Payment Processing Level

As a business owner you realize the importance of accepting credit card payments, but you may not realize what a payment processing level means for your business. This is especially true for B2B transactions.
While accepting payments like checks and money transfers are common, most companies would rather pay via credit card. Card transactions also provide benefits for the merchant. Research shows that buyers who pay with credit cards typically spend more on their purchases. This can obviously boost a company’s bottom-line and improve cash flow.
The main concern among B2B merchants is the cost of the interchange fees that come with processing credit cards. Most merchants end-up paying far too much for these fees. This extra cost is in consequence of many owners not completely understanding interchange fee charges.
Some businesses don’t know how to reduce overhead payment processing fees. With B2B merchants they may end up paying more than they should when they aren’t set up for another payment processing level like Level 2 or Level 3 credit card processing fees. Level 2 and Level 3 happen to be cheaper.
What exactly is Level 2 and Level 3 processing? How can you get setup for Level 2 or 3 credit processing? What does this ultimately mean when it comes to a payment processing level?
Breaking Down Level 1, Level 2, and Level 3
Before diving deeper into Level 2 and Level 3 interchange rates, let’s quickly go over interchange rates in general.
No matter the size or type of the business, if you accept payments through credit or debit cards then you’re going to have to deal with interchange rates.
In a previous Due post, James Stoner explains interchange fees. “These are charges that a merchant’s bank account must pay the card-issuing bank for card usage. Visa, MasterCard, and Discover charge the merchant when a customer uses their credit/debit card for a purchase. This fee was put in place in order to cover handling costs, fraud, bad debt costs, and the risk of approving the transaction.”
Visa and MasterCard set-up these fees. Fees are updated at six monthly intervals in April and October. The prices can go up or down (which way do you think they typically go)?
These fees will vary depending on the nature of the transaction, card type, card brand, type of business, and business size. Several changeable factors determine the cost of the fees. This is why some merchants don’t know exactly how much they’re paying in interchange rates.
Interchange rates are a necessary evil of doing business. B2B merchants can save a considerable amount on their credit card processing fees by qualifying for B2B interchange rates.
To qualify for these B2B interchange fees, merchants provide a string of additional information to go with each transaction. Visa describes the data required for Level 2 and Level 3 data as enhanced data. The higher the level, the more the data the merchant will have to provide.
There are three different levels of data:
Level 1 data is standard with all transactions and refers to business-to-consumer (B2C) transactions. It consists of basic information like the card number, the dates data, the CVV2 code. Many require the zip code as well as the merchant name, transaction amount, and amount needed.
Levels 2 applies to corporate, commercial, government and B2B transactions. This level requires all of the Level I data, and in Visa’s case they require the following information:
Sales tax
Sales Tax indicator
A customer code
Purchase ID
Purchase ID format
Level 3 payment processing is typically for larger transactions. This means that it requires more detailed information. This includes a summary data and line detail information.
In Visa’s case the credit card company also asks for:
All the Level 1 and Level 2 data
Destination country code
Shipping/courier charges
Discount details
Date of order
VAT information/reference number
Country code destination
And Zip code for delivery/sending
Level 3 line entry information required consists of: