Reduce Commercial Credit Card Processing Costs

Reduce Commercial

Credit Card Processing Costs

Executive Summary 3

Denitions 4

Visa

Straight-Through Processing (STP) 5

Visa STP for Buyers 5

Visa STP Payment Flow for Buyers 5

Visa STP for Suppliers 5

How It Works 5

Supplier’s Business Benets With Visa STP 5

Visa STP Payment Flow for Sellers 6

Large Ticket Credit Card Processing 6

Large Ticket Credit Card Processing Discounted Rates 7

Credit Card Processing With Enhanced Data (Level 1, Level 2 and Level 3) 8

What Is Level 1 Data? 8

What Is Level 2 Data? 8

What Is Level 3 Data? 9

Level 3 Data Requirements 9

Visa Level 3 Data Requirements 9

Mastercard

Level 3 Data Requirements 9

American Express Level 3 Data Requirements 9

Which Cards Qualify for Level 3 Rates? 10

What Qualies a Payment Transaction for Level 3 Interchange Rate? 10

The Role of Payment Gateways and Level 2/Level 3 Processing 11

Automatic Interchange Optimization 11

Tangible Benets of Level 2 and Level 3 Processing 12

Detailed Interchange Cost Comparison Example 12

Lower Interchange Rates Benet Businesses 13

Summary 13

Table of Contents

Executive Summary

Business to Business (B2B) and Business to

Government (B2G) payment transactions generally

involve corporate or purchase credit cards. The

charge amounts for these transactions are usually

higher compared to Business to Consumer

(B2C) transactions. Most B2B purchases involve

additional charges required for the delivery of

goods purchased (Freight, duty amount and so on).

On average, higher transaction amounts cost more

to process but isn’t always the rule. Businesses

processing large transaction volumes of B2B/B2G

cards can reduce transaction costs by providing

additional transaction data.

Credit card payment processing gets categorized

into three different levels: Level 1, Level 2 and

Level 3. As the level increases, so does the

requirement to provide more information when

processing a transaction. Most businesses can

operate at Level 1, but when processing qualifying

B2B or B2G transactions and providing additional

transaction information, the cost of the transaction

can be reduced. The reduced transactions rates

can be achieved by qualifying transactions at Level 2

and Level 3 card processing.

Merchants processing a significant volume of

B2B/B2G transactions have options to reduce

the cost of qualifying card transactions. These

options include collecting and passing additional

transaction data, submitting the settlement of

transactions within a specific time window and

registering with the card brands for additional

large-ticket program discounts.

This paper highlight ways in which businesses can

lower the cost of B2B/B2G payment transactions

by leveraging different payment processing

methods available.

Denitions

To fully understand the different payment processing

methods that businesses can leverage to lower

the cost of B2B/B2G payment transactions, it is

important to be familiar with a few key terms.

Card Types

• Business Card: A credit card issued to

employees at a small business. The Cardholder

is liable for cardpayments

• Corporate Card: A credit card issued to

employees at a large company for

business-related expenses. Thecompany is

liable for the card payments

• Purchasing Card: A credit card issued to

employees to make business-related purchases

instead of using a purchase order. These cards

are also referred to as P-Cards. And, take

the place of a purchase order and streamline

the process for authorized employees to buy

approved goods or services for a business.

Employers can impose restrictions on P-Cards,

such as capping spending or restricting

purchases at businesses with a certain merchant

category code (MCC)

• Government Purchase Cards (GSA SmartPay):

A purchase credit card issued by the government

to local, state or federal employees. Transactions

with GSA cards are taxexempt

Interchange:

The largest part of the transaction processing cost.

It is determined by and goes to the banks that

issue credit cards.

Level 1 Data:

Level 1 card data is the most basic and common

type of credit card transaction data. The data elds

required to qualify a payment transaction at Level

1 are Merchant DBA name, Billing ZIP code and

Transaction amount.

Level 2 Data:

Level 2 card data includes the Level 1 data in

addition to the following data elds: Sales tax

amount, Customer reference number or PO

number, Merchant postal code, Tax ID, Merchant

minority code and Merchant state code.

Level 3 Data:

Level 3 data refers to providing specic line

item details at the time of a purchase card or

government card transaction beyond what is

required for consumer card transactions. Level3

data includes the same information captured at

Levels 1 and 2, plus the following data elds:

quantity, product code, product description,

ship-to ZIP, freight amount, duty amount,

order/ticket number, unit of measure, extended

item amount, discount indicator, discount amount,

net/gross indicator, tax rate applied, tax type

applied, debit or credit indicator and alternate tax

identier. This data is equivalent to the information

found on an itemized invoice.

Transaction Settlement:

The process of moving funds from the cardholder’s

account to the merchant’s account following a

credit or debit card purchase.

Note:

The card types described above can be

usedin person (card-present – CP) or online,

overthephone, and by mail to pay an invoice

(card-not-present – CNP). However, Level 2

and Level 3 data primarily helps with

CNP transactions.

Visa

Straight-Through

Processing (STP)

Visa offers a commercial card processing program

called Visa Straight-Through Processing or Visa STP.

Visa STP is a buyer-initiated transaction service

that automates invoice-based payments for buyers

and suppliers. STP enables registered buyers and

sellers to benet from the optimization of the

accounts payable process. Sellers pay less for

processing large ticket transactions. Buyers can

make payments to any supplier registered with the

STP program.

The list of registered STP suppliers is provided by

Visa or any participating payment gateways with

Electronic Invoice Presentment and Payment (EIPP)

solutions. Buyers and suppliers must register with

Visa to take advantage of this program.

Visa STP for Buyers

Buyers benet from Straight-Through

Processingby:

• Automating payments to suppliers with the

submission of a payment data le. The payment

le is sent directly to a participating bank or an

Electronic Invoice Presentment and Payment (EIPP)

participatingsolution

• Gaining added payment control over the timing of

each transaction

• Automating payment and improving relationships with

participating vendors

• Reducing payment costs associated with manual

processes and the need to print checks

• Receiving payment status data that can be imported

back into the business ERP system for auto

reconciliation. Visa STP for suppliers

Visa STP Payment Flow for Buyers

The diagram shown depicts the process ow

buyers follow when processing STP payments.

Visa STP for Suppliers

STP for suppliers takes the hassle out of accepting

B2B invoicepayments.

You provide

apayment

instruction le

to your bank

Visa receives the le

from your bank and

passes through for

processing

Visa securely

sendsyou complete

purchase details for

reconciliation

Your supplier

receivespayment

automatically

How It Works

• Supplier’s participating customer initiates an invoice

payment through their bank or participating EIPP

solution

• The bank or EIPP solution processes the payment and

sends it to the supplier’s merchant processing partner

• The EIPP solution or merchant processing partner

processes the payment for the supplier and provides

the supplier invoice details electronically

• The buyer receives payment conrmation from their

respective bank or directly from the EIPP solution

Supplier’s Business Benets With Visa STP

• Reduced Visa Interchange. Supplier enjoys access

to reduced Commercial Card interchange rates (See

table shown.)

• No Fixed Acquirer Network Fees. Visa has eliminated

this fee for Visa STP payments

• Minimized risk. Visa STP combines a guaranteed

payment with limited chargeback risk and eliminates

the handling of sensitive card numbers

• Payment automation. Visa STP eliminates payment

keying, the supplier gets an electronic le with

invoice details for reconciliation within the existing

accountingsoftware

• Improved accounts receivable process. supplier gets

paid faster while eliminating the cost of collections

and write-offs

Note: Acquirers enroll merchants (suppliers) to

participate in STP (Does First Data allow this?)

• Once enrolled, Visa will identify the supplier as

STP-enabled in its Supplier Matching Service (SMS).

The Visa Supplier Matching Service is available to help

issuers and buyers in determining which suppliers

areeligible for STP

Visa STP Payment Flow for Sellers

Here’s how Visa STP works:

Your customer

initiatesan invoice

payment through

theirbank

Visa processes the

payment and sends

it to your merchant

processing partner

Visa securely sends

payment conrmation

to your customer

You receive

payment and

invoice details

electronically

Large Ticket Credit Card Processing

Visa, Mastercard and Discover

offer large ticket

transaction discount programs designed for merchants

who accept high dollar transactions. By enrolling in the

large ticket program with a designated card brand and

passing enhanced Level 2 processing, businesses can

substantially reduce the costs associated with accepting

large B2B and B2G credit card transactions.

Large ticket credit card transactions offer the lowest

per-transaction cost. Large ticket programs are applicable

only to B2B and B2G transactions involving large

purchases. Withlargetransactions, businesses can

save more money with a lower percentage fee and

a higher per-transaction fee; the per-transaction fee

doesn’t change like a percentage does. Visa,Mastercard

and Discover offer large ticket programs for highdollar

valuetransactions.

Sellers benet from reduced interchange rates when

processing STP payments. See the table shown for the

reduced interchange offered by Visa.

Shown are the Visa STP commercial interchange rates:

Access to the Lowest Available Visa Commercial

Interchange Rates

Transaction Amount Rate:

U.S. STP Tier 1 (Less than $7,000) 2.00% + 0.10

U.S. STP Tier 2 ($7,000 + $14,999.99) 1.30% + 35.00

U.S. STP Tier 3 ($15,000 + $49,999.99) 1.10% + 35.00

U.S. STP Tier 4 ($50,000 + $99,999.99) 0.95% + 35.00

U.S. STP Tier 5 ($100,000+) 0.80% + 35.00

*Rate accurate as of CPD 4/18/15

Source: usa.visa.com/content/dam/VCOM/download/merchants/

visa-stp-merchant-sheet-with-irf-table.pdf

Mastercard has three “Commercial Large Ticket”

categories with specic dollar-value thresholds:

• Commercial Large Ticket 1: Applies to transactions

that are atleast $7,255

• Commercial Large Ticket 2: Applies to transactions

that are atleast $25,000

• Commercial Large Ticket 3: Applies to transactions

that are atleast $100,000

Visa has one “Commercial Product Large Ticket”

category with adollar-value threshold:

• Commercial Product Large Ticket: applies to

transactions that are at least $5,000

Visa also has a separate “Large Purchase Advantage Fee

Program” with ve categories, each with its own dollar

amount threshold:

• $10,000.01 – $25,000

• $25,000.01 – $100,000

• $100,000.01 – $500,000

• $500,000+

Note that the “Large Purchase Advantage Fee Program”

categories only apply to select Visa Purchasing cards.

Other qualifying commercial cards for large purchases

receive the Commercial Product Large Ticket rate.

In addition to the dollar-value thresholds, qualifying

for large ticket rates requires passing all the required

enhanced data (seeLevel 2 and Level 3 sections later in

this paper). Omittingthe enhanced data does not qualify

transactions for large ticket rates even if the transaction is

above the dollar value thresholds noted above.

Large Ticket Credit Card Processing

DiscountedRates

• Visa: Visa large ticket rate for commercial cards is

1.45 percent + $35.00 per transaction. A separate

large ticket rate (1.20 percent + $39.00 per transaction)

applies to the General Services Administration (GSA)

government cards. For select purchasing cards, large

ticket rates range from 0.40 percent + $58.50 to

0.70 percent + $49.50

• Mastercard: Mastercard has several categories for

large ticket transactions. Mastercard large ticket rates

range from 1.20 percent + $40.00 to 1.51 percent +

$40.00. While the per-transaction component of the fee

in large ticket rates seems high, this rate only applies

to higher-value transactions. For large transactions,

paying a lower percentage fee in exchange for a higher

per-transaction fee results in lower overall costs

For more information, see the Mastercard 2018 – 2019

U.S. Region Interchange Programs and Rates at:

mastercard.us/content/dam/mccom/en-us/documents/merchant-

interchange-rates.pdf

• Discover: Discover Large Ticket Program has the

lowest ratefor this category, at 0.90 percent and $20

per transaction. Discover also sets the amount for

‘Large Tickets’ at transactions above $5,000

For more information on large ticket credit card

processing and discounted rates, reference the April 2019

Visa USA Interchange Reimbursement Fees schedule

at: usa.visa. com/dam/VCOM/download/merchants/visa-usa-

interchange-reimbursement-fees.pdf

Credit Card Processing With

Enhanced Data (Level 1, Level 2

and Level 3)

B2B/B2G transactions that include additional

transactiondata (Level 2 and Level 3) qualify for reduced

interchangerates. Visa, Mastercard and American

Express have programs for Level 2 and Level3

enhanceddata. Discover does not participate in any

enhanced dataprograms.

In order to process Level 2 transactions with

AmericanExpress, merchants need to contact the card

brand and register for Level2 payment processing.

Level 2 and Level 3 data for Visa and Mastercard are

available through interchange without having to notify

the card brands.

American Express Level 3 data is

only supported for businesses based in the U.S. who

are doing business in U.S. dollars and have a direct

account with American Express. OptBlue American

Express accounts do not participate in the Amex

Level3program.

It is important to understand the different

transactionqualifying levels to estimate the

processingcosts to be gained when processing

B2BorB2G paymenttransactions.

What Is Level 1 Data?

Level 1 card data is typically associated with consumer

transactions and includes the same information captured

during consumer credit card payment processing. The

basic data elds required to complete a Level 1 credit

card transaction are:

• Transaction amount

• Business name

• Billing postal code

Additional information, such as the date and time of the

transaction, merchant category code and cardholder

information are automatically recorded by the bank but

aren’t explicitly reported by the merchant processing

the transaction. Transaction Level 1 data returns limited

purchase data to the cardholder. Theinterchange cost for

B2B/B2G Level 1 qualifying transactions is the same as

consumer credit card transactions.

What Is Level 2 Data?

Level 2 data provides additional information about the

merchant and the transaction.

• Tax Amount (Between 0.1 percent and 31 percent of

thetotalamount)

• Customer code/PO Number

• Merchant tax ID

• Merchant ZIP/Postal code

• Merchant minority code

• Merchant state code

Note:

To qualify Visa/Mastercard transactions at Level 2 rate,

the Tax Amount must be between 0.1 percent and

31 percent of the total amount. However, tax-exempt

transactions must include a tax amount of zero, provide

the tax-exempt ag and provide Level 3 data to qualify

for Level 3 rates (lower interchange). For specic

Merchant Category codes (4111, 4131, 4784, 4215, 8211,

8220, 8398, 8661, 9211, 9222, 9311, 9399 and 9402),

Mastercard allows transactions to qualify at Level 2 rates

when passing a zero in the Tax Amount eld.

Visa, Amex and Mastercard offer lower Interchange

rates when this information is provided because the

transaction is less likely to be fraudulent. Level 2 data

processing is available to all merchants and provides a

rate reduction, but not as much as Level 3 processing. To

qualify payment transactions at Level 2 interchange, the

transaction must provide Level 1 and Level 2 data in the

transaction record.

The primary benet to the cardholder of Level 2 credit

card processing is control. Corporate cardholders

often set predened limits on spending. For example,

a company might place restrictions on the number of

monthly transactions per card, the amount of each

transaction and when or how a card may be used. When

processing payments, the merchant sends the additional

elds including tax and code with every transaction,

making it easy for companies to monitor and analyze

their spending, which helps them eliminate the risk of

inappropriate spending withcorporate credit cards.

What Is Level 3 Data?

Level 3 payment processing refers to providing

specic transaction line item details (beyond what

is required for consumer card transactions) at the

time of a corporate, purchase or government card

transaction. It is used in B2B/B2G transactions to

help large corporations track their purchase spending

by collecting additional transaction line-item details.

Passing the additional transaction data benets

seller merchants with signicantly lower interchange

rates for Visa, Amex and Mastercard transactions.

The data is reported back to the card brands and

is later forwarded to the purchasing business.

Businesses receive back the transaction details to

help them keep track of purchases with applicable

sales tax details and help them set restrictions on

purchases made with a company card. Providing this

additional transaction data is optional and can result

in substantial payment processing cost reduction

fora business.

Level 3 transactions require sending the most

data at the time the transaction is submitted for

settlement. Each transaction must include specic

line item details, in addition to Level 1 and Level

2 data, to qualify for Level 3 transaction rates.

The payment processor or payment gateway can

provide specic information on Level 3 data eld

requirements to qualify transactions at Level3 rates.

Level 3 Data Requirements

Level 3 transaction required data elds are subject to

change. Thefollowing list is provided for reference only.

Any business processing B2B/B2G transactions should

check with their respective payment gateway to ensure

the gateway is set up to pass and process enhanced

transaction Level 3 data. The merchant monthly

statement provides data rate qualication details and can

be used to asses if transactions are qualifying at Level 2

and Level 3 rates.

Visa Level 3 Data Requirements

• Unit of Cost

• Tax Amount

• Unit of Measure

• Freight/Shipping Amount

• Duty Amount

• Discount Amount

• Discount Per Line Item and Line Item Total

• Item Commodity Code

• Ship-From ZIP Code

• Ship-To ZIP Code

• Item Description

• Destination Country

• Item Product Code

• Item Quantity

• VAT Information (For example, Tax Amount,

Rate and Invoice Number)

Mastercard Level 3 Data Requirements

• Tax Amount

• Item Quantity

• Tax Indicator

• Item Description

• Customer Code (For Purchasing Cards)

• Unit of Measure

• Tax ID

• Extended Item Amount

• Product Code

• Debit or Credit Indicator

American Express Level 3 Data Requirements

American Express Level 3 data is only supported for

businesses based in the U.S. that are doing business

in U.S. dollars and have a direct account with American

Express. OptBlue American Express accounts do not

participate in the Amex Level 3 program.

• Dollar Amount

• Unit of Measure

• Item Description

• Item Category

• Item Industry Category

• Item Name

• Item SKU

• Item Quantity

• UPC Code

• Commodity Code

• Item Unit Price

• Item Unit Tax Amount

• Item Tax Type

• Item Tax Rate

• Item Tax Amount

• Item Discount Amount

• Item Discount Rate

Source: American Express Level 2 and Level 3 data:

gateway-na.americanexpress.com/api/documentation/

integrationGuidelines/supportedFeatures/

pickAdditionalFunctionality/levelIIAndIIIData/index.

html?locale=en_US

Which Cards Qualify for

Level3Rates?

Many corporate and purchasing cards qualify for Level 3

rates, but most business credit cards do not. Business

cards differ from corporate cards in that the cardholder

is usually liable for purchases rather than the company.

It is common for small businesses to have business

credit cards and larger companies to have corporate

credit cards. Cards eligible for Level 3 processing

include purchase cards, corporate, government spending

accounts, GSA SmartPay cards, eet and Mastercard

business cards. There is no simple way to quickly identify

if a credit card qualies for Level 3 rates. Regardless,

the card brands require merchants to accept all cards

without discrimination. When processing B2B or B2G

transactions it’s best practice to submit all the required

data for Level 3 transactions. If certain cards only qualify

for Level 2 interchange rate, providing Level 3 does not

affect negatively the cost of the transaction.

What Qualies a Payment Transaction for

Level3 Interchange Rate?

Several factors affect whether a transaction

qualies for Level 3 interchange rates:

• The card must be eligible for Level 3 rates (Corporate

and purchase cards; some business cards)

• All the required data for Level 3 must be provided

withthe transaction – the transaction must also

include Level 1 and Level 2 data

• The payment gateway used to process the

payment must be able to accept and process all the

additionalinformation provided in the transaction

• The transaction must be submitted for settlement

within a specic timeframe (May vary per

paymentprocessor)

The table shown provides information on which

enhanced data is required to qualify transactions at Level

1, Level 2 and Level3rates.

Transaction Level Requirements

Data Type Level 1 Level 2 Level 3

Merchant Name Y Y Y

Transaction Amount (Total) Y Y Y

Date Y Y Y

Tax Amount Y Y

Customer Code Y Y

Merchant Postal Code Y Y

Tax Identication Y

Merchant Minority Code Y

Merchant State Code Y

Ship From Postal Code Y

Destination Postal Code Y

Invoice Number Y

Order Number Y

Item Product Code Y

Item Commodity Code Y

Item Description Y

Item Quantity Y

Item Unit of Measure Y

Item Extended Amount Y

Freight Amount Y

Duty Amount Y

The difference in amount of data required for Level 2

versus Level 3 is not insignicant. Providing Level 3 data

requires a gateway that can process this data. Not all

businesses need a Level 3 solution. Businesses that

occasionally process B2G and B2G card but primarily

take consumer cards, do not need to focus on Level 3

data. However, if a business accepts a good volume of

purchasing or government cards or have frequent large

ticket sales with purchasing cards, Level 3 solutions

can provide a substantial cost savings on processing

fees. The difference between Level 2 and Level 3

interchange rates can add up quickly, specically on

largetransactions.

The Role of Payment Gateways

and Level 2/Level 3 Processing

Passing the required Level 2 and Level 3 data with

qualifying transactions alone does not mean transactions

will qualify at the lowest rate. Payment gateways

play a critical role in accepting and processing these

transactions to qualify at low rates. If the payment

gateway is not capable of accepting and processing the

enhanced transaction data, providing the additional data

is irrelevant. In this case, the transactions will not qualify

for Level 2/Level 3 since the data is not sent by the

gateway to the card brands.

Corporate or purchase cards that only qualify at Level 2

rates are generally accepted by most gateways. Because

it is not simple to quickly identify whether cards qualify

for Level 2 or Level 3 rates, it is best to process these

transactions through a payment gateway that supports

Level 2 and Level 3 processing; especially, when

processing large transaction volume with varying card types.

Credit card terminals and most POS systems do not

support accepting and passing Level 3 data. When

using a Level 3 qualifying card with a terminal device

or POS system, the transaction will be charged using

card-present rates and this does not provide the lowest

transaction cost. In order to qualify B2B/B2G transactions

at the lowest rates, a payment gateway capable of

accepting and passing the enhanced data will be required.

Some payment gateways do not support Level 2 or

Level 3 payment processing. In addition, gateways that

advertise the capability and functionality to process Level 2

and Level 3 data may not be certied to pass the data to

all the payment processing platforms they support. It’s

important for businesses to conrm whether a payment

gateway – and its supported payment processor – can

be set up to pass Level 3 data and then verify that

transactions are qualifying at the correct rate once

processing begins.

A quick way to check if transactions are qualifying at the

lowest rate is to look at the monthly merchant statement.

If the merchant statement shows “Standard” or “STD”

for transaction qualication rates, the transactions might

have downgraded. Insome cases, a business may

be missing out on savings without an obvious listed

downgrade term.

When only receiving Level 2 rates for transactions

eligible for Level 3, the business is overpaying for the

cost of the transaction. The best way to look for optimal

B2B/B2G interchange qualication is to have a processing

expert, familiar with Level 2 and Level 3, review the

merchant statement to help determine possible savings

for B2B or B2G transactions. In many instances, the

interchange savings can amount to tens of thousands

of dollars based on the processing volume of qualifying

cardtransactions.

Automatic Interchange Optimization

Some payment gateways provide additional functionality

to help qualify transactions at the lowest transaction

cost. The “best” payment gateways for Level 2 and

Level 3 processing provide functionality to automatically

identify qualifying card transactions and autoll all the

missing or incorrect Level 2 and Level 3 required data

elds with default merchant, predened values. Autoll

helps reduce human error and ensures that a business

provides the line item details needed to qualify for Level 2

and Level 3 rates.

This doesn’t mean a gateway without autoll functionality

is a bad choice. It just means the business will need

to continually pass correctly all the required elds and

parameters for providing enhanced data. Businesses that

have multiple staff members entering payments should

avoid gateways without auto-ll functionality. Entering

Level 2 and Level 3 data for every transaction is prone

to errors when multiple people enter this enhanced

datamanually.

The Fiserv CardPointe virtual terminal and payment

gateway solution automates Level 2 and Level 3

data population for businesses. CardPointe provides

businesses functionality to predene Level 2 and

Level 3 data values to substitute incorrect or omitted

values for processed transactions. This functionality

ensures that every qualifying transaction will be

submitted with all the required enhanced data to qualify a

B2B or B2G transaction at the lowest cost.

The CardPointe virtual terminal can be congured to

auto-ll the required elds when processing B2B and

B2G cards, saving time and minimizing the risk of human

error. The CardPointe payment gateway accepts Level 2

and Level 3 data with every transaction. Upon receiving

the transaction, the gateway qualies the card as a

qualifying Level 2 or Level 3 transaction and provides

the pertinent enhanced data to the payment platform.

This process ensures that every qualifying transaction

receives the expected transaction rate and reduces

the risk of transaction downgrades due to invalid or

omitteddata.

Tangible Benets of Level 2 and

Level3Processing

As of 2019, Visa sets its Level 3 rate for qualifying

commercial cards at 1.90 percent + 10 cents per

transaction (See table shown). Mastercard splits Data

Rate 3 eligible cards into more categories than Visa. Data

Rate 3 cards range from 1.75 percent + 10 cents per

transaction to 2.06 percent + 10 cents. Rates subject

to change.

Providing Level 3 data is better than only providing

Level 2 and providing Level 2 data alone is better than not

providing any enhanced data. For businesses accepting

a large volume of purchase or government cards,

Level 3 qualifying rates can produce signicant savings

(especially for large ticket transactions).

For example, in Visa’s 2019 interchange table, the rate for

commercial Level 3 is 1.90 percent + 10 cents. Providing

only Level 2 data on a card eligible for Level 3 rate,

increases the interchange cost to 2.05 percent +

10 cents: a 0.15 percent difference. On a $1,000

purchase, this increased percentage results in a cost

increase of $1.50 but on a $10,000 purchase, the cost

increases to an additional $15 dollars. The Level 3 savings

can add up quickly for businesses processing large

volumes of B2B and B2G transactions. Not providing any

enhanced data results in a highercost for the transaction

(See Commercial Card Not Present – 2.70 percent +

10 cents – in table shown).

The table shown provides interchange incentive reasons

toprovide Level 2 and Level 3 enhanced data for all

B2B/B2G transactions.

Fee Program

Purchasing

Corporate T&E

Commercial Level lll 1.90% + $0.10

Commercial Level ll – Fuel 2.05% + $0.10

Commercial Level ll 2.50% + $0.10

Commercial Card Present 2.50% + $0.10

Commercial Travel Service 2.65% + $0.10

Commercial Card Not Present 2.70% + $0.10

Commercial Standard Interchange

Reimbursement Fee

2.95% + $0.10

Commercial Product Large Ticket 1.45% + $35.00

Fee Program

Purchasing

Only

Government-to-Government (G2G) 1.65% + $0.10

GSA Large Ticket 1.20% + $39.00

Includes Fleet cards

The Commercial Standard Interchange Reimbursement

Fee category is the lowest downgrade category for B2B

transactions. It carries the most expensive rate of

2.95 percent + $0.10 (see table above). Not providing

the minimum data requirements for commercial card

payments will downgrade the transaction to this category

costing 1.05 percent more than a transaction processed

with Level 3 data.

A business processing a Visa purchase card for a $500

Card-Not-Present transaction would incur the following

transaction costs based on the amount of data passed

with the transaction.

Detailed Interchange Cost Comparison Example

When the transaction is:

• Submitted with all the required Level 3 data, the

interchange cost is: $9.60 (500 x 0.019 + 0.10 cents)

• Submitted with all the required Level 2 data, the

interchange cost is: $12.60 (500 x 0.025 + 0.1)

• Submitted with all the required Level I data, the

interchange cost is: $13.60 (500 x 0.027 + 0.1)

• Submitted without any enhanced data and

downgrade, the interchange cost is: $14.85

(500 x 0.0295 + 0.1)

The interchange difference is $5.25 between the

interchange category with the lowest cost and the one

with thehighest. Mastercard interchange rates are

similar, with the Data Rate 3 category incurring a

1.80 percent + $0.10 cost, which jumps to 2.95 percent

+ $0.10 for a “standard” (downgraded) commercial

credittransaction.

Business credit cards have a smaller interchange costs

gap, as shown in the table shown (taken from page 15,

Visa interchange schedule

Business Credit Fee Program

Interchange

Cost

Business Level ll 2.05% + $0.10

Business Business-to-Business 2.10% + $0.10

Business Retail 2.20% + $0.10

Business Card Not Present 2.25% + $0.10

Business Electronic Interchange

Reimbursement (EIRF) Fee

2.40% + $0.10

Business Standard Interchange

Reimbursement Fee

2.95% + $0.20

Siness Utility Program $1.50

In this case, the difference from the lowest priced

category to the highest comes in at .90 percent.

Although this is a smaller gap than commercial card

categories, it can still add up quickly. It is better to save

the extra 1 percent on all business card transactions by

providing enhanced data to qualify for better pricing.

Lower Interchange Rates Benet Businesses

Only businesses directly benet from lowered

interchange costs. Payment processors have no direct

incentive to help businesses qualify for Level 2 or 3

interchange rates. Interchange is the “wholesale” cost

of credit card processing. Banks collect interchange and

payment processors do not make money directly from

interchange; their prots are not affected by whether a

business gets lower costs at “wholesale price.”

Summary

Businesses accepting B2B or B2G payments in large

volume can greatly reduce transaction costs by providing

enhancedtransaction data.

The enhanced data must be accepted and processed

by the payment gateway processing the transaction.

Businesses can leverage existing payment gateway

interchange optimization functionality to reduce

transaction costs. Interchange Optimization automates

Level 2 and Level 3 data population for incorrect or

omitted transaction data. This functionality ensures

that every qualifying transaction is submitted with all

of the required enhanced data to qualify a B2B or B2G

transaction at the lowestcost.

In addition to providing enhanced Level 2 and Level 3 data

to reduced transaction costs, businesses can register with

the card brands to participate in the Visa Straight-Through

Processing and Large Ticket programs. These programs

offer businesses the lowest interchange rates for B2B

and B2G transactions. Theinterchange cost reduction

associated with providing enhanced Level 2, Level 3

or when registering for reduced interchange rate card

brand programs, can result in substantial savings

forabusiness.

Businesses ought to carefully review their merchant

statements to identify potential cost savings and evaluate

available solutions to help further reduce payment

processing costs.

References:

1. Visa USA Interchange Reimbursement Fees at: usa.visa.

com/dam/VCOM/download/merchants/visa-usa-interchange-

reimbursement-fees.pdf, Amex Corporate Purchasing

Card Program Administrator Guide at:

resourcecenter.

americanexpress.com/en/~/media/gcpmiscsites/

resourcecenter/US/Docs/Application_Forms%20and%20

Payment%20Products/CorpPurchasingCard/US_CPC_PA_

Guide_v1.pdf, and Mastercard 2018 – 2019 U.S. Region

Interchange Programs and Rates at:

mastercard.

us/content/dam/mccom/en-us/documents/merchant-

interchange-rates.pdf

2. Visa Straight-Through Processing Interchange Rates

and

usa.visa.com/content/dam/VCOM/download/merchants/

visa-stp-merchant-sheet-with-irf-table.pdf

Fiserv,

Inc.

255 Fiserv Drive

Brookfield, WI 53045

be trademarks or registered trademarks of their respective companies. 691502 10/20

About Fiserv

Fiserv is driving innovation in Payments, Processing Services, Risk & Compliance, Customer & Channel

Management and Insights & Optimization. Our solutions help clients deliver nancial services at the speed of life

to enhance the way people live and work today. Visit serv.com to learn more.

About Miguel Gracia

Miguel Gracia, VP of Solutions Engineering, is a senior executive with 30 years

of technology experience. His expertise revolves around payment processing

solutions, tokenization, Point-to-Point Encryption (P2PE) terminals, eCommerce,

network security and information security within PCI guidelines.

In 2012, Miguel Gracia joined CardConnect

, which was then subsequently acquired

by First Data. He supports the B2B Enterprise Payments team as a Sr. Solutions

Engineer and develops product solutions within the Enterprise Gateway Integration

and Support groups. Miguel has completed hundreds of payment processing

integrations within the CardConnect gateway. For over 20 years, Miguel has taken

lead roles during the design, testing, deployment and management of secured

data networks, PCI data compliance processes and information systems and IT

departments supporting customers in diverse payment processing environments.

Miguel Gracia has an undergraduate degree in computer science from the

New Jersey City University and a Master of Science in IT Management from

theStevens Institute of Technology.