Best Practices for B2B and G2B Merchant Services Transactions

Patricia Keller, CFO, Capital Payments, LLC

I won’t go so far as to say I was dragged kicking and screaming into the world of blogging because that would perhaps be a slight exaggeration. Suffice it to say that, as a true numbers person, blogging is not something I would normally do. A CFO “out of water,” so to speak, in the world of verbiage. That said, because I feel strongly about raising awareness on business-to-business and government-to-business merchant services best practices, blogging turns out to be the perfect venue.

Credit card acceptance in both the B2B and G2B market segments continues to increase annually. Today, more businesses are adopting B2B cards to reduce administrative expenses and identify opportunities for savings. Many are making B2B card acceptance a requirement to do business. Simultaneously, government contracts are aplenty and procurement policies often specify G2B acceptance as a requirement. So what does this mean for you as a merchant?

No one can deny the obvious -- that acceptance of B2B and G2B cards allows a business to generate more revenue through multiple sales channels. But, while less obvious, no one can deny, too, the opportunity to effect significant cost savings by taking advantage of the lower interchange (processing) rates these cards can afford. To qualify for the lower rates, a little education goes a long way.

As a result of the growing B2B and G2B segment, MasterCard and Visa have implemented specific rate-sensitive requirements to which card acceptors must adhere to qualify for the lower processing rates. B2B and G2B transactions are Level 2 and Level 3 (versus Level 1 consumer transactions) and have the largest interchange rate spread. With a standard merchant account, Level 2 and 3 transactions will automatically downgrade, increasing the costs of processing the cards – costing you money. You won’t even know it’s happening…until you get your merchant statement.

Level 2 and 3 transactions require a specific method of processing to qualify for the lowest rates. For Level 2, most standard terminals and payment gateways can be used. Level 3 requires special software in conjunction with a Level 3 processing service. Level 3 transactions provide specific information such as item description, quantity, unit-of-measure, price and sales tax information, combined with detailed merchant and cardholder information. The bottom line? The more information you collect at the time of purchase, the lower your processing rate will be. Qualifying for the “gold standard” of Level 3 processing rates for B2B and G2B cards reduces processing expense overall. Savings can be significant. And Level 3 capability will increase your competitiveness. Your costs can, in fact, be less than your competitors.

If your business is trending to the growing B2B and G2B market segments, now may be the right time to reevaluate your current merchant processing provider to take a look at what you’re gaining – and potentially losing – with your current program. It’s a given -- no one knows your business better than you do. But, at the same time, it’s imperative to work with a merchant services provider who is proactive – who knows your industry and will take the time to advise you what best meets your needs – to secure the lowest rates possible.

With more than 18 years in the industry, I can stand tall and admit interchange rates are my passion. Remember, I’m a numbers person. I’d be more than happy to speak with you about how you can realize significant savings with B2B and G2B card acceptance.