Level 3 processing, a unique class of credit card processing, is a classification that only applies to specially issued Purchase Cards (p-cards) that are able to accept an enhanced set of data about the goods and services that are being purchased. Banks started issuing p-cards to federal, state, and local government agencies (GSA SmartPay) and larger corporations to help them streamline the collection of payment from their customers. The U.S. Federal government spent $26 billion in 2006 using the GSA SmartPay purchase card and has over 3,000,000 cardholders. Businesses spent over $700 billion in 2006 and the growth rate (27% CAGR) is nearly twice that of regular credit cards.
Government agencies and businesses prefer to use P-cards for a number of reasons including cost savings from e-procurement, enhanced reporting on purchases, greater employee purchasing control, and lower negotiated rates with businesses (e.g. airlines). The Federal government saved over $1 billion in 2006 by using p-cards. Similar cost savings were realized by businesses in terms of percentage of spend. Merchants enjoy accepting the purchase cards because payment can be received quicker, invoicing costs are substantially reduced, and government agencies and larger corporations have been known to give preferential treatment to businesses that are able to accept these cards and provide the necessary Level 3 data.
What most businesses do not know is that standard merchant accounts are not typically set up for Level 3 acceptance and not all providers of merchant accounts can offer Level 3 capabilities. If a merchant’s goods or services can be sold to government agencies or larger corporations, they are wise to get setup with a merchant account that can facilitate Level 3 processing. Level 3 processing is exclusively used in business to business and business to government environments.
Merchants should also be aware that when the appropriate information is included in a Level 3 purchase, they are rewarded with lower processing rates which can be as much as 1.00%. Evolve Systems has the experience and expertise to assist businesses in working with Level 2 and 3 processing as well as your e-commerce and website needs.
For information on how to assist your clients in processing at Level 3 rates, please contact us at Evolve Systems.