The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.

Comparison: NAICS vs. SIC

NAICS was developed in 1997 to replace the older Standard Industrial Classification (SIC) system. While SIC focused on the “product” or “output” of a business, NAICS focuses on the “process” or “production” method.

Structure of NAICS

NAICS uses a six-digit hierarchical coding system:

  • First two digits: Economic Sector (e.g., 44 for Retail Trade)
  • Third digit: Subsector
  • Fourth digit: Industry Group
  • Fifth digit: NAICS Industry
  • Sixth digit: National Industry

Financial Implications

While Merchant Category Codes (MCCs) are the primary system for credit card transactions, banks and insurers use NAICS codes to assess business risk, determine eligibility for commercial loans, and set insurance premiums.