Card-Not-Present Processing

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Card-not-present transactions occur when a purchase is made but neither the cardholder nor card are physically present. In your personal life, you may be familiar with this when you purchase products online to then pick up later or have them shipped to you. For example, when a restaurant makes an online order from a food supplier, they may not present a physical card at the time of the order. The supplier will still go ahead and put the order together, despite not having ever seen a physical card, knowing that the information, once approved, will result in a payment from the creditor. For many business-to-business vendors, the transactions tend to be much greater than those of individual consumers, which means the need for security is more substantial. 

When a customer is physically present in front of you, then you can watch them swipe, tap or insert their card in the reader. But when a purchase is being made without the cardholder physically present, then it is called a card-not-present transaction. This makes it extremely easy for customers to find you and to be able to make transactions. Especially since March 2020 when online sales spiked. However, without having the customer and the card right in front of you, you need to be able to find a more secure way to qualify this as a secure transaction. And the way to do that is through Level 2 and Level 3 processing.

There are a number of fees that your business will have to pay in order to process card-not-present transactions. These include:

  • Interchange fees
  • Assessment fees
  • Risk and PCI compliance

Interchange Fees

The bank that issued the card that your customer used to make a transaction charges a fee to you for the privilege of accepting their type of credit cards, such as MasterCard, Visa, American Express, and Discover. These companies make billions of dollars in the process. Factors that can affect the fee include the card’s brand, the region or jurisdiction the transaction occurs in, the size of the business, and whether the transaction type is listed as a Level 1, Level 2, or Level 3.

Assessment Fees

There are different types of fees that companies such as Visa and MasterCard can assess to merchants. Both MasterCard and Visa charge a type of Assessment fee that ranges approximately 0.14%.  Another example is referred to as Network Access and Brand Usage (NABU) fees; they are paid to support the network. 

Risk and PCI Compliance

Nobody wants to face crime, cyber-attacks, or monetary fines. In 2016, the PCI Security Standards Council reported that 71% of hackers attacked small businesses and companies with fewer than 100 employees. If you have a data breach, then you will be required to show your compliance documents to a forensic examiner who will determine if the data breach was due to noncompliance or another security-related control failure. In this instance, you might also risk major credit card brands placing a restriction on your business or terminating services altogether if you do not obtain compliance. 

And then, of course, there’s the issue of what happens to your brand’s reputation when it comes to light that you had a data breach. Your competitors will be all too happy to take your customers if yours don’t feel safe with you. So being PCI compliant is about more than saving on fines. Protecting cardholder data and your business is a smart move for any business owner.

Qualifying For Lower Rates

Consumer cards only qualify for Level 1 processing. But when it comes to processing purchase cards, corporate cards, and business cards, there are many solutions so your business can process card-not-present commercial transactions by asking for more data.

There are changes that will need to be made in order to help you save more money by paying less in fees. First, you may need to update your payment processing software. In order to get the most benefit out of the reduced fees that come with Level 2 and Level 3 processing, you have to be able to ask your customers for important information, also known as line item details, and your payment system needs to be able to process that data. If your current system does not have fields for the following information, then their purchases will be charged at Level 1 rates. For Visa, the minimum fields required for Level three processing are:

  • Discount amount
  • Discount per line item and line item total
  • Duty amount 
  • Item commodity code
  • Item descriptor
  • Product code
  • Shipping amount
  • Unit of measure
  • Unit of cost

In order to process Level three transactions, MasterCard requires:

  • Customer code, but for purchasing cards only
  • Debit or credit indicator
  • Description of product 
  • Extended item amount
  • Product code
  • Quantity
  • Tax ID
  • Tax amount 
  • Tax indicator
  • Unit of measure

How Interchange Pros Can Help You

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In order to submit the data that is necessary for you to enjoy your lower interchange rates, you need to have a system set up to accept the data that you need to receive, and then process it. If you don’t, then the payment will be processed according to the level of the amount of data that was given, so you can face Level 1 or Level 2 processing fees rather than Level 3 processing fees simply because not enough data was provided. We make it easy for you to transition over to a new system without any interruption to the high quality of customer service that your clients expect from you. Our system automatically inserts the necessary data to qualify your transactions at reduced Level 3 interchange rates.  We have many testimonials from satisfied business owners who are happy with the savings they are seeing. Call us now to find out how we can do the same for you.