What are the three types of service providers according to PCI DSS?

The classification of service providers according to PCI DSS into Level 1, Level 2, and Level 3 is based on the volume of transactions they handle and the associated requirements for compliance. Level 1 service providers are those that process more than 6 million transactions per year, and they face the most stringent requirements, including an annual on-site security assessment by a Qualified Security Assessor (QSA). Level 2 service providers handle between 1 million to 6 million transactions and must complete a Self-Assessment Questionnaire (SAQ). Level 3 service providers process fewer than 1 million transactions annually and also utilize the SAQ but with less rigor than Level 2.

This hierarchical structure is critical as it creates a tiered approach to compliance, allowing for organizations of different sizes and transaction volumes to be assessed and managed appropriately regarding their security controls and obligations under PCI DSS. By categorizing service providers in this way, organizations can implement controls that are suitable for the risk associated with their transaction volumes.