After working with several B2B merchants and realizing that B2B merchants have higher than usual processing bills, Guardian set out to find a way to ease the burden of the high interchange rates that corporate cards carry.
To give you an idea, on the consumer side, the interchange rate maxes out at around 2.4% for a high-end rewards card. On the corporate side, the cards average 2.8% - 2.95%! This is just interchange - not including the markup that companies were paying to their processors.
In setting out to find a way to help alleviate some of these costs for our clients, we learned about different rules that Visa and MasterCard have in place for corporate cards and purchases. This is known as LVL Il and III data, and it can significantly reduce the interchange costs of corporate cards.
To put it simply, Visa and Mastercard have rules in place that allow merchants to lower the assumed risk associated with the transaction.
On the consumer side, the safest way to take a payment is in person. This is known in the industry as a "Card Present" transaction. The merchant can verify the name on the card, and match it to a driver's license should they choose to. Because of the lower risk with these transactions, they hold slightly lower interchange rates than Card Not Present Transactions.
Visa and Mastercard understand that this is not how business is done in the B2B marketplace, so they had to come up with a way to incentivize merchants to do their due diligence and make sure the transactions are genuine.
Basically, if you are able to transmit this extra data Visa and Mastercard assume that you have taken the time to vet your customer. To them, this equates to lower risk, therefore the interchange cost of the card is reduced.
After learning about this set of rules, we set out to find a way to make it easy for our clients to take advantage of the LVL II and III pricing. This led us to a piece of software that allows us to automatically transmit LVL Il and Ill data any time a corporate card is used.
The average savings between a standard transaction and an LVL III transaction is .75%! To most people, that doesn't seem like much at all, but those of you in the B2B space know that .75% can make a big difference on the larger tickets that B2B merchants process.