When businesses start looking for ways to lower B2B credit card processing fees, the first thing they typically do is shop around for a better processor rate.
And that makes sense. After all, that’s what most payment processors focus on when trying to earn someone’s business.
But here’s something that often gets overlooked.
For businesses accepting commercial cards, corporate cards, and purchasing cards, the processor’s markup is usually only a small portion of what they’re actually paying to accept credit cards.
The majority of those costs come from something called interchange.
And in our experience, that’s where some of the biggest opportunities to reduce processing costs can be found.
The challenge is that many businesses have never had anyone take a close look at how their transactions are actually qualifying at the interchange level.
Make Sure Your Business Is Set Up for B2B Credit Card Processing
If your business sells products or services to other businesses, there’s a good chance many of your customers are paying with commercial, corporate, or purchasing cards.
This is especially common among manufacturers, distributors, government contractors, wholesalers, and other B2B companies.
What many businesses don’t realize is that these cards can qualify differently from standard consumer credit cards.
Visa and Mastercard have special interchange categories for certain commercial and purchasing card transactions. These programs allow eligible transactions to qualify for lower interchange rates when the appropriate transaction information is submitted and the applicable requirements are met.
But simply accepting commercial cards doesn’t mean your transactions are automatically qualifying for those lower rates.
Your processing system needs to be configured correctly, and the required transaction information needs to be submitted.
If that isn’t happening, transactions can end up qualifying at higher interchange rates, even when the business has negotiated excellent pricing with its processor.
And because many businesses aren’t examining the underlying interchange categories, these additional costs can go unnoticed for years.
Why the Processing Setup Matters
Two businesses can have the exact same processor pricing and still pay substantially different amounts to accept credit cards.
One may have a processing system that automatically submits the information needed for lower commercial card interchange rates.
The other may be processing those same types of cards without the necessary information, resulting in higher interchange costs.
The difference isn’t necessarily what the processor is charging.
It’s how the transactions are qualifying behind the scenes.
Why Lower B2B Credit Card Processing Fees Start With Interchange
Every credit card processing fee generally consists of three components:
- Interchange: The portion paid to the bank that issued the customer’s card.
- Card network fees: Fees charged by Visa, Mastercard, and other card networks.
- Processor markup: The amount the payment processor charges for its services.
Depending on the business and its card mix, interchange can represent as much as 80% to 90% of the total processing cost.
Yet when businesses compare payment processors, most of the conversation revolves around the processor’s markup.
There’s nothing wrong with negotiating competitive pricing. Businesses absolutely should.
But consider this.
A company might spend weeks negotiating a slightly lower processor rate while overlooking interchange qualification issues that could be costing significantly more.
That’s why we believe it’s important to look beyond the quoted processing rate and understand how transactions are actually qualifying.
A competitive processor rate doesn’t necessarily mean you’re getting the lowest overall processing costs.
How Level 3 Processing Can Reduce B2B Credit Card Processing Fees
One of the biggest opportunities for businesses accepting commercial and purchasing cards involves enhanced transaction data.
Visa and Mastercard have programs that allow eligible commercial card transactions to qualify for lower interchange rates when additional information is submitted with the payment.
This can include details such as purchase order numbers, item descriptions, quantities, tax amounts, and other transaction information.
You may have heard this referred to as Level 3 processing.
Visa has also made significant changes to its commercial card programs, including introducing its Commercial Enhanced Data Program and Product 3 qualification requirements.
But here’s the important part.
You don’t need to understand all the technical details to take advantage of these programs.
What matters is whether your processing system is capable of submitting the correct information and whether your transactions are meeting the applicable qualification requirements.
And for many B2B businesses, much of this can be automated.
With the right processing technology, the necessary transaction information can be captured and submitted in the background without employees having to manually enter additional details every time they accept a payment.
When eligible transactions meet the requirements, they can qualify for lower interchange rates.
That means the business can potentially reduce processing costs without changing how its employees handle payments.
However, there’s an important distinction.
Just because a processor or payment gateway says it supports Level 3 doesn’t necessarily mean your transactions are qualifying correctly.
The only way to know is to examine the actual interchange qualification data.
For businesses interested in the technical details, Revolution Payments also has a more in-depth guide explaining Visa’s recent commercial card changes and qualification requirements.
Flat-Rate Pricing: Simple Doesn’t Always Mean Less Expensive
Flat-rate pricing has become increasingly popular, particularly with providers such as Stripe, Square, and PayPal.
The appeal is understandable. Businesses pay a predictable rate without having to worry about different interchange categories.
For some businesses, especially those accepting mostly consumer cards, that simplicity can be convenient.
But for B2B companies accepting substantial commercial and purchasing card volume, flat-rate pricing may not be the most economical option.
Here’s why.
When a commercial card transaction qualifies for a lower interchange rate, the merchant doesn’t necessarily receive the benefit of that lower cost under a flat-rate pricing arrangement.
The business may continue paying the same percentage regardless of how the transaction qualifies.
Interchange-plus pricing works differently.
With interchange-plus, the actual interchange cost is passed through to the merchant, and the processor charges a separate markup.
So when eligible transactions qualify for lower interchange rates, those savings generally flow directly to the business.
For companies processing significant B2B credit card volume, that difference can add up.
This doesn’t mean flat-rate pricing is always a bad choice.
It simply means businesses should understand what they’re paying and whether their pricing structure allows them to benefit from lower interchange costs.
Large-Ticket Transactions: Another Opportunity Worth Looking At
Another area we frequently examine involves businesses accepting large credit card payments.
This is especially relevant for government contractors, distributors, manufacturers, and companies accepting large corporate purchasing card transactions.
Visa and Mastercard have special interchange programs for certain qualifying large-ticket transactions.
Depending on the card type, transaction amount, and applicable requirements, these programs can provide substantially lower interchange costs than standard commercial card categories.
And the savings can be significant.
On some high-dollar transactions, the difference between qualifying for the appropriate Large Ticket interchange category and processing at a higher commercial card rate can amount to hundreds of dollars on a single payment.
But again, these savings don’t happen simply because the transaction is large.
The transaction must qualify, and the processing system must be capable of supporting the applicable requirements.
Many businesses accepting these types of payments have never had anyone examine whether they’re taking advantage of the available Large Ticket programs.
It’s another reason why looking at the interchange side of processing can be so valuable.
A Real-World Example of Lower B2B Credit Card Processing Fees
We had a distributor that was already processing with Revolution Payments, and they had negotiated some very competitive processor pricing with us.
So from that standpoint, they were already in pretty good shape.
But when we took a closer look at the interchange side of their processing, we found that a number of their transactions weren’t qualifying at the rates they should have been.
After making some adjustments to how those transactions were being processed, we ended up saving them over $50,000 per month, without making any changes to the processor pricing they already had.
That’s over $600,000 a year in savings.
And what I find interesting about this example is that none of those savings came from negotiating a lower processor rate.
They came from identifying opportunities on the interchange side that were being overlooked.
Now, this was a distributor processing substantial credit card volume, so naturally, the savings opportunity was larger than what a smaller business might experience.
But the underlying issue is the same regardless of size.
Having a competitive processor rate doesn’t necessarily mean your transactions are qualifying at the lowest interchange rates available.
We’re also happy to share actual processing statement comparisons showing the difference before and after the changes. Just send us an email if you’d like to see them.
How an Interchange Audit Can Help Lower B2B Credit Card Processing Fees
One of the things we’ve learned after decades in the payment processing industry is that businesses often assume their processing costs are competitive because they’ve already negotiated a good rate.
And sometimes they are.
But unless someone has actually examined how their transactions are qualifying at interchange, there’s really no way to know whether additional savings are being overlooked.
That’s where an interchange audit comes in.
Rather than simply comparing processor rates, an interchange audit looks at the underlying transaction data to determine whether payments are qualifying correctly.
That includes examining commercial and purchasing card transactions, unnecessary interchange downgrades, enhanced data qualification, and potential Large Ticket opportunities.
At Revolution Payments, we specialize in working with B2B businesses and government contractors, and we offer no-obligation interchange audits to help identify these types of issues.
The process is straightforward.
We start with a recent processing statement and examine how the transactions are qualifying.
If everything looks good, we’ll tell you.
But if we identify transactions qualifying at unnecessarily high interchange rates, we’ll explain what’s happening and what the potential savings could look like.
And there’s no obligation to make any changes.
The goal is simply to determine whether you’re paying more than necessary on the interchange side of your processing costs.
If your business accepts commercial, corporate, or purchasing cards and hasn’t had an interchange audit recently, it may be worth taking a closer look.
Contact Revolution Payments at 888-790-3450 to learn more or request a no-obligation interchange audit.
Frequently Asked Questions
What is the cheapest way to accept B2B credit card payments?
There isn’t one pricing model or processing setup that’s cheapest for every business. It depends on the types of cards accepted, transaction sizes, processing volume, and how transactions qualify at interchange.
For many businesses accepting significant commercial and purchasing card volume, interchange-plus pricing combined with automated enhanced data submission can provide opportunities to reduce overall processing costs.
How can businesses reduce interchange fees?
Businesses can potentially reduce interchange costs by ensuring eligible transactions qualify for the appropriate interchange categories.
For commercial cards, that often involves submitting accurate enhanced transaction data, meeting the applicable qualification requirements, settling transactions on time, and identifying unnecessary downgrades.
An interchange audit can help determine where those opportunities exist.
What is Level 3 credit card processing?
Level 3 processing generally refers to submitting enhanced transaction information with commercial and purchasing card payments.
This may include purchase order numbers, item descriptions, quantities, unit prices, and tax information.
When the correct information is submitted and the transaction meets the applicable card network requirements, eligible transactions may qualify for lower interchange rates.
Visa has also introduced updated commercial card requirements through its Commercial Enhanced Data Program, including Product 3 qualification.
Is interchange-plus pricing better for B2B businesses?
For many businesses accepting significant commercial card volume, interchange-plus pricing offers greater transparency and allows them to benefit more directly when transactions qualify for lower interchange rates.
However, the best pricing structure depends on the business’s processing volume, card mix, and overall costs.
The important thing is understanding how your transactions are qualifying and whether you’re benefiting from the lower interchange rates available to your business.