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B2B Credit Card Processing

Reduced interchange is just one of the many perks of processing B2B enhanced data transactions at your business.   

Does your business sell merchandise or services to other businesses? How about local, state or federal government entities? These are known as B2B (business-to-business) and B2G (business-to-government) transactions, respectively. To qualify as one, the purchaser is buying on behalf of a business or government agency. A B2B payment could look like a property manager buying supplies for a community clubhouse, an operations executive paying for the construction of a new branch, a business covering travel costs for employees on assignment, or a solopreneur paying for the startup costs of a home business with a designated business account. There’s a huge range of examples.

B2B payment cycles used to be quite slow. The seller would receive orders over the phone, in person or via mail, then deliver the product or service to the buyer, along with a paper invoice. The buyer would mail a paper check back to pay, or have to deliver cash or a check personally. Then the merchant would bring the check to the bank and wait for it to clear. The order-delivery-payment period could take weeks to months.

Modern B2B transactions are far more efficient. Electronic checks (ACH transfers) are commonly used to make payments, and in recent years credit cards have gained a huge share of the B2B playing field. eChecks take longer to authorize and clear, but are popular because of their low, flat processing rates. Commercial credit cards, on the other hand, bring lightning speed to B2B payments. Real-time authorization and fast funding through a B2B merchant account make cash flow reliable and timely. Lines of credit allow purchasing businesses to be more consistent with payments since they’re not restricted by their current checking account balances. On the other side of the sale, the seller benefits from more on-time payments.

Types of Commercial Credit Cards

  • Corporate cards are issued by large businesses, who are usually liable for purchases.
  • Business cards are usually issued by small to medium sized businesses, and sometimes hold the employee cardholder jointly liable for purchases.
  • Purchase cards, also known as procurement cards or p-cards, are issued by a variety of businesses. Each transaction made with a p-card includes enough details that the business can use its statements in lieu of invoices and order receipts. They can take the form of plastic cards or just account numbers.
  • Fleet cards are issued by businesses who have two or more company vehicles. They are used to cover fuel, maintenance, repair and other transportation-related expenses.

Employees can use commercial credit cards to make payments online, over the phone or in store for business-related purchases in line with spending limits and other restrictions set by the employer. They help businesses keep track of their spending, and they’re processed differently than traditional consumer cards.

Enhanced Data

Credit card brands group transactions according to data level, which refers to the amount of information a business includes with a transaction when it goes through the authorization process. There are three data levels, but each card brand has their own way of classifying them. Discover only recognizes data level 1. American Express recognizes levels 1 and 2, but not level 3. Visa and MasterCard recognize all three levels but their specifications for levels 2 and 3 vary slightly. Visa calls them data levels while MasterCard calls them data rates.

  • Level 1 data universally contains the business name, the transaction amount and the date. It’s the level of all consumer credit card purchases.
  • Level 2 data contains all the level 1 data plus the sales tax amount, customer code, merchant postal code, tax identification number and more. Again, Visa, MasterCard and American Express have slightly different criteria for level 2.
  • Level 3 contains all the level 1 and 2 data plus product code (e.g. SKU or UPC), item description, quantity and unit of measure, ship from postal code, shipment destination postal code, freight amount, duty amount, invoice number, order number and more.

So you see, B2B credit card processing can seem a little complicated at first.  However, the more you learn about it, the better you can assess if it’s a wise investment for your business. Put simply, a transaction with the least amount of details qualifies as data level 1, while a transaction with the most details qualifies as data level 3. Level 2 and 3 data is called “enhanced data” and characterizes B2B commercial card transactions. The higher the data level of a transaction, the lower the interchange rate the card brands charge, because it's more difficult for the cardholder to dispute and thus less likely to result in a chargeback. Why?

  • B2B payments are typically for recurring needs rather than impulsive wants (associated with business-to-consumer transactions)
  • Most B2B merchants have established, long-term relationships
  • All the extra data passed through with B2B credit card payments serve as transaction proof against chargeback claims
  • Fraud is less likely because commercial credit cards have pre-authorized spending limits and pre-authorized users that payment software can pick up on—and decline payments when the card’s restrictions are violated

B2B Interchange Rates

Interchange is included in the rates your merchant service provider (MSP) charges and is merely passed through from the card brands. So when you have interchange plus pricing for your merchant account (which we highly recommend instead of tiered pricing), the interchange is what Visa, MasterCard, Discover and American Express charge for their part in authorizing and settling credit card payment funds. The markup, or the “plus,” is what MSPs charge for their part. The card brands determine interchange rates and update them regularly. When you have a consistent markup from your MSP, your overall rates become much lower when you accept enhanced data commercial credit card payments.

To sum it up, accepting B2B payments can be economical if processed correctly. If a merchant accepts a level 2 or 3 commercial credit card payment and passes it through the authorization process without the enhanced data, it can downgrade to level 1 (the level of consumer card transactions) and catch the higher rate. Specialized software that auto-populates the enhanced data fields is the most efficient way to facilitate B2B credit card processing if you accept a consistent volume of commercial credit cards. It’s possible to enter all of the enhanced data manually into a payment terminal or online payment gateway, but it’s time-consuming, leaves room for error, and is really only viable for merchants who accept a handful of B2B transactions per year.

Setting up a B2B Merchant Account

If you already have a merchant account that accepts consumer credit cards, you will want to ask your account provider if they offer level 2 and 3 payment processing software. Some don’t. If they do, a software upgrade would enable your payment solution to properly categorize and pass through the enhanced data. Software upgrade costs vary, but usually come in the form of a monthly fee. So you’ll want to make sure the amount you’d save in B2B reduced interchange would cover the cost of the upgraded software, and then some.

Another qualifier for B2B merchants is their MCC (Merchant Category Code). The major card brands list MCC codes that are eligible to be considered B2B merchants. The list is slightly different for each card brand. Your merchant account provider will first have to assign you the proper MCC code, ideally one that all the card brands agree on as B2B-eligible, before you can start processing B2B credit card transactions at the specialized low rate.

With a merchant account from BankCard USA, B2B credit card processing software automates the recognition, categorization and pass-through of enhanced data so that you can effortlessly accept commercial credit cards and never worry about missing the reduced rate. Each B2B payment processing solution includes automated invoicing, advanced online reporting, accounting reconciliation and recurring billing options, plus compatibility with hundreds of third-party software applications. End-to-end integration support to make sure all of your business software is linked and working together is also included. Take advantage of next-day funding, 24/7 client support (including PCI compliance walk-throughs), and an adaptable payment solution designed to foster efficiency and growth.

Benefits of B2B Partnerships

A B2B credit card processing solution comes with many benefits:

  • Strengthens relationships with commercial cardholders who prefer paperless transactions
  • Reduces your invoicing costs since invoices can be automated and sent electronically, or voided completely for level 3 payments since the enhanced data makes the invoice redundant
  • Fosters predictable revenue
  • Helps you get paid faster and eliminates drawn-out collection efforts
  • Makes for more comprehensive records and reporting
  • Saves money, especially for high ticket transactions

BankCard USA can deck out your credit card terminal and/or payment gateway with the right tools to navigate the often fast-paced B2B landscape, whether you collect business credit card payments on a recurring billing cycle or in single transactions. Our B2B payment processing software is designed to save you time and money. In fact, our low rate guarantee means that we will beat the rate of any verified provider, and show you how during a free consultation with a side-by-side comparison of your current processing statement and our proposal.