ERP systems, credit card processors, online payment gateways – these understandably are not the sexiest topics for many people. And as a consumer, there is little incentive to understand how these backend processes work, since the merchant pays the fee.
But if you’re a government contractor, not understanding how financial processing works can be very damaging. It means you’re probably doing a disservice to your government customer and to your own bottom line.
This post will give a high level overview of the main components of financial processing and how they interact. Understanding these interactions is critical if you want your backend processing to be as efficient as possible by handling Level-3 financial data.
In most transactions there are three components that interface with each other. These are:
- ERP/Accounting Packages – examples Oracle, Deltek.
- A Payment Gateway – example PayFlowPro, Cybersource
- A Credit Card Processor – examples First Data, Elavon.
In most instances the ERP/Accounting system sends data to the gateway, which shares it with the processor. In most scenarios, the gateway connects the accounting system and the processing so there is a seamless passing of data during the transaction.
In some cases, the financial transaction can be accomplished using a so-called virtual terminal (for example FTSConnect), and the transaction information is then added to the internal books separately. Some Virtual Terminals have the capability of passing the Level-3 data without connecting to an ERP/Account package.
Each of these three steps must be collecting and passing Level-3 data for the govcon to be receiving the most favorable processing rates. This is not difficult – all you really need to do is ask some specific questions.
Virtually all ERP/Accounting packages are capable of passing Level-3 data, but many are not set to do so. If this is the case, that can be rectified by a member of the internal IT team.
Most gateways are Level-3 compliant, but there are some that are not. PayFlowPro is certified with many processors and is a good choice. But it’s best to have a professional review your situation to be sure.
Finally, many card processors have multiple networks for fulfillment and not all of them may be Level-3 compliant. This also is easy to fix – the govcon simply fills out a new application and gets a new merchant number. They do not have to change their merchant bank.
So there’s a thumbnail sketch. Obviously some of the technology gets a bit more complicated. But just knowing to ask these simple questions and becoming Level-3 compliant can result in a 20-40% reduction in backend processing charges.