This email will discuss the fundamental changes taking place, which will soon be mandated, that your company should prepare for. Contractors that want to remain successful must adopt the most efficient and cost-effective GSA-complainant technologies available.
The GSA SmartPay™ program is 23 years old (started in 1989 as the IMPAC program) and accounts for about $30 billion annually in transactions. Approximately $20 billion of that is with the small purchase card.
The SmartPay program saves the government money by avoiding paper-based procurement; it streamlines how front-line managers can access products and services; and the card providers (banks) rebate the government a percentage on the amount purchased. It makes the procurement easier for the federal cardholder and the vendor, a truly win-win scenario.
As the SmartPay contract did not mandate Level-3 processing, GSA has added Level-3 processing as a requirement for some of the contracts recently awarded, especially the Strategic Sourcing BPAs on GSA Schedule. Further, SmartPay training programs for Federal cardholders emphasize that buyers should look for Level-3 processing from the vendors they purchase from.
What does Level-3 processing mean to my business?
GSA recommendations are moving in the direction of a Level-3 mandate.
There are two major objectives that government agencies have when it comes to budgetary concerns and transparency issues:
(1) Obtaining the lowest price possible from suppliers and
(2) having the most detailed information returned from merchants when making purchases with the GSA SmartPay purchase card.
These objectives can be met through “Level 3 Processing”. The increased desire for “Level 3 Processing” was evidenced in last year’s report on Point-Of-Sale Discounts for GSA SmartPay Cards where one of the main objectives listed was: “Introduce Level 3 Data as the reporting source to the Federal Strategic Sourcing Initiative (FSSI)”.
As referenced in the Value Propositions section of the report, Master Card and Visa have created special rates to support Purchase Card programs like GSA SmartPay by reducing the merchant transaction costs (interchange) if Level-3 line item detail information is transmitted with the card payment file. By providing Level-3 data, a supplier may reduce their credit card processing fees – often by 30% to 40%. In addition, the GSA Smartpay website states:
The cost for a $30,000 transaction is only 60 basis points. Compare that to the cost of a regular P-Card or Commercial Card at 2.40% and you can see the savings is quite impressive.Thus, government agencies are strongly encouraged to take into consideration whether a company can provide Level-3 line item detail when they select a supplier. With Level 3 data, agencies get a two-for-one: (1) lower processing costs that the supplier can pass on to the agencies as lower prices; (2) more detailed information on the purchases made.
Down the road, there may be even more incentive to look for Level 3-ready suppliers. A Senate committee has just approved the Government Charge Card Abuse Prevention Act. This act will require federal agencies to put new safeguards and controls on government charge cards used by federal employees. Among these would be the utilization of effective systems, techniques, and technologies to prevent or catch fraudulent purchases. The bill will require penalties for violations.“Level 3 line item detail” includes such data as item description, item quantity, item unit of measure,and item freight amount. Requiring this level of detail virtually ensures that only authorized purchases will occur, significantly cutting down on fraud and abuse.
Processing GSA SmartPay cards requires a more sophisticated technology platform to capture what Visa and MasterCard call Level 3 data. Level 3 data will allow the GSA SmartPay card to meet the Visa and MasterCard Interchange requirements and get lower rates associated with government purchasing cards.
Level-3 will become a requirement for SmartPay, so get ahead of the curve. Get Level-3 compliant.When it comes to accepting government purchasing cards, it’s time to leave the 20th century behind. 21st century technology is required to keep businesses both competitive and compliant with ever increasing regulations designed to reduce fraud.
Who Uses Level 1 and 2 Processing:Almost every business that accepts credit cards uses one of the first two levels of processing. Together, these two types of processing account for most of the business-to-consumer transactions that take place every day.
Levels 1 and 2 Processing:
The different levels of transaction determine the amount and type of information that is passed through the credit card processing network. Level 1 transactions are usually made by consumers with their personal credit cards, thus the information required to accept payment is basic: supplier name, transaction amount and date. Level 2 transactions require additional fields of information, such as sales tax amount and customer codes, and are often made with corporate purchase cards from a U.S. bank.
Who Uses Level 3 Processing:
Level 3 processing involves sending up to 12 fields of detailed data through the credit card processing network, including quantities, product codes and product descriptions. Such specific transaction information is mainly used for business-to-business, corporate and government purchases, providing business the ability to control and monitor purchases made on the company credit card.
What are the benefits of Level 3 processing?
With the additional fields required to qualify for Level 3 processing, businesses can monitor what kind of purchases are made on the company credit card, as well as how much is spent and where items are being purchased. Level 3 credit cards can also include restrictions, limiting the types of business at which an employee can make purchases and eliminating any inappropriate spending that might occur using the company card.
Level 3 processing capabilities come with a lower processing rate than Levels 1 and 2, due to the amount of information that must be provided at the point of transaction.
· Government purchasing cards can be processed with the same level of detail normally associated with an itemized invoice. This is known as Level 3 line-item transaction data.
· When Level 3 technology is in place, a merchant can submit electronically to a government buyer complete transaction detail. This can automatically be entered into its accounting system and reviewed each day, thus providing for greater financial accountability.
· To encourage merchant participation and support of purchasing card programs, Visa and MasterCard have created special interchange rates to reduce a merchant’s transaction costs whenever Level 3 line-item details is transmitted with the financial settlement.
· In providing Level 3 data, a government contractor may substantially reduce their credit card processing fees – sometimes by up to 40%. This savings is available for any size purchasing card ticket. However, this savings can be further increased for contractors that process large tickets, by enrolling in the special “large ticket” program for the GSA SmartPay program.
· Up until last year, only large ticket Visa transactions were eligible for the special reduced interchange rates. This is one reason why the great majority of government contractors have remained unaware of the tremendous savings they are missing in not having a merchant account with Level 3 technology.
· Virtual terminal technology is now available that makes processing a Level 3 transaction much simpler and faster than in the past.
· Some of the features associated with this new technology include the ability to do recurring billing; accept payment by electronic check; a feature called Secure Vault which stores cardholder data securely; automated online invoicing; shopping cart integration; and integration with a merchant’s accounting system.
· The detailed real-time reporting tools available with the virtual terminal are especially useful for businesses that want to be able to closely monitor their transaction activity.
· Visa and MasterCard have formulated regulations designed to reduce fraud. Many businesses are not in compliance with these regulations, especially with regard to storage of cardholder data. Processing with the new virtual terminal technology insures that data is securely stored offsite and that the business is in PCI (Payment Card Industry) DSS (Data Security Standard) compliance.
The lower rates and amount of control and tracking provided makes Level 3 processing an extremely useful credit card processing capability.
78% of merchants set up to process level 3 are sending level 3 data, but NOT set up properly to receive the 30-40% interchange reduction for level 3 data. Contact me for a no obligation review to make sure your taking advantage of the savings your entitled to.