For our suppliers, accepting electronic card payments comes with an “extra” expense not associated with cash or check payments — the interchange fee, which is a small percentage of the transaction amount, paid by the supplier, when the transaction is processed. While we understand that pricing of the supplies and services we purchase usually have those expenses built into the purchase price, we always try to work with our suppliers to assist them in keeping their costs down — which is a savings that can then be passed on to their customers. So how do we help our suppliers with that “extra” expense?
It’s called Level-3 data. When we help our suppliers obtain and use Level-3 data during the payment process, they’ll see reduced interchange fees on card transactions.
Depending on the processing method, which can also be dictated by the point-of-sale (POS) devices that suppliers use, credit card processing can include three different levels of data with the transaction. These data levels — Level 1, Level 2 and Level 3 — are defined by how much information is needed to complete a payment, with Level 1 requiring the least amount of data and Level 3 requiring the most data.
Level-3 data carries significant importance for our suppliers — it’s the key to ensuring that they’re paying the lowest possible interchange fees for card transactions. And for us, Level-3 data is the key to maintaining a great relationship by providing our suppliers with incentives to accept electronic card payments.
What Is Level-3 Data?
Level-3 data, also called Level-3 line item detail, is similar to the data found on an itemized invoice for business-to-business (B2B) and business-to-government (B2G) transactions. The supplier enters this data into their POS (or virtual POS) before the transaction works its way through the applicable payment systems for processing and settlement. Level-3 data includes the standard data associated with consumer transactions (merchant name, transaction amount and date) plus the following:*
- Tax amount
- Invoice number
- Order number
- Product code
- Product commodity code
- Product description
- Product quantity
- Product unit of measure
- Product extended amount
The difference in payment processing (and interchange savings) is in the details.
Savings for Our Suppliers
Level-3 processing provides more detailed information about the transaction, which the issuing bank sends back to the buying organization. The most significant reason for suppliers to include this Level-3 data is that the interchange fees that they pay for card transactions are significantly reduced. And when the transaction amounts get large, as they often do with B2B and B2G transactions, so do the supplier’s savings increase when they provide Level-3 line-item detail.
So how much can a supplier save with Level-3 data? Here are some examples from the MasterCard interchange schedule:
- The commercial standard interchange is 2.95% plus 10 cents.
- The Level-3 rate ranges depending on the size of the transaction and is evaluated and possibly adjusted twice annually. Currently the Level-3 rate is 1.80% plus 10 cents if the transaction is less than approximately $7,500. The rate drops as the transaction amount grows.
- As the chart below shows, the higher the transaction amount, the greater the savings over the standard interchange category.
So is the attention to detail in Level-3 transactions worth it to your organization? From the perspective of the entire payment ecosystem, and what it means to our suppliers and the overall cost to us, it is. Conveying Level-3 information provides a significant financial opportunity for our suppliers who accept corporate cards or P-cards from us. Even just one large P-card transaction per year can justify the investment in the capability to transact in this manner.
Benefits for Buying Organizations
But let’s not forget the significant benefits for the buying organization. Having Level-3 data as part of the transaction allows buyers like you to “recognize” with greater certainty the transaction details associated with the payment. When the transaction comes through into the issuer payment solution on the buyer side, then you can code and allocate those transactions more easily, especially when there are multiple transactions with similar amounts on the same card payment.
Historically, though, there have been some obstacles for suppliers to provide Level-3 data for transactions. The most obvious obstacle is that card terminals don’t prompt for additional data — and if they did, you’d be entering letters from a numeric keypad. (Think about sending a text message on flip phones a decade ago, and you’ll get the picture.) What this really means is that suppliers who want to supply Level-3 data to get the fee savings need to input their transaction information from a system using software that prompts them for the required information.
Access to Level-3 Data
AOC Solutions (in partnership with our companion company, 3Delta Systems) offers several ways for you and your suppliers to reap the benefits associated with payments that include Level-3 data.
- EC-Pay® Buyer-Initiated Payments Platform: This payment platform for buying organizations uses the traditional credit card processing networks to “push” payments directly into a supplier’s banking account — without any action required by the supplier. The supplier doesn’t even have to be set up to accept card payments. And the EC-Pay platform includes Level-3 data with each payment, which automatically qualifies the supplier to take advantage of the lowest available interchange rates.
- Payment WorkSuite® Gateway Services: This software-as-a-service gateway for merchants can handle browser-based, real-time and file-based processing — in any combination. Supported processors include Elavon, First Data, TSYS, Vantiv, WorldPay and more. And when merchants use this platform for payment processing, they’ll receive Level-3 data with each transaction, resulting in huge savings on interchange fees.
Please reach out to us if you’d like to learn more about how Level-3 data can help you and your suppliers save on interchange fees.
*Depending on the payment processor, additional data elements may be included with Level 3. Not every processor supports all the possible data elements for Level 3.