merchant account numbers, particularly those that identify merchants to the equipment they use for processing transactions. A merchant with a single merchant processing account number may use several terminals at one location, resulting in one MID and several TID’s.
The MID numbers assigned to your company’s different profit centers identify them as discrete accounting entities, allowing each point of sale to be broken out on your monthly statement. For all practical purposes your service provider or processor will classify businesses under one or more of the following general business types: Retail, Food & Beverage, Hotel, Mail Order/Telephone Order, Auto Rental, Advanced Reservations (Hotel), Automated Fuel Dispenser, Airline, Supermarket and E-Commerce.
Problems of Overlap
The hotel industry is a good example of one in which using a single MID can be problematic. Each MID type has unique rules for authorizing, depositing and qualifying transactions, and each also has its own base discount rate. The highest “Retail MID rate” is still much lower than the lowest “Hotel MID rate,” but according to card association rules these transaction types are never mixed. This means hotels must assign each profit center a separate MID number or risk seriously overpaying for its payment card transactions.
Individual MIDs would enable a hotel operator to separately track transactions for each profit center. Without MID separation, it would be nearly impossible for a hotel controller to separate food and beverage charges from front desk, retail outlet or other charges. Using different MIDs for different profit centers enables hotel management to avail itself of the best discount rates available for each one, thus simplifying the accounting process and improving reporting capabilities at the same time. Routing all charges through a single Hotel MID would result in transactions from non-hotel points of sale to be “unqualified” for the lowest rate, so the ability to break out transactions based on MID type has a profound effect on the total cost of doing business.
Businesses other than hotels may also face incentives to separate points of sale. Merchant service professionals of all kinds can supply useful information for businesses to use in deciding how to handle multiple MIDs. The more you know about how these systems work, in real life as well as ideally, the better decisions you will be able to make and the more control you will have over costs.