Many businesses are leaving money on the table and don’t realize it. The interchange fees from credit card acceptance are part of doing business, but most businesses are unaware that card brand programs exist to help reduce these fees. A common misconception is that the payment processor’s mark-ups are the only place to save on fees. The more significant savings potential is actually in the interchange which is the hard cost of payment card acceptance. Interchange fees are those collected for the card brand and the card-issuing bank to partially cover the operational costs and risk associated with issued credit cards. Payment processors charge merchants a mark-up on top of interchange, which partially covers their operational cost and financial risks associated with processing and settling card payments for merchants.
There are over 300 levels of interchange with rates ranging from as low as .05% to as high as 3.25%. What determines the cost of interchange is based on many factors, including benefits given to the cardholder and perceived risk to the card network and the card issuer. While each interchange level might have static costs pre-determined by the card brands (Visa®/Mastercard®), many transactions are eligible to qualify at lower-cost rates.
By optimizing interchange qualifications, transactions can land at the lower interchange rates. Interchange optimization does this by collecting additional transaction information to reduce the risk associated with each transaction. Most merchants collect Level I data, which includes the minimum information required to authorize and process a payment transaction. Collecting less data increases the recognized transaction risks for fraud, which is why Level I data carries the higher fees.
Level II and Level III transactions are enhanced data capture levels that provide more in depth transaction information, usable by the cardholder, the card brands and their issuers. The additional information is valuable to the card networks, their issuers and allow the merchant customer to qualify for lower interchange costs if the enhanced data is presented with the transaction authorization.
Elavon proprietary Level II and Level III data enrichment programs bypass the merchants’ technology limitations by populating all of the data for the merchant with no up-front cost to the merchant.
Providing Level II and Level III data points can be a challenge for businesses for a variety of reasons:
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