As you know, adding payment processing to your software provides benefits for both you and your customers. When it comes to credit card processing, there are several types of transaction levels. These levels relate to the type of data included in the transaction, and it’s vital to understand the basics so you can determine what transaction types your software needs to support.

Understanding credit card transaction levels is especially important for developers whose software customers are primarily business-to-business and/or business-to-government. If your clients are primarily businesses rather than consumers, it’s essential to accept relevant payment types, such as business and corporate credit cards. Offering Level 2 and Level 3 transactions can help make your product more attractive and useful to your clients.

Level 2 Card Processing

The vast majority of Level 2 payments occur in a B2B environment with commercial-type cards. This level of credit card processing generally involves corporate credit accounts such as business and procurement cards. A Level 2 transaction requires more data to be collected as compared to a general sales transaction. The required transaction data that is passed through from the integrated software solution to the payment processor is: merchant name, date, amount, PO number, customer code and tax.  Most major credit card providers participate in these types of transactions. Some benefits of Level 2 processing for merchants include the following:

• Lower interchange rates
• Secure transactions with less fraud risk
• Additional details for business-to-customer invoicing

Level 3 Card Processing

Level 3 transactions require even more data for processing than Level 2 payments. Level 3 processing includes all the data of a Level 2 transaction, plus additional line-item information, including essential tax data.  The information in the line item detail can be found on a typical itemized invoice which helps to track spending at large corporations and government entities.

Level 3 transactions offer many benefits because they

• Are available for procurement and corporate purchases
• Provide savings on interchange fees for large-ticket purchases
• Contain additional data for reporting

Keys to Successful Payment Integration

Credit card processing can be a complex capability to add to your software. Fortunately, we at Paragon Payment Solutions can help guide you through your payment integration and help you identify if your software needs to support level 2 and level 3 transaction processing capabilities.