2005 Newsletter 010 October

Visa’s 2025 Fee System Overhaul

Overview

In October 2025, Visa began implementing its Commercial Enhanced Data Program (CEDP) a major restructuring of how interchange discounts are earned. The change replaces legacy “data level” models with a new AI-driven system that rewards accurate, detailed transaction data and penalizes incomplete or falsified inputs. The most significant change: elimination of Level 2 interchange discounts by April 2026, leaving only base-rate (Level 1) and fully qualified (Level 3) pricing tiers.

Details (Next 6–12 Months)

For Merchants

• Fee Exposure: April 2026 (March 31, 2026 at midnight?) loss of Level 2 rates could increase effective costs by 1–2 percentage points for businesses that don’t provide complete data.
• This change is documented in the current VISA manuals (April 2025) – and will no doubt be further supported by additional rule changes once we see the October version – Stay Tuned for more once they release
  
  
• Technical Compliance: POS, ERP, and gateway systems must be upgraded to transmit valid item-level fields (SKU, tax, invoice, ship-to ZIP).
• See my earlier post about a Q4 Checkup – Is your POS, Payment, Acquirer, and systems ready for the coming holiday months? – I’ll bet they aren’t
  
  
• AI Validation: Visa will use artificial intelligence to detect “junk data.” Merchants flagged will automatically lose discounts and may be back-billed.
• How and Who will be “back billed” has yet to be determined – I can take a guess, but stay tuned for more as soon as it’s “inked”.
  
  
• Operational Strain: Small and mid-sized merchants are most at risk, facing integration costs and limited time to appeal AI rejections.
• More importantly will be – who IS ready, and who is not? Asking the RIGHT questions will become a critical piece going into 2026.

For Acquirers and ISOs

• Support Burden: Must assist merchants in upgrading terminals, gateways, and data mapping.
• Outside of the scope of what many Acquirers have done in the past – this will put new burdens on staff and functional expertise (increased costs in FTEs) for major acquirers.
• ISOs already don't “trust” anyone in the payment space – requesting (requiring) merchants to make changes will be met with significant push back.
  
  
• Compliance Liability: Inaccurate merchant data may trigger Condition 12.7 violations under Visa’s Core Rules.
• Rules and more rules – acquirers may elect to avoid possible fines and just “not allow” or charge for the option to reduce fees effectively removing the benefit of additional data support
  
  
• Revenue Volatility: Increased merchant inquiries and disputes over AI scoring will strain support and reconciliation processes.
• I see a significant increase in “Merchant - Acquirer - VISA” – dialogues and arguments in the coming months as this is both implemented and smoothed out. NO ONE is going to be happy, and we’re ALL going to hear about it.
  
  
• Product Opportunity: Acquirers with automated data-validation tools can reposition as compliance partners, not just processors.
• But at what cost? – Acquirers have not historically been the best with “cutting edge” technology or partnering with their merchants (years with some large providers in my own career has proven that) so tools will be developed (or vaporware versions) and man will implement “something” but the tools that really help are going to take some time to develop and this is a key area to watch going forward.

Mid-Term Outlook (2026–2027)

• AI-Scored Pricing: Visa will evolve toward dynamic, data-quality-based interchange where rates vary by real-time data completeness.
• I can’t wait to see how this gets implemented – and the first merchants / acquirers who are “fined” for not fitting “AI STANDARDS” (have we seen any of those yet? – nope). The next rules cycle or two is going to be interesting if nothing else.
  
  
• Unified Data Standards: Expect global adoption of the April 2025 Visa Data
• Not going to lie - this will be nice to see finally, a global data standard. The various regions (and providers) have been looking for this for some time.
  
  
• Standards Manual requirements across credit, debit, and Interlink networks.
• A lofty goal – not sure it’s going to happen as easily or as “seamlessly” as we’d all like, but one to watch as it happens.
  
  
• Network Competition: Mastercard and regional networks may follow with similar “data-for-discounts” models, pressuring acquirers to align technology.
• More on this soon – I see it already, but am still reviewing the other card brand rules and changes to build a solid report for all of you.
  
  
• Dispute Integration: Compelling Evidence 3.0 and System Integrity Fees will link directly to CEDP data accuracy making data compliance a dispute-reduction tool.
• Yet a new data element to be argued over – just like any and all documents that merchants have submitted for decades. Look for this one to be further defined and “narrowed” as VISA tightens the noose on what qualifies and what does not (mostly by their lack of any guidance on the matter)

Relationships within Visa’s Core Documents

Together, they show Visa has been laying the regulatory groundwork for this “data-for-discounts” system since early 2024.

Broader Implications for the Global Payments Ecosystem

1. End of “cheap compliance”
   Merchants can no longer achieve interchange savings through placeholders or minimal data. The move converts interchange optimization into a technical compliance race.
2. Pressure on Acquirers and ISVs
   Acquirers must deliver certified integrations and validation APIs; ISVs that fail will lose competitive ground to enterprise-grade gateways already capable of full Level 3 data.
3. AI-driven pricing era
   This marks the first large-scale use of artificial intelligence to adjudicate interchange qualification. Over time, Visa could dynamically price transactions based on live data fidelity scores.
4. Ripple Effects Beyond Visa
   Mastercard may copy or counter-program with its own enhanced-data model; Discover and Amex could adopt similar standards to preserve interchange parity.
5. Strategic Outcome: “Data is the new discount.”
   Visa is shifting from static rate tables to data-dependent incentives, turning compliance itself into a billable service tier.

Long-Term Forecast

• Global rollout: Expect alignment of Visa Europe and APAC rules with CEDP by 2026–2027.
• If only this were true – many of the other regions have fought the “alignment” with the US for some time. I’m not sure how well this will be received UNLESS it’s US aligning with the other regions as the major changes (not likely).
  
  
• Fee consolidation: Traditional interchange, assessment, and integrity fees will merge into a unified AI-scored performance fee.
• Further bluring the line - as to what the fees actually ARE
  
  
• Analytics monetization: VisaNet may resell anonymized merchant data insights—turning compliance into revenue.
• When has it ever NOT been about the data? – this opens up a new model where VISA (and the other brands) now compete with Google and others on greater data aggregation and the ability to make even MORE money on what they charge for, on the front end to merchants and in the future to those who want to leverage their global reach in data aggregation.
  
  
• Small-merchant fallout: Independent retailers and B2B vendors without advanced POS integrations will likely face permanent 30–60 bps cost increases.
• Many will be pushed out of business – further consolidating the industries and the solutions available. Who remains is yet to be seen.

Summary

Visa’s 2025 interchange revamp marks the start of a data-driven era in payments. The old pricing tiers based on minimal compliance are ending; the new model ties cost directly to data accuracy and transparency. In effect, data has become the new discount.

Acquirers and merchants who adapt quickly investing in data governance, AI validation readiness, and enhanced reporting will maintain competitive rates and reduce dispute exposure. Those who delay will face higher fees, operational friction, and shrinking margins.

Visa’s 2025 revision is not merely an interchange tweak; it’s the first stage of a global data-governance model for payments. By eliminating legacy “discount shortcuts,” Visa is transforming interchange economics from volume-based incentives to data-quality incentives, anchoring the next decade of network-wide AI pricing.