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accepting p cards

Accepting P-cards for Payment: More Defined and More Refined

December 16, 2014

As more businesses adopt purchase cards (P-cards) as an option through which to pay their supply chain vendors, more sellers are turning to card acceptance services providers for solutions that are both administratively compatible and financially efficient. These seller organizations are demanding a higher quality of conversation regarding the specialized nature of P-card acceptance—and more generalized providers are struggling to deliver.

As a consequence, the gap between card acceptance services that focus on consumer payments and those specializing in B2B programs is becoming more apparent in the marketplace. And sellers are becoming much more cognizant of the advantages of services furnished by specialists.

There are two primary areas that need to be accommodated in order for a provider to fully serve a B2B vendor:

  • A deep understanding of the technology available and how it will work with the seller’s existing business process infrastructure
  • The specialized requirements Mastercard and Visa provide that allow for a reduced cost to the seller when P-cards are accepted. This is important as most card acceptance environments assign fees to the seller for being allowed to accept cards for payment

These two issues go hand-in-hand in the B2B world as technology facilitates the qualification for the lower interchange expense.

How Accepting P-cards for Payment Works

The largest fee a seller is charged to be able to accept Mastercard or Visa payments is the “interchange fee.” This fee makes up about 80 percent of the total amount sellers are charged. When P-cards are presented by the buyer as a form of payment, a special interchange designation can be applied that is not available to consumer transactions. If more detailed, Level 3 line-item data is entered and attached to a transaction prior to settlement, and the interchange expense of the transaction is re-calculated at a significantly lower rate. For example, the interchange expense component for Mastercard transactions can drop from 2.95 percent to 1.90 percent or a reduction of about a third. The impact is similar for Visa.

For heavy use or for large transactions, this feature can mean thousands of dollars in savings to the seller. In fact, both Mastercard and Visa have special P-card interchange categories just for large-dollar transactions that offer even more significant seller savings than in this example. The trick is making this capability available to the seller.

The drawback? Most point-of-sale technology doesn’t handle the entry of Level 3 data, so transactions default to the higher rate charged to vendors. While some organizations focusing on consumer card acceptance may have access to this technology, most don’t have the expertise to recognize the opportunity nor the acumen to implement it.

Choosing the Right P-card Provider

The trick to choosing a card-acceptance-services provider is finding one familiar with the specialized nature of P-cards—one who can bring the best technology that allows sellers to input, capture and deliver Level 3 data with their transactions. Optimally, the provider will have their own proprietary software and the knowledge to integrate it into the seller’s operating environment. It’s worth noting again that most consumer-centric point-of-sale technology does not accommodate the entry of Level 3 data. So consulting with a provider specializing in B2B card acceptance can maximize both the efficacy of the technology and the financial benefits of transacting with Level 3 data.

Sellers wanting to accept P-cards from their customers should choose a provider that demonstrates the expertise to engineer a robust and effective solution that integrates with their existing operational preferences. Additionally, the card acceptance services provider should present a logically organized evaluation of the seller’s existing card-acceptance expense structure and a mathematical model showing the likely financial benefits from transacting with Level 3 data.

Not offering to provide these should be considered a red flag.

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