Merchant levels under PCI DSS are defined based on what criteria?

Merchant levels under PCI DSS are primarily defined based on transaction volume. The Payment Card Industry Data Security Standard differentiates merchants into various levels to establish compliance requirements based on the number of credit or debit card transactions they process annually. This approach recognizes that higher transaction volumes present a greater risk for data breaches and therefore necessitate stricter security measures to protect cardholder data.

Levels are generally categorized as Level 1, Level 2, Level 3, and Level 4, with Level 1 representing merchants that process the highest number of transactions (over 6 million annually) and requiring extensive compliance validation. By aligning merchant levels with transaction volume, PCI DSS ensures that the compliance requirements are proportionate to the level of risk associated with the merchant's card processing activities.

The other criteria, such as geographic location, type of goods sold, or number of employees, do not directly determine the PCI DSS merchant level. Transaction volume specifically reflects a merchant's exposure to risk and the potential impact of a data breach, making it the most relevant criterion for categorizing merchant levels.