VISA's shift from Level 2 & 3 to CEDP: What does it mean?
Table of Contents
- What is it?
- Why the Switch?
- Verified vs. Non-Verified
- Why does it matter?
- What do you need to do?
- Final Thoughts
What is it?
Visa’s Commercial Enhanced Data Program (CEDP) is a strict data-quality framework launched to overhaul how corporate, B2B, and government credit card transactions are processed.
Traditionally, when businesses accept corporate cards they could unlock significantly cheaper processing fees. This was known as Level 2 & 3 interchange. All that was needed from the business was extra transaction details like a purchase order number and sales tax amount.
CEDP is a complete overhaul of this system. Instead of checking if a business attempted to fill out the extra data fields, Visa now uses advanced AI and validation technology to audit the accuracy, quality, and completeness of the data in real time.
Why the Switch?
Before CEDP, many merchants used shortcuts or automation workarounds to qualify for lower interchange. If their payment system didn’t track a specific item code, a common practice was to input “0000” or type out “Generic Item” into the data field to satisfy the Level 2 or 3 requirement.
Under CEDP, Visa will flag and reject junk data. To pass validation and secure the best rates, merchants must provide “invoice-quality” line item detail. This includes:
• Specific product descriptions
Ex. “Dell 24-inch Monitor”
• Accurate product quantities and unit costs
•Exact SKU numbers or valid commodity codes
•Highly specific tax breakdowns
Distinguishing Local & Federal tax
•Standardized units of measure
Ex. BOX or EACH
Verified Vs. Non-Verified
Visa will evaluate a company’s data submissions over time and assign each a dynamic status - Verified or Non-Verified.
Verified Merchants: Businesses that consistently submit highly accurate, detailed line-item data. These merchants are granted Visa’s lowest-cost processing rates (now called “Product 3” rates).
Non-Verified Merchants: Businesses that submit incomplete, generic, or poorly-formatted data. Their transactions fail validation, and are monitored and penalized.
Why does it matter?
The switch to CEDP will be impactful for businesses handling a large number of B2B or corporate card transactions. The positive side is that businesses can achieve significant savings on interchange costs, but on the other hand they can also pay more fees than they historically would if CEDP qualifications are not met. Here are two specific examples of why these changes matter:
• The “40% Penalty”: When a transaction fails CEDP validation, it gets downgraded to standard retail credit card rates. This can instantly increase the processing fees on that transaction by 40-50%.
• Level 2 Disappearing: With Visa moving away from the Level 2 interchange program, there is no longer a middle ground safety net to qualify for interchange savings. Businesses will either pass stricter Product 3 CEDP data standards, or pay maximum retail processing fees.
What do you need to do?
Payment systems need to transition from submitting legacy Level 2 & 3 transaction data to adhering to new requirements for the CEDP data. This includes:
• Remove all generic or auto-filled placeholder data like missing item codes being “0000”
• Connect your business operational systems directly to your payment gateway so the data is transmitted seamlessly and accurately
• Double check that all information is being passed through accurately
• Monitor monthly processing statements for downgraded transactions (i.e. “Non-Qualified”)
• Contact your payment processor and/or point-of-sale provider to ensure they fully support CEDP data transmission
If your payment processor does not support CEDP, we highly recommend that you contact PolyPay to get setup so you are never penalized for transmitting data properly.
Final Thoughts
CEDP is the new standard for data transmission and risk assessment on transactions. If your business does not make the switch to adhere to these standards, you will be penalized for it on every transaction. With the removal of the Level 2 interchange program, there is no longer a safety net for submitting 50% of the required data. If you are unsure about whether your payment solution can adhere to CEDP standards, contact us so we can help you become compliant with the program and save money on interchange costs.
