Why Is It a Problem? What is the Solution?
Corporate cards have the highest payment processing rates for merchants. Why?
Here is the education behind why corporate and business types of cards cost the merchant a higher processing rate.
The situation is that corporate cards are higher risk of being charged back because they are abused by employees who are issued the cards from their company. The employees are tempted to use the card to take their spouse out to dinner or fill up their personal car with gas. More of these transactions eventually get charged back. Because corporate cards are used fraudulently more often, they are considered higher risk and therefore they are charged a higher rate for card processing.
Understanding “Interchange Rates”
The issuing bank associations decide what kinds of cards and what types of transactions carry what kind of risk for chargebacks, and then they create what is called an “Interchange Chart”. This chart becomes the wholesales cost of any payment transaction. It is non-negotiable. All payment processors have to cover this wholesale Interchange Rate when considering their markup to the merchant in order to service the merchant’s account. Lots of confusion arises because this chart is a table with different rates and transaction fees for hundreds of different categories. This risk is determined by mostly 5 factors:
- Risk in particular industries, like retail, restaurant, travel, government, lodging, gas, service, mail order and others.
- Risk by the mode of transaction, whether it is swiped or keyed in or entered on an e-commerce site.
- Size of the transaction amount.
- Debit vs Credit.
- Whether it is a Corporate or Business card, the transactions which carry the highest rate because they have the highest risk of chargeback!
So is there any way for the merchant to get any relief? The answer is YES.
Some salesmen tell merchants that the high rates can’t be helped, that it is just the way life is. This does not seem fair to the merchant who takes a lot of corporate cards because they are in a B2B business. It does not seem fair to those merchants who have low chargebacks.
But a solution is called “Level 3” Processing.
If the merchant can pass more information back through their Point Of Sale that shows that the sale is less risky and has less risk of chargeback, then the transaction will qualify at a lower rate. Such information includes tax, shipping address and/or SIC code and more. The interchange chart indicates that transactions including this information will qualify at a lower rate than a transaction that does not pass through this information.
A new challenge now arises however,
where the merchant has to have equipment or a virtual terminal that asks for this extra input. Plus the merchant has to take the time to manually enter the information, enter it correctly and not skip over any input questions. If any information is skipped, the transaction defaults back to the highest rate.
Many processors sell Level 3 processing, but it usually can only be handled with a virtual terminal from a computer screen. Again, it is time consuming and if any information is skipped or entered incorrectly, the transaction defaults to the highest rate. Merchants become very frustrated and end of getting so discouraged with the higher rates anyway, that they go back to quicker ways of collecting credit card payments.
The Best Solution:
The best solution is technology which defaults the added information automatically so the merchant does not have the pains taking task of entering it manually. Very few processors have invested in resources that solve this challenge. Electronic Money Company does have this solution. We have technology that passes default information through a gateway, terminal or mobile app. The merchant can return to a simple “swipe and done” via a terminal or mobile app. Or one can quickly enter the card number, expiration date and address via an e-commerce gateway or virtual terminal.
Save Up To 1% with Electronic Money Company’s
Level 3 Processing Technology
Call us to find out how you can save up to 1%
on business and corporate card transaction processing!