Credit card processing methods can be characterized by the following levels: Level 1, Level 2, and Level 3. These levels differ from each other based on how much information is required to complete a payment.
3 Levels of Payment Processing
Level 1 processing requires the least for payment authorization. Level 1 credit card processing is required for Business to Consumer (B2C) companies. The majority of companies use Level 1 when processing standard consumer credit cards offered by Visa, MasterCard, and American Express.
Business to businesses (B2B) companies, especially those interacting with small to medium-sized businesses, need Level 2 payment processing.
Level 3 processing is a set of specific additional line-item detail data such as item descriptions, quantities, tax detail, etc. along with the required standard transaction info such as account #, exp. date, and more. The importance of this type of information lies in the fact that the interchange fees borne by the merchant as part of the transaction fees they pay are significantly lowered.
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Level 3 Payment Processing
Level 3 processing is required by the so-called “Large Ticket Interchange” or LTI, a special interchange category. This refers to larger transactions that occur in the B2B and B2G fields.
In the case of Level 3 credit card processing, the capture of specific line item data is required for all transactions. These are typically some 15-20 fields, but the number depends on the client and can reach 100.
Common line item details for Level 3 credit card processing include:
- Commodity codes
- Product codes
- Item descriptions
- Merchant contact info
- Tax amounts
- Freight amounts
- Quantities and units
Benefits for merchants include the following:
- Being able to attract a specific type of clientele
- Benefiting from faster account settlements
- Being able to pay lower interchange fees by accepting Level 3 credit transactions
To submit Level 3 data, you should use specialized payment software that can be accessed via a secure website application. The payment platform received the data through the integration with a merchant’s ERP (Enterprise Resource Planning) system.