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The financial industry may use credit card data to identify suspicious gun purchases


Gun control advocates are hoping a new tool will help identify suspicious gun sales. It involves a piece of financial plumbing, let's call it, used by credit card companies and banks. But will the financial industry embrace it? Wailin Wong and Darian Woods from our daily economics podcast The Indicator explain.

WAILIN WONG, BYLINE: Now, credit card companies and banks don't collect product-level data on what specific items people are buying with their cards.

ANDREW ROSS SORKIN, BYLINE: But the one thing that is communicated back to all of those folks is the merchant category code.

WONG: Andrew Ross Sorkin is a columnist and editor-at-large at The New York Times, where he covers the financial industry. And he knows all about the merchant category code, or MCC for short. It's this four-digit number that's used to categorize a business by what it primarily sells. That could be cat food or concert tickets or refrigerator repair. And one big way the industry uses these codes is to gather data on consumer spending. David Shipper is a strategic adviser at a financial services research firm called Aite-Novarica Group.

DAVID SHIPPER: I mean, without them, it really would be difficult to understand, as a card issuer, where your consumers are spending money.

WONG: Merchant category codes have been around since 2003, and they're managed by a group in Geneva, Switzerland, called the International Organization for Standardization.

DARIAN WOODS, BYLINE: The ISO is the authority that approves or rejects requests for new codes based on criteria like, is the proposed new category distinct enough from the categories that already exist? And do the businesses in the category generate at least $10 million in annual sales?

WONG: Until September, there wasn't a code specifically for stores that sell guns and ammunition. Those businesses are usually designated as sporting goods or miscellaneous. So in 2018, Andrew Ross Sorkin thought, what if there was a new code just for gun stores so the financial industry could have a chance at potentially spotting suspicious activity? So he started writing and giving talks about this idea, and one bank took notice - Amalgamated Bank. It submitted an application to the ISO for a new merchant category code, and after an initial rejection, the ISO approved the request. And David said that caused quite a stir.

WOODS: The new code was considered a win by gun control advocates, but a firearms trade association and almost two dozen Republican attorneys general are balking at the idea.

WONG: David says that it's not clear how effective the new merchant category code will actually be as a way to spot suspicious purchases. For starters, the code is like a blunt instrument. It only identifies the type of business where a credit card is used. It doesn't give any information about what was purchased.

WOODS: And then there's the question of whether the new merchant category code will get used at all. So remember; we mentioned earlier that banks assign the codes to the businesses, and gun stores are usually designated as sporting goods or miscellaneous. So for this new code to actually get used, stores and their banks would have to work together to reclassify the store.

WONG: David says he doesn't really see that happening, and he's also skeptical that newly-opened gun stores will want this code assigned to them. So at the moment, the new merchant category code exists, but it needs financial institutions to embrace it. But Andrew says he hopes the new code will inspire continued debate and reflection in the financial industry about how those businesses can help reduce gun violence.

WOODS: Darian Woods.

WONG: Wailin Wong, NPR News. Transcript provided by NPR, Copyright NPR.

Wailin Wong
Wailin Wong is a long-time business and economics journalist who's reported from a Chilean mountaintop, an embalming fluid factory and lots of places in between. She is a host of The Indicator from Planet Money. Previously, she launched and co-hosted two branded podcasts for a software company and covered tech and startups for the Chicago Tribune. Wailin started her career as a correspondent for Dow Jones Newswires in Buenos Aires. In her spare time, she plays violin in one of the oldest community orchestras in the U.S.
Darian Woods is a reporter and producer for The Indicator from Planet Money. He blends economics, journalism, and an ear for audio to tell stories that explain the global economy. He's reported on the time the world got together and solved a climate crisis, vaccine intellectual property explained through cake baking, and how Kit Kat bars reveal hidden economic forces.