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Credit Cards, PCards and Level 3 data

Here’s a post that talks about business more than business analysis.

I have been researching what it means to process level 3 data for credit cards. For quite a while now. Finally today I had that “Oh!” moment and I want to share it because I have had trouble finding data.

Credit Card processing is simple. I am assuming e-commerce here.

1. Customer enters credit card information (Number, expiry date, billing address, CVV)
2. Site (Merchant) sends the information to a CC processor.
3. CC processor talks to the issuing bank and authorizes the card
4. Site (Merchant) gets paid by issuing bank
5. Customer pays the issuing bank later

Not So BasicsPCards
Large Corporations and Government Agencies (LCGAs) realized one day that they could save a lot with electronic transactions and decided to use credit cards. But the employees went crazy with their personal credit cards. So Visa and MasterCard came out with special cards that were issued to employees specifically for official purchases. This is the Purchasing Card (PCard).

Level 3
However, the usual credit card transactions were difficult to settle. LCGAs realized that if the Merchant sent more data about the purchase to the CC processor while charging the card, LCGAs could get this data back from the CC Processor and thus could reconcile all transactions electronically and hence easily.

So the merchants started sending “Level 3” data to the CC processors. This is detailed data about the line items for which the card is being charged.

The basic benefit of Level 3 data is that LCGAs can reconcile the purchases made by their employees easily. They can also keep a check on what the employees are buying.

Level 3 processing is only beneficial for PCards. Not for consumer Credit Cards. It’s advisable for merchants to pass Level 3 data to CC processors because it increases their chance of working for LCGAs as well as gets them some discount on transaction processing fees.

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