Level II and III Data

This extra information is often provided by B2B (business-to-business) and B2G (business-to-government) merchants. Here’s a breakdown:

Level 1 Data: This is the standard information required for all consumer-facing credit card transactions. It includes:

    • Merchant Name
    • Transaction Amount
    • Date

Level 2 Data: This adds additional data elements to the standard transaction data, which can offer more detail for commercial cardholders. This level often includes:

    • Merchant Postal Code
    • Tax Amount
    • Customer Code (or PO number)
    • Merchant Minority Code
    • Merchant State Code
    • Sales Tax Indicator (whether items are taxable or not)

Level 3 Data: This provides the most detailed transaction information. It’s especially relevant for government and corporate purchases. The data can include:

    • Item Description
    • Item Product Code
    • Item Quantity
    • Item Unit of Measure
    • Item Extended Amount
    • Freight Amount
    • Duty Amount
    • Ship To Postal Code
    • Ship From Postal Code
    • Destination Country Code
    • VAT Information (if applicable)
    • And many other line item details…

By providing Level 2 and Level 3 data when processing transactions, merchants can qualify for lower interchange rates. This is because card companies often reward the added transparency and detail with a cost-saving benefit. It reduces the risk for the card companies, and the detailed data can be useful for B2B and B2G transactions where detailed reporting is necessary.

However, capturing and sending Level 2 and Level 3 data requires more sophisticated payment software and systems. Not all merchants will find it beneficial or necessary to process at these levels, but for those with a large volume of B2B or B2G transactions, the savings can be significant.

How much can a merchant save in credit card fees by adding level 2 and 3 data?

The savings a merchant can realize by providing Level 2 and Level 3 data when processing credit card transactions depend on several factors, such as the merchant’s industry, the volume and average ticket size of transactions, the specific card brands being processed, and the agreement with the payment processor. However, here are some general points to consider:

Interchange Fee Reduction: By providing Level 2 and Level 3 data, merchants can qualify for lower interchange rates. These are the fees set by card networks (like Visa, MasterCard, etc.) that every merchant must pay to process a transaction. With Level 2 and Level 3 data, interchange rates can be reduced by up to 0.5% to 1.5% or more on qualified B2B and B2G transactions.

Specific Savings: Depending on the card brand and type of card:

    • For a B2B transaction using a commercial card, providing Level 2 data might reduce interchange rates by about 0.70% compared to Level 1. Adding Level 3 data might bring an additional 0.7% to 1.50% reduction.
    • GSA (U.S. General Services Administration) purchases often require Level 3 data, and merchants can see significant reductions in interchange fees for these types of government transactions.
    • Example: Let’s assume a business processes $1 million in B2B transactions annually. If they can save an average of 1% on interchange fees by supplying Level 3 data, that translates to a savings of $10,000 annually. Other Benefits: Beyond direct savings, providing detailed data can make a merchant more attractive to B2B and B2G customers who require detailed transaction data for their own accounting and reporting needs. Considerations: Not every transaction will qualify for these reduced rates, even with the additional data. The card must be a type that’s eligible for the reduced rates (like a corporate or purchasing card), and not all B2B transactions will qualify.
    • Merchant Service Provider’s Role: The merchant’s agreement with their payment processor is crucial. Some processors may not pass on the full savings of lower interchange rates to the merchant. It’s essential to have a transparent relationship with the processor to understand the actual benefits.

How long has level 2 and 3 data been around for credit card processing?

Level 2 and Level 3 data processing for credit card transactions have been around since the early days of electronic B2B transactions, which began to take shape in the 1980s and 1990s.

Here’s a brief timeline:

  1. 1980s: Electronic data interchange (EDI) systems started becoming popular in the 1980s. These systems allowed businesses to exchange documents and transaction data electronically. As businesses moved to electronic payments, there was a need for more detailed transaction information to match the detail that could be provided in EDI documents. This is where the concept of Level 2 and Level 3 data began.
  2. 1990s: By the 1990s, the major card brands (like Visa and MasterCard) introduced corporate and purchasing cards. These cards were designed for B2B transactions, and with their introduction came the need for more transactional details, akin to what you’d find in a typical invoice. Thus, Level 2 and Level 3 processing standards were developed to cater to this demand. These enhanced data levels allowed companies to capture details like item descriptions, quantities, tax amounts, and more.
  3. 2000s to Present: As electronic B2B transactions continued to grow, the importance of Level 2 and Level 3 data has only increased. Today, many B2B merchants understand the value of providing enhanced data, not just for the potential savings in processing fees but also to meet the needs of their customers who require detailed transaction data.

In summary, while the exact year of introduction might vary slightly based on the card brand and region, the concept of Level 2 and Level 3 data has been around for several decades, closely tied to the rise of electronic B2B transactions.

Can level 2 and 3 data be captured at the point of sale? or is it for card not present transactions?

Level 2 and Level 3 data can be captured both at the point of sale (POS) and for card-not-present (CNP) transactions. However, there are some nuances to consider:

Card-Not-Present (CNP) Transactions:

    • CNP transactions, such as online or over-the-phone orders, commonly utilize Level 2 and Level 3 data. This is especially true for B2B e-commerce platforms or invoicing systems where detailed information about the transaction, such as item descriptions, quantities, and tax details, can be easily captured and transmitted.
    • The infrastructure for CNP transactions, like online gateways, often has built-in capabilities to capture and transmit this detailed data.

Point of Sale (Card Present) Transactions:

    • It is possible to capture Level 2 and Level 3 data at a physical POS terminal, but it requires specialized hardware and software that can handle the input of the additional data. Most standard retail POS systems are set up for Level 1 data capture by default.
    • Capturing Level 2 and Level 3 data at the POS is less common than in CNP environments, mainly because the speed of processing is a priority in many face-to-face retail environments. Inputting extensive transaction details can slow down the checkout process.
    • However, in certain B2B retail scenarios where purchasing cards are used (e.g., buying supplies in bulk at a hardware store for a business project), there might be POS systems in place to capture the enhanced data.

Importance of the Scenario:

    • The decision to capture Level 2 and Level 3 data often depends on the merchant’s customer base and the type of transactions they handle. If a merchant frequently deals with corporate or government clients who use purchasing cards, it may be beneficial to set up their processing systems, whether POS or CNP, to capture the additional data.

In summary, while Level 2 and Level 3 data capture is more commonly associated with CNP transactions, it’s entirely possible to capture this data at the point of sale, provided the POS system is equipped to handle the additional data requirements.

What software can capture level 2 and 3 data at the point of sale for card present transactions, and what type of credit card terminals?

Capturing Level 2 and Level 3 data at the point of sale (POS) for card-present transactions requires specialized software and hardware solutions. Various payment gateways, POS software providers, and terminal manufacturers support Level 2 and Level 3 data capture.

Software Solutions:

Payment Gateways/Processors: Many leading payment gateways and processors have solutions that support Level 2 and Level 3 data capture.

POS Software: Some specialized POS software, particularly those targeting B2B sectors, have built-in support for Level 2 and Level 3 data capture. For instance certain versions or configurations of Microsoft Dynamics or SAP can be integrated with payment modules supporting Level 2 and 3 data.

Terminal/Hardware Solutions: To capture Level 2 and Level 3 data at the POS, you’ll often need terminals that can be integrated with the software solutions above and that allow the additional data entry required.

  1. Traditional Terminals: Brands like Verifone and Ingenico have models that can be configured to handle Level 2 and 3 data, especially when integrated with the right payment processor or software.
  2. Smart Terminals/POS Systems: Modern smart terminals or POS systems that operate more like computers or tablets can also handle Level 2 and 3 data.

Key Considerations:

  • Integration: It’s crucial to ensure that both the software and hardware solutions are compatible and can communicate seamlessly. Often, merchants work with payment processors or consultants who can help set up the right combination of software and hardware.
  • Configuration: Simply having a terminal that can support Level 2 and 3 data isn’t enough. The system needs to be correctly configured, often with the help of the payment processor or software provider.
  • Training: Employees need to be trained on how to input the additional data required for Level 2 and Level 3 processing, especially in a face-to-face retail environment.

To determine the best solution for a specific business, it’s often helpful to speak directly with payment processors or consultants who can provide guidance based on the business’s specific needs and transaction volume.

Integrated Solutions: Many ERP (Enterprise Resource Planning) and accounting software, when integrated with payment gateways, can automatically populate Level 2 and Level 3 data from the business’s records. This is common in scenarios where businesses already maintain detailed records of their sales transactions. For instance, integrations between platforms like SAP, Microsoft Dynamics, or Oracle with suitable payment gateways can often support this feature.

Points to Consider:

  • Data Source: Auto-populating Level 2 and 3 data usually requires a source for that data, such as an integrated e-commerce system, ERP, or inventory management system. The quality and accuracy of auto-populated data depend on the correctness and completeness of this source data.
  • Custom Integrations: Some businesses might need custom integrations to achieve automatic data population. This often involves working with IT specialists or consultants familiar with both payment processing and the business’s specific software environment.
  • Verification: Even with auto-population, it’s a good practice for businesses to verify the data, especially when starting with a new system or after major updates, to ensure accuracy and compliance.

Merchants should consult with their payment processors or software providers to discuss the specific needs and capabilities of their systems to ensure accurate and efficient Level 2 and 3 data processing.