Merchant levels are primarily defined by which factor?

Merchant levels are primarily defined by transaction volume, which refers to the total value of credit card transactions processed by a merchant over a specific period, typically on a monthly basis. This classification is crucial because it helps payment processors and card networks determine the risk associated with a merchant and set appropriate fees and compliance requirements.

Higher transaction volumes often indicate more significant business operations and can subject merchants to more stringent security and compliance regulations due to the increased flow of sensitive customer data. This relationship also impacts the cost of processing fees, which may vary based on the volume of transactions a merchant handles.

The other factors such as quality of service provided, geographical location, and number of products sold do not play a direct role in determining the merchant level in the context of payment processing and security assessments. While they may influence business strategies, they do not have the same regulatory or compliance implications tied to transaction volume.