B2B Payments

Are B2B Merchants Routinely Overpaying For Card Processing?

One columnist is arguing that many B2B merchants are overpaying for payment card processing because they are using a merchant account provider without any B2B expertise.

“For example, say two merchant account providers offer a B2B merchant ‘interchange plus; pricing with the same rates and fees. What could possibly be the maximum difference in annual cost between provider A and B if the rates and fees are the same?” penned Phil Hinke in Practical Ecommerce. “Well, I recently worked with a B2B merchant that was paying $30,000 more per year because it chose the wrong processor. The merchant didn’t realize it because the higher processing cost had nothing to do with a provider’s rates and fees. It had everything to do with the salesperson not understanding the B2B marketplace and not being willing to put forth some effort to educate and set up the merchant correctly.”

The issue involved associating the right data with each transaction. Because that wasn’t done, tax and interchange charges were higher than they should have been.

“Level II requires the tax and customer code information to be passed along with the transaction. It applies to credit cards from certain businesses, including corporate and purchasing cards. Level III information is more commonly used for orders involving purchasing cards. Level III information includes Level II information plus line item detail, such as the purchase order number, product code, and description,” Hinke wrote. “A B2B merchant receives reduced interchange rates if Level II or Level III is set up correctly. Level III interchange can be as low as 1.85 percent + 10 cents and Level II as low as 2.05 percent + 10 cents. However, if not set up correctly, the interchange can be as high as 2.95 percent + 10 cents, which was the case with the vast majority of transactions processed by the above-mentioned merchant.”

It’s a good lesson about the importance of not merely using experienced vendors, but making sure—especially in the complicated B2B world—that it’s the right kind of experience.

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