FTC orders Mastercard to open debit transactions to competing payment networks

The Federal Trade Commission has ordered Mastercard to begin providing competing payment networks with the information they need to process debit card payments. In the proposed enforcement action, the FTC said Mastercard allegedly violated a provision of the Dodd-Frank Act known as the Durbin Amendment prohibiting merchants from routing transactions through alternative networks.

The action is aimed at “tokenization,” which is basically mobile payment apps like Apple Pay, Google Pay, and Samsung Pay. When you go to make a debit or credit card purchase using your phone’s mobile wallet, the software replaces sensitive information, including the primary number associated with your account, with a special set of single-use “tokens.” Mastercard and Visa say this practice prevents fraud because the tokens do not contain exploitable information when in transit. Only when they reach the Mastercard or Visa servers and remap to their original account holder do they point to someone.

According to the FTC, Mastercard has historically stopped competing networks from accessing its token vault. This means that whenever consumers chose to pay with a mobile wallet, merchants had to route transactions through Mastercard (or Visa) and pay the company’s transaction fees, which are typically higher than those of competitors. The Durbin amendment calls for banks to support two competing payment networks on all debit cards. It was a provision put in place by Congress to promote competition among networks. The FTC has not said whether it has reached a similar agreement with Visa.

“As we take these steps to bring this matter to a close, there should be no doubt that tokenized transactions provide an increased level of protection for both consumers and merchants,” said Mastercard spokesman Seth Eisen. . “This focus on safety guides our efforts in a highly competitive market and gives us the incentive to continue to invest in innovations that promote the peace of mind that every person expects.” Eisen added that Mastercard “will continue to work to update our processes to comply with the consent order and provide even greater choice.”

The FTC plans to collect public comments before voting to finalize the order against Mastercard.

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