Pay Theory Blog
October 25, 2023

Level 2 & Level 3 Processing

What is Level 2 and Level 3 Processing?

Level 2 and Level 3 processing are the classifications given to credit card transactions that pass along additional payment data. If you are taking credit cards now, you are already participating in this spectrum as level 1 and likely didn’t know. (We should note, Level 1 Processing is not the same as PCI Level 1)

Before We Go Further

Only transactions made with corporate cards, government cards, and some business cards are eligible for the second two levels.

  • Not Eligible: Consumer cards
  • Only specific industries are eligible (defined by Merchant Category Codes)

Why Visa, Mastercard, and American Express Do This

Passing the extra transaction information reduces the calculated risk. The three credit card companies have a lot of overlap between the required data but card-specific requirements exist. We recommend setting yourself up to pass all of the data through.

When the Effort Makes Sense

Card Transactions

  • 25,000-35,000 card transactions per year
  • This isn’t a regulatory requirement but rather a best practice that Pay Theory has set

Card Types

  • Business cards
  • Business Prepaid cards
  • Government cards

Generally You Are

  • A government contractor
  • Selling to wholesalers
  • Have a lot of B2B transactions

Be Aware of Shortcuts

Here is something to keep in mind. If you are working with a payments expert or consultant, they may suggest filling the required field with the “dead data.” We would strongly suggest against that. In recent years there have been systems developed to analyze that. Like most things in life, It’s best not to take shortcuts.

Sources Referenced