What Is Level 3 Payment Processing?

If you operate a Business to Consumer (B2C) company, you are using Level 1 credit card processing. This is what most companies use when processing standard consumer credit cards offered by Visa, MasterCard and American Express.

If your business provides goods or services to other businesses (B2B), especially if you interact with small to medium-sized businesses You might have to explore Level 2 processing is an ideal solution. However for larger corporate or government purchases upgrading to  Level 3 payment processing will help optimize interchange rates and save money.

Yet what exactly is Level 3 credit card processing, and why does your business need it?

What Is Level 3 Payment Processing?

With Level 3 credit card processing, all transactions require the capture of specific line item data typically around 15-20 fields.  However, that number can go as high as 100 — depending on the client.

Common line item details for Level 3 credit card processing include:

6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Commodity codes
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Product codes
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Item descriptions
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Merchant contact info
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Tax amounts
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Freight amounts
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Quantities and units

Why require all of these additional details? What is the benefit to the buyer — and more important — what is the benefit to you?

The Advantages of Level 3 Credit Card Processing

The most important benefit for customers who buy with Level 3 credit cards is control. By requiring all of this extra information, they can more easily restrict things like:

6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels Who in the organization is allowed to buy
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels How frequently the card may be used
6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels The size and dollar amount of each purchase

Given the sheer volume of multinational and governmental spending, such controls are necessary. They allow organizations to more carefully track where money is going and why.

However, there are several benefits for you — the merchant:

6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels You attract a very different type of clientele — mainly heavy-hitters that wouldn't (or couldn't) do business with you otherwise. Many government agencies only use Level 3 credit cards for major purchases.

6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels You also benefit from faster account settlements. With Level 3 processing, the Days Sales Outstanding (DSO) becomes shorter, allowing you to avoid unnecessary delays. This can be a huge advantage if cash flow is a concern.

6e633a235ea0d523078e667b9f84f15b-blue-check-mark-by-vexels You pay lower interchange fees by accepting Level 3 credit transactions. Because of all of the extra information required, fraud becomes less likely, and you’ll be reward you for helping to reduce the risk of credit card abuse.

Making Level 3 Credit Card Processing Work for You

level 3 processing isn't for everyone. Especially If you deal mostly with consumers or smaller businesses, you're probably better off with Levels 1 and 2.

Though if Level 3 is right for you, there are two additional components you should keep in mind:

While Level 3 can be more secure, it is imperative that you invest in PCI-compliant payment processing. Otherwise, you're simply exchanging one type of risk for another.

Submitting Level 3 data requires the use of specialized payment software that is accessed via a secure website application. Data is typically passed to the payment platform via integration with a merchant’s ERP system.
If you have additional questions about Level 3 credit card processing, contact our payment support team today.