PayPal Advanced Checkout - What are Level 2 and 3 Card payment transactions?

Card payment processing has three levels: Level 1, Level 2, and Level 3. The levels differ in the amount of information required to complete the payment as a Level 1, Level 2, or Level 3 eligible transaction. Level 1 requires less information and therefore generally incurs higher interchange fees compared to transactions processed with Level 2 and Level 3 data. Most businesses can operate at Level 1, however, when processing corporate and purchase credit cards, IC++ merchants can benefit from reduced interchange fees by providing additional transaction information called Level 2 and Level 3 data.

Corporate and purchase credit cards are eligible for Levels 2 and 3 processing if the required information is provided. Consumer cards are only eligible for Level 1 processing.

Level 2 and Level 3 cost optimisation benefits don’t apply to debit cards.

Merchant benefits from Level 2 & 3 processing may include:

• Reduced interchange costs if they’re IC++ merchants.
• Fewer chargebacks.

Currently, both Visa and Mastercard offer Level 2 & 3 processing. Amex offers Level 2 and Discover offers only Level 1 processing.

Merchants can send Level 2 & 3 data to PayPal only for taxable US domestic corporate and purchase credit card transactions. Visa and Mastercard have their transaction criteria to qualify for Level 2 & 3 processing:

• Visa: The total tax amount must be between 0.1% and 22%.
• Mastercard: The total tax amount must be between 0.1% and 30%.
  
  Note: Merchants that want to qualify for Amex Level 2 processing are required to contact Amex for approval before they accept the Level 2 data.

To qualify for Level 2 & 3 processing, merchants must send the following information. However, the card network and cardholder issuing bank ultimately determine whether a transaction qualifies for Level 2 or Level 3 processing.

Level 2 data:

• Card number, expiration, billing address, shipping address, and invoice number.
• Customer Code or PO number - unique reference ID for the order.
• Tax amount - an amount must be submitted separately from the total transaction amount.

Level 3 data:

• Level 2 data, and,
• Unit amount or Unit price
• Unit of measure
• Freight or Shipping amount - total shipping and handling charges.
• Duty amount - total charges for any import or export duties.
• Discount amount
• Item commodity code
• Item description
• Item product code
• Item quantity
• Unit tax amount
• Unit discount amount
• Ship-from ZIP code