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by Cari StraussMay 6, 2019Recurring Operations

What are data levels?

Credit card processing is involved in every digital transaction using a credit card or debit card. This process transfers credit card information to and from the issuing and acquiring banks involved in the purchase. These transactions must be secure and PCI compliant to prevent data breach and confidential information from being stolen. For security and PCI compliance purposes, different data levels are involved in various credit card transactions. Digital transactions that require secure data transfer may occur within the following parties: business and consumer, business and business, or government corporations. As the data level increases, the requirements for verification and authorization are heightened to ensure the security of processing. Level 1 data processing is used in business-to-consumer transactions, regardless of the size of purchase.  Level 2 data processing is required for business-to-business transactions. Level 3 data processing requires the highest amount of security for government or corporation transactions.

Level 1 Data

Level 1 data involves transactions between businesses and consumers. As the first data level, it requires minimal details for verification. This transaction is initiated by the consumer’s personal credit card. The only data required for this purchase is the credit card number, expiration date, and amount of the transaction.

Level 2 Data

For business to business transactions, level 2 data requirements must be met. These transactions require level 1 details, in addition to the tax amount, PO number, and zip code of purchase. As the requirements for level 2 processing increases, the consumer is better identified, and as a result, there is greater guarantee of secure transmission. The higher the data level, the lower the transaction cost. Considering, the increased verification of level 2 data, the transaction cost of credit card processing is reduced.

Level 3 Data

Level 3 data occurs between government agencies or corporations. Due to the highly classified nature of government transactions, this data must be verified by gathering detailed information regarding the parties involved. Although it may go without saying, level 3 data is the most secure. Each level 3 transaction must include the previous details from levels 1 and 2. In addition, the following information must be provided: line items and categories of shipment, destination of shipment, invoice number, freight amount, and duty amount. These transactions are only performed via eCommerce and primarily for government agencies. However, business-to-business transactions may occur at level 3 as well. Based on the severity of clearance required for level 3 processing, these transactions often cost the least of the three levels. As previously stated, an increase in information verified, lower the transaction risk, and therefore, reduces the transaction cost.

Acquiring Level 3

Due to the level of detailed verification and authorization required, not every transaction can be processed at a level 3 data clearance. Notably, not all credit card processors can accept transactions at the 3rd level, as a specific gateway and deeper integration is needed for these secure transactions. A variety of software companies, such as BluePay, Tidal Commerce, and Dharma Merchant Services, can provide the necessary gateway for processing. Additionally, comprehensiveinformation must be provided for Level 3 transactions.

Benefits

There are many benefits to level 3 data processing. At the highest security clearance, businesses and corporations can save an average of 1% on interchange rates and processing fees. This can add up to a hefty savings for any business. When processing transactions at a Level 3 clearance, an itemized invoice is provided, allowing for simplified billing and accounting. Additionally, businesses and government entities can place restrictions on when or how the credit card is being used. Monthly upper limits for transactions can also be established.

While pursuing Level 3 data processing might sound ambitious, it can certainly be advantageous for many businesses. Due to significant financial savings and low-risk transactions, it is often wise for large businesses, corporations, and government entities to pursue Level 3 data processing.

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