Visa's New B2B Interchange Rules: Boost CEO on Data & AI Impact

The landscape of Business-to-Business (B2B) payments is undergoing a significant transformation with the introduction of Visa's Commercial Enhanced Data Program (CEDP). This initiative represents one of the most substantial revisions to interchange qualification in several decades, directly linking lower interchange rates to the precision and transparency of transaction data submitted by suppliers. Dean M. Leavitt, founder and CEO of Boost Payment Solutions, offers a comprehensive perspective on how CEDP is designed to rectify longstanding inconsistencies and propel the industry towards greater data integrity.

Navigating Visa's Commercial Enhanced Data Program

Interchange rates have historically been a critical determinant in how suppliers perceive and adopt card payments. Even a marginal alteration in these rates can significantly influence profit margins, a factor of immense importance in commercial transactions. Visa’s CEDP emerges as a pivotal development, establishing a direct correlation between reduced interchange rates and the quality of transaction data. Leavitt emphasizes that CEDP is a deliberate effort to streamline and standardize practices that have, for years, been characterized by ambiguity and varying degrees of adherence.

Addressing Historical Data Inconsistencies

For a considerable period following the introduction of Level Two and Level Three data programs for commercial card transactions, concerns mounted regarding the accuracy of submitted data. Leavitt points out, "A lot of players in the industry were what’s commonly referred to as stuffing data, meaning they were putting erroneous data into the fields that would otherwise qualify the transactions for the lowest possible interchange rate." This practice, while potentially beneficial for individual entities in the short term, eroded the overall reliability and fairness of the system. CEDP directly confronts this issue by mandating the submission of authentic, verifiable data.

The Core Requirements of CEDP

Under CEDP, suppliers or their designated agents are now required to submit actual invoice data. This means the information must flow into Visa’s system precisely as it appears on the original invoice issued by the supplier to their customer. This stringent requirement is fundamental to the program's objective: ensuring data validation and accuracy to enable suppliers to benefit from reduced interchange rates. Leavitt underscores, "This is all about validating the data and making sure that it’s accurate and real so that the supplier can enjoy the lower interchange rate."

Compliance and Financial Implications for Suppliers

The program, which commenced on October 17th, introduces a new paradigm for compliance enforcement. Leavitt starkly states, "Suppliers are treated as guilty before being proven innocent. You have to prove that your transactions are verified." This shift places the onus of proof squarely on suppliers, demanding proactive measures to ensure data integrity. Non-compliant entities face a substantial financial penalty, potentially paying a full percentage point more in interchange fees compared to their verified counterparts. Conversely, those who meet the rigorous standards receive a clear incentive: an interchange rate that is 15 basis points lower than the previous Level Three rates. Even with a slight assessment increase by Visa, the net benefit for verified transactions is a 10-basis-point reduction in the interchange fee, highlighting the significant financial advantage of compliance.

The Integral Role of Artificial Intelligence

Preparing for the implementation of CEDP has presented a considerable technical challenge for many organizations. Boost Payment Solutions has actively embraced generative Artificial Intelligence (AI) tools to tackle this complexity. AI is deployed to parse and reorganize intricate invoice data, automating checks for transaction accuracy. Leavitt explains, "We are using AI in a variety of different ways, and we have deployed it for this CEDP initiative. We use AI to check other AI within our organization. It’s kind of AI checking AI." This innovative approach underscores the critical role technology plays in meeting the program's demands.

The influence of AI in B2B payments is only expected to grow. Leavitt predicts that AI will significantly reduce the manual effort associated with exception handling, accelerate the speed-to-market for new payment products, and enhance accuracy, particularly in large enterprise payments that often involve thousands of invoice lines. The ability of AI to meticulously review and process vast amounts of data offers a pathway to operational efficiencies and improved financial outcomes.

Ecosystem Readiness and Reconciliation Challenges

The implementation of CEDP has created a sense of urgency across the commercial payments ecosystem, yet readiness among participants varies widely. While some acquirers, processors, and FinTech facilitators have dedicated months to preparation, others express significant concern regarding their preparedness. On the supplier side, readiness extends beyond technological adjustments. Visa’s own AI and machine learning systems are designed to review transaction data post-fact, potentially issuing rebates if transactions later qualify for a lower rate. This deferred qualification can lead to reconciliation issues, as suppliers might initially pay a higher interchange rate and only later receive a rebate.

Boost Payment Solutions' Proactive Approach

Boost Payment Solutions has strategically engineered its platform to circumvent these reconciliation challenges. "We’ve made sure that all of our transactions process in a fully verified way," Leavitt states. Boost adopts a "prefunded" approach, paying suppliers and charging them the interchange rate as if all transactions are already verified. This eliminates the need for future rebates and simplifies reconciliation, allowing suppliers to immediately realize the benefits of lower rates rather than waiting weeks for adjustments.

Ensuring Data Verification through a Two-Layered System

Boost's prequalification strategy is built upon two distinct layers: supplier verification and transaction verification. Leavitt clarifies that once Visa recognizes a supplier as receiving transactions in a verified manner, "any payments made to them will be treated as verified, and they will be entitled to that lower CEDP rate." Operating primarily in the realm of buyer-initiated payments, Boost facilitates transactions where the data originates directly from a buyer’s approved invoice. This ensures that "every single one of the transactions that we facilitate takes the accurate data that the buyer has given to us, pretty much off their invoice, and we then process that transaction the way Visa has prescribed it." Boost's rigorous testing has demonstrated a nearly 100% verification rate, empowering the company to guarantee the lowest CEDP rate to its clients.

This approach fundamentally redefines the traditional risk assumption, flipping the script from "guilty until proven innocent" to "innocent until proven otherwise." As Leavitt affirms, "Any transaction processed through us is going to pay the lowest CEDP rate because we have confidence that those transactions will be verified by Visa."

Leavitt views CEDP as a broader acknowledgment that commercial transactions inherently differ from consumer payments and, as such, warrant a more appropriately structured rate system. The underlying message to suppliers and their providers is unequivocal: accurate data is paramount, and failure to comply will incur financial consequences. The program marks a definitive move towards greater transparency, integrity, and efficiency in the complex world of B2B payments.