What Is Level 3 Processing and How It Optimizes Transaction Costs

What Is Level 3 Processing and How It Optimizes Transaction Costs
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Many large corporations and government agencies provide their employees with commercial credit cards to make purchases or pay invoices, which allows buyers to better track spending across their organization.

Business-to-business (B2B) is one of the fastest-growing segments for new and established companies. Forrester Research predicted in January 2019 that in the United States, B2B e-commerce “will reach $1.8 trillion and account for 17% of all B2B sales in the U.S. by 2023.”

If you conduct business with companies or government agencies (B2G) that buy goods or services using corporate cards, purchasing cards or business cards, you can significantly lower interchange fees by sending line-item details on eligible transactions. The card brands refer to this enhanced data transmission as Level 2 and Level 3 credit card processing. 

Lower Risk, Lower Costs

Consumer credit card transactions simply send Level 1 data, which includes card details, merchant name, date and transaction amount.

Transmitting details from invoices helps validate the cardholder and the authenticity of the transaction. Business buyers and government agencies receive helpful information to better link purchases to payments, extending greater visibility and control over internal spending. Passing enhanced purchase data to the card brands lowers risk, which in turn qualifies transactions for a lower interchange rate. 

These savings are passed on to merchants if they process with a provider like PayJunction that has a Level 2 and Level 3 Payment Gateway and supports Interchange Plus pricing. Level 3 processing provides superior reporting and requires the merchant to send line-item details with every B2B eligible transaction made in person, online, over the phone or by mail. The card brands differ slightly on the information to send, but it is typically 10 to 20 data fields. Enhanced data must be added before the transaction settles, and to qualify for the best rates, settlement must occur within 24 hours of authorization.


Level 2 Data Level 3 Summary Data Level 3 Line Item Details
Level 1 data elements Level 1 and 2 data elements Level 1 and 2 data elements
Sales tax amount Ship to/from ZIP code Item description
Sales tax indicator Destination country code Item quantity
Customer code VAT invoice reference number Item unit of measure
Purchase ID VAT tax amount/rate Item total
Purchase ID format Discount amount Item commodity code
- Freight/shipping amount Item product code
- Duty amount Item unit cost
- Order date Item VAT tax amount/rate

Source: Visa Enhanced Data, Purchasing Data

Rates vary by card brand, as well as card type, input method and transaction size, but no matter how you slice it, the savings add up. Here are typical network interchange rates from Visa for corporate purchasing cards:

  • Level 1 = 2.70% + $0.10
  • Level 2 = 2.50% + $0.10
  • Level 3 = 1.90% + $0.10
  • Level 3 large ticket (>$5,000) = 1.45% + $35

Providing Level 3 data does not guarantee that the transaction will qualify for Level 3 interchange rates. Qualification depends on multiple factors such as card type and the quality of the Level 3 data provided with the transaction.

Level 3 Savings Add Up

For businesses that accept a lot of purchasing or government cards, qualifying for Level 3 rates can produce significant savings. This is especially true for businesses that have high average tickets.

Taking the time to properly enter details for all Level 3 eligible transactions can pay off for merchants that do a lot of B2B and B2G transactions. How much?

How Much Can Level 3 Processing Save?

Here’s a savings example based on an automotive dealer with 3 locations. About 20% of their business comes from servicing fleet vehicles for corporate and government clients. 

  • Total Volume = $750,000/month/location
  • B2B Level 3 Eligible Processing Volume (20%) = $150,000/month/location

  Level 1 - 2.70% Level 2 - 2.50% Level 3 - 1.90%
Interchange/transaction
(average purchase = $475)
$12.85 $11.85 $9.00
Monthly interchange/location $4,050 $3,750 $2,850
Monthly savings/location - $300 $1,200
Annual savings/location - $3,600 $14,400
POTENTIAL ANNUAL SAVINGS
(all 3 locations)
- $10,800 $43,200

The dealership could use those savings for advertising, staffing, technology upgrades, or new equipment for the service department.

Just imagine what you could do with savings like that! 

Start Saving

Talk to PayJunction today to find out if your software provider has integrated to our gateway to support Level 2 and Level 3 credit card processing.

Find out if your software provider supports level 2 and 3 processing.

Are you able to collect level 3 data today? Tell us in the comment section below.


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PayJunction Team

Content written by the PayJunction team encompasses broad business topics including marketing, brick-and-mortar business operations and management.

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