Payment Processing Solutions

Level 2 & 3 Processing

Q Solutions, LLC offers level 2 & 3 processing for the lowest interchange rates for B2B & B2G customers.

Advanced Payment Processing

Payment processing is categorized into Level 1, Level 2, and Level 3, each serving distinct purposes and having specific requirements. Level 1 processing demands the least amount of data, whereas Level 3 requires the most. Major credit card companies revise their rates and data requirements annually in April and October.

Having more detailed information about a transaction facilitates easier tracking, verification, accounting, and enhances fraud prevention, which is crucial for large B2B and B2G entities. Consequently, Level 2 and Level 3 transactions typically come with lower interchange rates, providing savings that can be used to attract buyers or increase profits.

Level 2 and Level 3 processing is important for a many merchants, regardless of their industry. With this in mind, let’s explore each level in more detail and understand the significance of advanced processing for both merchants and independent sales organizations (ISOs).

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Processing Levels

Level 1 Processing

Level 1 is the simplest form. It’s suitable for standard consumer transactions and makes up the vast majority of payments. In addition to basic payment data like card number and CVV, it usually requires merchants to submit four extra data points:

Total Purchase Amount
Purchase Date
Merchant Category Code
Seller Name

Level 1 interchange rates are the highest of the three.

Level 2 Processing

Level 2 is more advanced, typically used for business-to-business (B2B) and corporate card transactions. Depending on the card brand, it requires additional data points, including:

Tax Amount
Tax ID
Tac Indicator
Customer Code/ PO Number

There are also half a dozen optional data points that can be included with Level 2 payments. This additional information gives businesses greater control over their transactions, allowing them to cut costs and manage their operations more efficiently. Level 2 interchange rates are lower than level 1 but higher than level 3.

Level 3 Processing

Level 3 processing is the most detailed of the three options. It is ideally suited for large B2B and B2G transactions requiring comprehensive information to ensure security and correct/authorized use of funds. The added transparency provides a layer of security and trust that is crucial where public money or publicly traded companies are involved. Depending on the card brand, Level 3 requires all the same data as Level 1 and 2, plus information like:

Duty
Commodity Codes
Product Codes
Item Quantities
Unit of Measure
Unit of Cost
Discount Rates
Discount Per Item Line
Line Item Total
Shipping Amount
Destination Zip and Country Codes

Level 3 interchange rates are the lowest – allowing eligible businesses to save on each transaction.

Benefits of Level 3 Processing

Lower Interchange Fees

Level 3 transactions offer better security and potential savings for merchants. Major card brands give discounts for them, which can be double that of Level 2 transactions. These savings quickly accumulate for government purchases, benefiting B2B merchants and B2G organizations in securing profits and winning contracts.

Compliance with Government & Industry Regulations

Large B2B/B2G transactions require Level 3 data, not just as an extra but as a minimum requirement. It ensures compliance, reduces risk, and unlocks a door for merchants to respond to government and industry proposals.

Enhanced Reporting

Detailed transaction data provides valuable insights for decision-making and forecasting. Level 3 reporting aids in accounting and reconciliation by importing accurate records into systems.

Greater Security and Fraud Prevention

Level 3 processing provides added protection against fraud, especially with increasing rates. This benefits merchants, ISOs and customers.

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