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What is Level 3 payment processing?

Editorial Team

3 min read
Two men in warehouse


If you operate a business-to-consumer (B2C) company, you are using Level 1 credit card processing. This is what most companies use when processing standard consumer credit cards offered by Visa, Mastercard, Discover, and American Express.

If your business provides goods or services to other businesses (business-to-business or B2B), especially if you interact with small to medium-sized businesses, you might have to explore Level 2 processing as an ideal solution.

However for larger corporate or government purchases, upgrading to Level 3 payment processing will help optimize interchange rates and save money. Yet, what exactly is Level 3 credit card processing, and why does your B2B need it?

What is required to process Level 3 transactions?

With Level 3 credit card processing, all transactions require the capture of specific line item data typically around 15-20 fields.  However, that number can go as high as 100 — depending on the client.

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

Why require all of these additional details? What is the benefit to the buyer — and more important — what is the benefit to you?

The advantages of Level 3 credit card processing

The most important benefit for customers who buy with Level 3 credit cards is control. By requiring all of this extra information, they can more easily restrict things like:

  • Who in the organization is allowed to buy
  • How frequently the card may be used
  • The size and dollar amount of each purchase

Given the sheer volume of multinational and governmental spending, such controls are necessary. They allow organizations to more carefully track where money is going and why.

However, there are several benefits for you — the merchant:

  • You attract a very different type of clientele — mainly heavy-hitters that wouldn’t (or couldn’t) do business with you otherwise. Many government agencies only use Level 3 credit cards for major purchases.
  • You also benefit from collecting accounts receivable funds sooner. With Level 3 processing, the Days Sales Outstanding (DSO) becomes shorter, allowing you to avoid unnecessary delays. This can be a huge advantage if cash flow is a concern.
  • You pay lower interchange fees by accepting Level 3 credit transactions. Because of all of the extra information required, this minimizes fraud risk, and you’ll be able to take advantage of lower processing rates.

Making Level 3 credit card processing work for you

Level 3 processing isn’t necessarily suited for every business, especially if you deal mostly with consumers or smaller businesses. Then you’re probably better off with Levels 1 and 2.

Though if Level 3 is right for you, keep in mind that standard credit card terminals do not support this type of processing. Submitting Level 3 data requires the use of specialized payment software that is accessed via a secure website application. Data is typically passed to the payment platform via integration with a merchant’s ERP system.

Contact the Clover sales team to find out which Clover or partner solution is right for you.

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