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The B2B Opportunity

By Peter Scharnell

Visa estimates that the business-to-business (B2B) and government markets will generate $14.4 trillion in spending by the end of the year. That's a tremendous amount of opportunity for you, ISOs/MLSs, in a surprisingly underserved market segment.

The B2B space includes businesses selling to other businesses, large corporate clients and the government. This sector progressively sees credit cards gaining payment market share.

There are many reasons for both the B2B buyer and seller to use and accept credit card payments. Benefits include enhanced reporting and reconciliation, not having to extend credit, receiving payment more quickly and reducing collection problems.

There are also more and more instances where large corporate and government contracts require businesses working with them to accept purchasing cards. With the advent of level-3 processing programs, you can now address the needs of these large corporate and government accounts and focus on a new frontier of payment processing sales opportunities.

What Is Level-3 Processing?

There are three primary types of credit cards recognized in the processing industry: consumer cards (level 1), corporate cards (level 2) and procurement cards (level 3). Level-3 line item detail is designed to support B2B and business-to-government (B2G) credit card use. Level-2 processing requires that the merchant enter prompts for the customer code and the tax amount in addition to the standard level-1 payment information.

Level-3 line item detail provides more specific purchase information such as item description, quantity, price, freight amount and other specific detail. This information is extremely valuable to finance personnel in order to help them streamline accounting and business practices and to merge payment data with electronic procurement systems. Level-3 information contrasts with the standard data that appear on a typical consumer credit card statement, which consists of the dollar amount, transaction date, merchant name, city and state.

Level-1 information is often insufficient to document B2B and B2G transactions. Similar to an invoice, Level-3 line item detail must define exactly what is being purchased, link that information with the payment transaction and deliver it electronically to the appropriate personnel.

Corporate and government customers often use procurement, or purchase, cards (p-cards) that are typically more expensive to process than other credit cards, that is unless they include the additional line item data with the card transaction. P-cards are rapidly being adopted to improve efficiency, lower cost and decrease the time associated with the handling of purchase orders.

Additionally, there are large ticket interchange rates available from Visa and MasterCard that will significantly reduce the transaction costs by about 30% (on average). Merchants that process level-3 data with their transactions will realize considerable savings by always receiving the best available processing rate.

Accepting p-cards improves profitability and efficiency by reducing payment time from 30 - 60 days to two to three days. And electronic authorization reduces collection expenses and the cost of floating funds until the payments are received.

These are some compelling ROI opportunities for customers, which means new sales prospects if you are looking to expand your merchant portfolio.

How to Provide Level-3 Processing

Level-3 processing will increase your competitiveness by helping you win new business and address a rapidly growing and lucrative market segment. In order for your prospective merchants to manage interchange qualifications to obtain the lowest rates available, you need a system that will support level-3 data.

EXS recommends a comprehensive solution such as 3 Delta Systems, Inc.'s (3DSI) payment solution for commercial and government p-card programs. 3DSI specifically developed the system for suppliers and merchants providing goods and services to corporate and government personnel who pay for their orders using p-cards.

While 3DSI designed the system to meet the special requirements of p-card transactions, all standard consumer credit cards may also be processed. This translates to a single comprehensive solution for your customers' processing needs.

Because many business models exist in the B2B space, you will need to be able to offer several methods of processing the transactions. A solution like 3DSI can provide a very simple Web interface or virtual terminal and more complex gateway integration into backend accounting systems.

Because the B2B space typically deals with larger and more complex customers, it's important to get a detailed understanding of the specific needs of each customer so that you can provide the correct solution. You should work with your processor to get the proper training and support for B2B sales opportunities.

Providing level-3 processing will allow you to offer a new service to a customer base to which you most likely have not yet sold. You can educate these new prospects on the benefits of level-3 processing and show them how they can significantly reduce their processing rates and increase profitability by improving cash flow and reducing operating costs. Keep in mind that the B2B sales cycle can be much longer than the typical retail merchant sale; however, the rewards you earn can be tenfold.

Peter Scharnell is VP Integration for Electronic Exchange Systems (EXS), a national provider of merchant processing solutions. Founded in 1991, EXS offers ISO partner programs, innovative pricing, a complete product line, monthly phone/Web training, quarterly seminars and, most of all, credibility. For more information, please visit or e-mail Peter at .

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