What Level 3 Credit Card Processing Is and Why It Matters

 In Business Intelligence, Industry Trends, News

It’s simple, right? You swipe your credit card, and the credit card fairies flutter their way out of their little hideaways, scoop up your cash, and ferry it over to the bank account of whoever you bought the goods from. Easy peasy.

Well, not quite. You’re forgetting the part about the magic beans and the Tax Gremlin.

All fairy tales aside, credit card transactions are complicated processes that involve a lot of data being exchanged between multiple parties, and things can get tricky quickly.

Credit card security is, of course, a big concern and adds another layer (or five) of complexity to these data exchanges, but credit card security and PCI (Payment Card Industry) compliance are separate from processing level. No matter what processing software you end up using, make sure that it is PCI compliant.

So, Level 3 processing. What is it and how can you qualify for it?


What is Level 3 processing?

The different “levels” of processing simply refer to the amount of card data needed to complete the transaction.

Level 1 processing is a standard consumer transaction, with limited data involved (transaction amount and transaction date).

Level 2 processing is for B2B and B2G (business-to-business and business-to-government) transactions. There is more data exchanged in a Level 2 transaction than in a Level 1 transaction, but the amount of data that can be exchanged is limited by the data capturing capabilities of most POS (point of sale) hardware systems.

Level 3 processing, also B2B and B2G, is the equivalent of including a detailed line item invoice (with item descriptions, quantity information, tax details, etc.) with each transaction. Having such detailed accounts of where their money is going allows businesses and governments to keep better records of their spending.

Level 3 transactions can only be made by Level 3 purchase cards, but customers who use such cards are usually looking to make a lot of purchases, so being able to accommodate them could be a huge advantage to you as a Level 3 merchant.

Why should I have Level 3 processing?

No matter the processing level, there’s a fee attached (of course), but interchange rates are as much as .50% to 1% lower for Level 3 merchants. Additionally, Level 3 processing provides lower Days Sales Outstanding (DSO) by collecting receivable funds more quickly.

“Interchange rates are as much as .50% to 1% lower for Level 3 merchants.”

In short, Level 3 processing is for data-rich transactions made with a Level 3 purchase card. Collecting all that data means that both parties can conduct thorough reporting to improve their own performances, allowing them to reduce costs and improve operations. The catch is that Level 3 transactions can only be accepted by qualifying merchants.

How do I qualify for Level 3 processing?

To qualify for Level 3 processing, you must utilize the software necessary to run Level 3 transactions. That’s all there is to it. Don’t forget that you still have to be PCI compliant, too, no matter your processing level, and that Level 3 processing is for B2B and B2G transactions, not consumer-level transactions.

Level 3 processing requires that specific line item data be collected, which is not possible with standard credit card terminals. Specialized payment software must be used and is available from providers such as Nodus, BluePay, Bill & Pay, 3Delta Systems, and others. Many of these softwares offer integration options with your other business softwares, so you’ll need to do some research to find the software that’s right for your company.

SalesPad + PayFabric = Level 3 Processing

SalesPad provides its own solution by partnering with Nodus PayFabric to provide Level 3 processing to merchants. PayFabric integrates seamlessly with both SalesPad Desktop and SalesPad Cloud. Learn more about PayFabric with SalesPad.

Read more about PCI compliance, ecommerce and other important order processing and purchasing terms.


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