B2B Payments-coming out of the Stone Age?


B2B payments have been a laggard when it comes to faster payment adoption. The traditional invoice/PO and “wait for the check” game is becoming passé in favor of newer, faster options.

With a wave of robust and vertically integrated ERP/Accounting software the time is right for Business to Business merchants to get up to speed on ways to increase cash flow, save on credit card processing fees, and better service their vendors with payment options they want to use, namely Credit Cards, Debit Cards, and Same Day ACH

This writer had a discussion with a payment processor that is going after the B2B segment. Paykings, a St. Petersburg, Florida based merchant processor ISO, is making it easy to add Level II and III data to save on fees from Visa and Mastercard without a lot of effort from the merchant.

According to Paykings CEO. “Im always surprised when we speak to a wholesale merchant and they don’t know anything about Level 2 and 3 data and how much they can save…”  He added “…we have case study where a merchant has saved $20,000+ in fees just by adding Level 2 and 3..”.

Paykings further stated that ACH is accelerating the replacement of physical checks “..in a big way..” [sic]

Same Day ACH

Banks are getting on board too as the competition for payment handling heat up between ACH and traditional credit card payment programs. According to the NACHA Website, this is happening now:

NACHA – The Electronic Payments Association is the steward of the ACH Network – one of the largest, safest and most reliable payment systems in the world. The ACH Network creates value and enables innovation by universally connecting all U.S. financial institutions, and moving money and information directly from one bank account to another.

NACHA has adopted a Rule to provide a new, ubiquitous capability for moving ACH payments faster. The Rule will enable the same-day processing of virtually any ACH payment. Using an expert, third-party economist, NACHA assessed 10 primary use cases for Same Day ACH. One significant use case for Same Day ACH include:  Business to-Business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments;

Currently, most ACH payments are settled on the next business day. There are many uses of ACH payments, however, for which businesses and could benefit from same-day processing. This NACHA rule change will enable ACH Originators that desire same-day processing the option to send same-day ACH transactions to accounts at any receiving financial institution (RDFI).

What Level II and III Data Discounts for B2B Merchants

Level II and III data is simply attaching more data points to credit card transactions that is readily available to wholesale and B2B merchants. The higher the level, the more data points, and, ultimately, the better the savings on interchange rates. The beauty is—its coming out of the fees charged by Visa and Mastercard.

Card issuers see Level II and III transactions as more secure, and less likely to be disputed after the fact, so they’re willing to offer discounts in return for that security.

For Level II, that means a merchant providing inputs like a customer code and sales tax. To take full advantage and deal in Level III transactions, a merchant has to go a few steps further, offering information like item descriptions, quantities, unit price, shipping zip code and more.

Savings Benefit

Level III processors are most commonly among merchants handling large-scale B2B and government transactions. Including this data can bring some serious savings on interchange rates, which can come in at up to 1% lower than a standard transaction.

Let’s take a $20,000 sale to a large industrial buyer. Using a typical MasterCard interchange schedule, Level III can net over $200 in interchange savings, a huge savings on a single transaction.

The story continues in payments and the evolution continues….