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Further Update from Square with regards to Virtual Credit Card Payments.
Their answer is that they"Can't guarantee acceptance of Virtual credit cards with Square".
The Merchant category Code (MCC) that some accommodation booking sites are issued with are MCC 7011- Hotels Motels and Resorts This MCC is not available in the Square system, but they are working to acquire the additional codes through the various credit card networks, but this is a lengthy process.
Square have MCC 4722 - Tourism. If the Virtual Credit Card does not recognise this MCC then there is a mismatch and the cards are being declined.
Needless to say I tried using Square today and the credit card transaction was approved, so Square must have set up my merchant code MCC-4722 which worked with the Virtual credit card payment from Booking.COM.
I have similar issues with Virtual Credit Card payments using "Square" Point of Sale Device. The credit card details although entered correctly are not recognised by B.C.
I have spoken to B.C support and they advise me that the Square Merchant Code needs to be setup as an "Accommodation" business in the Square settings / setup.
I am in the process of asking Square to change this for me as I have checked and my merchant code is an optional entry.
I will update if this works once all the changes are made.