Credit card transactions can fit into one of three different categories: Level 1, Level 2 or Level 3 processing and the Level classification can have a significant impact on Interchange fees imposed by the card brands. Typical retail and ecommerce transactions qualify at Level 1 rates, however certain types of merchants that accept specific types of payment cards (commercial, business, government and purchase cards) can see reduced interchange fees by submitting additional Level 2 and Level 3 data.

Each level of processing requires a certain amount of data and requirements needed for verification and authorization. Therefore, Level 3 commercial card acceptance for businesses and government purchasing cards alike are priced differently from consumer credit card transactions due to level of detail passed in a purchase transaction.

How does it work?


Level 3 processing requires the capture of specific line item details, which are then reported back to Visa and MasterCard to help businesses save money with lower interchange rates than those seen with Level 1, or 2 purchases. Level 3 credit card processing requires the inclusion of purchase order and line item detail. Level 2 and Level 3 are also referred to collectively as “Enhanced Data”. Additionally, the subset of data collected allows for greater transparency for an AR department to monitor and track internal spending and set parameters/restrictions for business card purchase behavior.

To add to the complexity, Visa and MasterCard have different requirements for Level 2 and Level 3 data, therefore the merchant’s point of sale and card processing system must be certified with their payment processor to ensure that transactions are qualifying at the proper interchange rate. For example, the chart below illustrates the enhanced data requirements for Level 2 and Level 2 for both MasterCard and Visa:


Additionally, transaction level parameters are required to qualify along with the enhanced data, such as having the authorization amount equal to the settlement amount and settling within 72 hours of original authorization.


What can I expect for savings?


How much you save with Level 2 & 3 processing depends on the mix of credit card types that your customers use to pay your bills. The more business cards used, the greater the savings. Aliaswire as asked to help a large B2B merchant find ways to reduce their interchange fees. A sampling of data showed that this Biller/Merchant was accepting a significant amount of commercial and procurement cards which created an interchange profile that was skewed to the most expensive card types. Once the merchant implemented DirectBiller® with Level 2 & 3 data, the merchant experienced significant savings. Even thought the card mix did not change significantly, the Level 2 & 3 data submitted significantly shifted the interchange cost curve to a much lower average interchange rate.

The chart below summarizes the interchange costs before and after level 2 & 3 data elements where implemented:

The implementation of Level 2 & 3 had significant cost implications for the merchant, shifting average interchange for all processing lower by over 40 basis points and providing the merchant with a substantial ROI. On average, Aliaswire’s DirectBiller® merchants and billers save $6,000 for every $1 milling in business/commercial card processing volume.

How to take advantage of Aliaswire’s Level 2 & 3 Processing?


Aliaswire’s DirectBiller solution is certified for Level 2 and Level 3 processing. Through DirectBiller, Aliaswire has helped many of our billers achieve interchange optimization and lower their costs of payment card acceptance. For qualifying merchants, the savings from submitting Level 2 and Level 3 data can be substantial with DirectBiller clients achieving savings of 60bps – 100bps savings on typical card programs.

Aliaswire has proven cases of ROI for even our smallest billers and we can provide an analysis of your merchant statements should your business be looking for a lower interchange rate. Or, if you are just getting started and have questions on how to benefit from Level 2 and 3 processing, please inquire contact Aliaswire today.