If you operate in the B2B space, selling goods and services to other businesses, you probably qualify for lower credit card processing fees ‒ up to 50 percent! You just aren’t taking advantage of them. Because you don’t know how to harness the power of level 2 and level 3 data.
When deciding what rate to charge you, credit card companies consider two things: sales volume and risk.
Credit card companies incentivize businesses by offering lower rates to companies that process a lot of sales. They know card fees cut into the bottom line, so they want to make it as cheap as possible for big businesses to accept them.
But credit card companies also want to encourage people to make secure transactions. Disputed transactions can cost them a lot of money. Which why card companies love level 2 and level 3 data.
In the industry, disputed transactions are called chargebacks. Chargebacks are different from refunds. Refunds occur when a customer contacts you, returns the product and asks for their money back. A chargeback occurs when the customer contacts your bank, challenges the transaction, and forces it to take their money out of your account.
Because certain types of transactions are more prone to chargebacks, credit card companies charge you more to offset the risk. Generally, the less they know about a transaction, the more they charge to process it.
This is where level 2 and level 3 data comes in. It describes transactions in painstaking detail, which lowers the risk of a chargeback. Once they understand the deal is secure, the credit company automatically lowers their processing fees. If your standard rate is 2.75% or higher (rates vary based on your provider), processing a level 3 transaction could cut that in half!