Level 3 Processing is used in business-to-business and business-to-government transactions to help significantly lower interchange rates for Visa and Mastercard transactions.
When it comes to processing payments, businesses define and classify their transactions in different levels based on the size and the significance of the transactions. Though every transaction in a business is always significant, the customer information that the businesses obtain while processing these transactions holds more significance than the payment itself. This customer information is equivalent to additional revenue for the customer.
Based on the amount of information that is collected while processing credit cards payment, these data levels can be classified as Level 1, Level 2, and Level 3. As the level goes up the amount of data collected while payment processing goes up too. It is as such self-explanatory that Level 1 needs minimum information as the levels go up the required information increases as well. In this piece though, we will start off talking with Level 3 and then Level 2 and how you can accept the data in these levels.
Level 3 Processing – What is It?
This is referred to as the type of processing that is used by large organizations and corporations, to track and monitor B2G and B2B transactions, organizational spending and helps in collecting additional details. In Level 3 processing, additional sets of data and information are collected through the input of extra line items.
The extra data that is being collected helps the organizations in securing interchange optimization i.e. securing lower rates of interchange. This data is reported back to the payment processing companies such as Mastercard and Visa which in turn lets the businesses keep a track of things such as sales tax, and makes it possible to set purchase restrictions on credit cards issued by companies.
This as such helps the companies to stay right on top of all their spending and expenses that ensures that company funds are utilized only for the purpose of the company and its operations.
What is Level 3 Data?
Usually, most of the merchants never will have the chance to accept payments using Level 3 cards. However, if you are in the heavy B2B industry or if your business makes a lot of payments using Government cards, then the facility to accept Level 3 payments can help you in reducing the subsequent interchange costs substantially.
With Level 3 data acceptance interchange rates can be slashed by a complete 1 percent than the standard rates. But as a business, if you want to gain access to Level 3 payment processing, you will need to input a lot of information on every transaction. Also, not all gateways are equipped to collect Level 3 Data.
Level 3 Data may include the following potential fields while payment processing:
- Purchase Order or PO Number
- Destination Zip Code
- Tax Amount
- Tax Indicator
- Requestor Name
- Address of the Destination
- Destination City
- Destination State
- Item SKU or ID
- Item Description
- Item or Unit Price
- Measuring Unit (each)
- Extended Price
- Line Discount
- Commodity Code
- Duty Amount
- Freight Amount
The above fields may change with changing business requirements and business domains, but all-in-all the level of detail that is captured remains more or less the same. When configuring for Level 3 payment processing, businesses need to ensure the settings are updated correctly.
Level 2 Data and How it is used
Now coming to Level 2, it is similar to payment processing Level 3, with the only difference that it requires less information to be captured. In Level 2 as well merchants need to enter some additional fields but these fields are comparatively simpler details and are easy to enter with very few fields. With Level 2 as well you get lesser interchange rates but that is lesser than what you get with Level 3 processing.
To process Level 2 payments and capture Level 2 data, you would either need a good payment gateway that can handle Level 2 payment data or a standalone POS terminal. With Level 2 you can get interchange rates to as low as 0.50 percent which is lower than usual sales at Level 1 or no data capture. Level 2 processing is extremely beneficial for B2B merchants who are into processing huge orders. To qualify as a Level 2 merchant accepting Level 2 data, you will need to capture some or of the below fields with every transaction.
- Name of the Merchant
- Transaction or Sale Amount
- Tax Amount (between 0.1% to 31%)
- Date of Transaction
- PO Number or Customer Code
- Merchant Location Zip Code
Now that we have covered both Level 2, and Level 3 payments and what kind of data is accepted, let us see how you can start accepting data while processing payments for both levels.
Advantages for Using Level 2 and Level 3 Payment and Data Acceptance
If you are running a large corporation with huge order volumes and subsequently a large number of payment transactions, using these levels of payment processing and data acceptance can help you a lot in terms of saving and keeping a tab on the overall operations.
The more data you accept and pass on to the gateways, the more your interchange rates are slashed. You can get the interchange rates slashed to about 1 percent with Level 3 data acceptance which is huge considering huge transactions. Similarly, with Level 3 you can save up to 0.05 percent which is again pretty substantial. One other advantage is the fact that with these Levels, restrictions on card purchases can be placed that can help businesses keep a tab on every spending and transaction.
How to Accept both Level 2 and Level 3 Data?
To be able to accept Level 2 and Level 3 data, you will need to ensure you are set up with a payment processing company or a company that can provide you with the gateway services. These services can ensure you get low rates along with many other features. The companies will charge you a monthly fee but the huge savings that you will make using these data acceptance levels is worth it.
Levels of data acceptance in payment processing help businesses in ensuring that payment gateway companies get pertinent transaction information that helps these organizations in keeping a check on their transactions and pending. In the long run, using these levels (Level 1 and Level 2) helps businesses in saving a lot of interchange costs thereby leading to major cumulative savings over a period of time.