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B2B Payment Processing for Card not Present Transactions

by | Apr 19, 2018

If you are a manufacturer or distributor, and/or you sell to other businesses (B2B) or to the government (state or federal agencies) or large corporations or entities (universities, or hospitals) you need to efficiently accept and process purchasing cards or corporate cards.  These cards are typically presented for payment by phone, mail or via your ecommerce site and as such, are considered card not present (CNP) for payment processing rates.  Level 3 payment processing is the method for reducing these rates.

Historically, because CNP transactions are considered riskier than those where the physical card is swiped or inserted into a chip reader  – they are processed at higher interchange fees.   Purchasing cards themselves process at higher interchange rates because P-card programs often come with cash rebates for the companies (your buyers) that implement the programs.  The banks that issue the cards and run the programs receive these interchange fees, making it easy to offer this type of reward.  The cost difference between a purchasing card processed at retail rates vs Level 3 can be substantial, especially notable because B2B transactions are as a rule – larger than retail transactions.

What is a purchasing card or P card?

Unlike a typical credit card – purchasing cards are issued to corporations or government entities for employee, buyer and department purchasing.  Eliminating some of the red tape for the user/buyer and simplifying purchase processes – these cards provide control over expenses, greater transparency to monitor spending because the transactions allow for collection of extensive line item detail with each purchase and a host of other benefits to the purchaser and merchant.

When merchants collect and pass this detailed data to Visa and MasterCard with the transaction for authorization, they receive substantially reduced interchange rates on the transaction.  Processing line item detail with a B2B transaction is considered a best practice in B2B payment processing.

There are several rate reductions based on the amount of line item detail collected with the transaction.  Level 2 payment processing, which is considered good practice,  can be processed through a retail payment gateway or even a stand alone desktop credit card terminal.

Level 3 credit card data – a best practice – includes all of the line item detail in level 2 plus the additional line item detail noted below.  At first glance – it looks complicated, but many B2B payment gateways which is required for level 3 payment processing will auto populate the information for the B2B Merchant.

Level 2

  • Merchant Name
  • Transaction Amount
  • Tax Amount
  • Transaction Date
  • Customer Code or PO #
  • Merchant Zip Code


level 3

  • Ship-From Zip Code
  • Destination Zip Code
  • Invoice #
  • Order Number
  • Item Commodity Code
  • item description


  • item quantity
  • item unit of measure
  • item extended amount
  • freight amount
  • duty amount


Any and all card types can be processed at the best interchange rate possible over a B2B payment gateway.  Retail payment gateways such as authorize.net and credit card terminals cannot pass Level 3 credit card data line item detail and therefore do not qualify transactions at the lowest possible interchange fee available.

Visa and MasterCard have encouraged B2B credit card use by incorporating this system of valuable data transmission to the buyer and supplier alike and rewarding the merchant who embraces Level 3 payment processing with a substantially lowered interchange rate on the transaction

It’s crucial to note –

  • Purchasing card use is on the rise and substantially so. Merchants who accept them are sought out, and considered preferred suppliers.
  • Purchasing cards are costly to process over a retail payment gateway because they are not set up to pass this type of data for authorization. Processing this way results in a downgraded transaction (does not qualify for the targeted or optimized interchange rate).
  • In addition to these reduced payment processing rates – Visa and MasterCard both provide an even further reduced rate for merchants utilizing best practices in payment processing for high tickets (approximate $5,000). These rates also require Level 3 credit card data.

Best practices in payment processing for B2B include the collection of Level 2 and Level 3 credit card data to be passed to Visa and MasterCard for purchase/ buyer analysis.  The benefit provided to the merchant is the significant reduction in the interchange rate for the B2B transaction.

How do I qualify for B2B interchange rates?

Often times entry level merchant account sales staff are unaware of the complexities of B2B payment processing so using a merchant service provider with this niche expertise is crucial.  Underwriting a B2B merchant for credit card processing includes unique nuances including establishing the merchant with an MCC code that qualifies them with Visa, MasterCard, Discover and American Express for more favorable rates.

What is an MCC code?

MCC stands for Merchant Category Code.  The codes are assigned by Visa and MasterCard upon initial set up of the merchant account and identify the merchant as eligible for the reduced B2B interchange rates and level 3 payment processing.  Your merchant account provider is influential in the assignment of the necessary MCC code that will ensure these substantially reduced interchange rates.

Unlike shopping for a merchant services provider when you’re primarily accepting consumer credit cards at the retail POS (point of sale), focus for B2B merchant solutions should be less on the providers markup vs the total cost of the B2B transaction.  A B2B payments consultant might charge you a slightly higher markup but help you drastically reduce your wholesale rates, resulting in a lower cost overall.