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The idea of a Level 2 & 3 processing is not as new, but it’s something that convenience stores and other retailers may soon be using to expedite the payment process. Check out this article for more information on how these types of transactions work.
When both the merchant and the seller are companies, B2B payment processing is used. This means that the seller is billing a fellow company for their goods and/or services. Because it’s classed in one of two ways, Level 2 or Level 3, it’s also known as Level 2 and Level 3 processing. It usually occurs for card-not-present transactions that need more client data, as these transactions are more likely to be fraudulent.
Data verification and processing speeds are the key distinctions between Level 2 and Level 3 processing. Level 2 takes less data from the client but charges somewhat higher rates, while Level 3 collects more data from the customer but charges retailers reduced credit card processing prices. Collecting more client information strengthens the transaction and lowers the chance of fraud or chargebacks. As a result of the lesser risk, the processing costs are also cheaper.
What is the difference between B2B and B2C payments?
B2B (business-to-business) is a distinct business strategy that allows for large transaction values and growth. It also needs different technologies than a typical B2C (business-to-consumer) retailer, such as B2B payments. While the procedure is similar, there are several important distinctions between B2B and B2C payment processing, including preferred payment methods, rates, and even order minimums.
B2B payments are usually more valuable, and they’re becoming more so. Consider this: a consumer’s personal budget is likely to be less than a company’s commercial budget. As a result, B2B payments often handle larger sums. As a result, payment processing prices vary for B2B and B2C organizations and should be taken into account when looking for a payment processor.
Each year, roughly $120 trillion in B2B payments are conducted worldwide, including $25 trillion in the United States alone. We’ll look at B2B payment processing and how to set it up for your company in the sections below.
How Do Business-to-Business Payments Work?
Electronic payment processing can now handle B2B transactions thanks to advancements in payment technology. B2B sales have become quicker, more convenient, and more streamlined as a result of this advancement, lowering the cost of both successful and failed payments. So, how does it function?
Step 1: Customers pay for your products or services over the internet.
Step 2: The information is sent to your bank via your payment gateway.
Step 3: Your bank contacts your client’s issuing bank to seek money.
Step 4: Your bank receives the information from the customer’s bank, which determines if your client has adequate cash.
Step 5: Your bank sends this information to your payment gateway, which subsequently completes the transaction.
Credit card processing for B2B and B2C transactions is essentially the same. The card network connects your bank (acquiring bank) with your client’s bank (issuing bank), which issued you with a merchant account.
To manage your B2B transactions, you’ll need a reliable payment processor. Look for a company that is dependable, has the proper features and integrations, and has the best prices. Check out our top selections for small company B2B payment solutions.
What Are the Different Types of B2B Payments? How Do Companies Pay Each Other?
Businesses may pay one other in a variety of methods, the most common of which is via check. It’s worth noting that checks are losing favor—more than 30% of firms anticipate using fewer checks in the next year, while 37% want to utilize more e-payment alternatives using virtual cards.
Why Should You Review Your B2B Payment Processing?
There is a lot of space for improvement in the B2B payments business. According to Deloitte, processing costs are a key concern for 35% of firms, costing them approximately $8 to execute a single supplier payment.
You may be putting up a B2B payment system for the first time, or you may already have one. Regardless of your circumstances, pricing is simply one of many factors to consider when evaluating your B2B payment processing system.
According to The B2B Payments Tipping Point, selecting an innovative B2B payment processor has a number of major advantages, including fewer mistakes and fraud, higher efficiency, lower costs, and better cash management.
Ensure that payments are made on time
The majority of small firms are used to pursuing money. It’s a sad business truth. According to one study, one out of every ten bills gets paid late. When it comes to B2B payments, that figure almost doubles. Furthermore, 30% of firms claim processing time is a key barrier, with payment taking an average of 30 days to complete.
You can make it easier and simpler for both you and your customers to execute a transaction by optimizing your existing B2B payment processing.
Reduce the likelihood of disaster
In 2020, more than three-quarters of organizations experienced fraud (or attempted fraud), and it’s a problem that’s getting worse. Unfortunately, many payment systems lack the security necessary to safeguard your data and those of your clients. Upgrading to a more secure B2B payment processor will help you avoid being a victim of fraud.
Organize and Manage Data Effortlessly
Data has been accessible to organizations of all sizes because of technological advancements, which can be both a benefit and a problem. On the one hand, you have access to more data than ever before, allowing you to make more informed business choices. However, it may become cumbersome and difficult to maintain. Not to mention that missing data might cause delays in reconciling your accounts. In a single year, missing data costs $3.3 trillion.
Conclusion
While the COVID-19 epidemic has a lengthy but transitory effect on B2B payments, expectations are positive as digital payment technology catches up and compensates for the decline in cash use throughout the globe. If your primary client is another business, it’s worth looking into strategies to protect your company, enhance consumer confidence, and decrease inconvenience when it comes to B2B payments.
Frequently Asked Questions
What is a Level 2 transaction?
A Level 2 transaction is an in-game purchase that can only be made by a user with a higher level of accreditation. The levels range from 3 to 6, where the most common being users who have reached Level 4 or 5 as they are able and allowed to spend up to $8 on items for their account at any given time.
What is a Level 3 payment?
A Level 3 payment is a type of person-to-person transfer in which money or currency is transferred to the account of another individual without going through any financial institution, such as a bank.
