The Federal Trade Commission has ordered Mastercard to provide competing payment networks with the information they need to process debit card payments. In a proposed enforcement action, the FTC said Mastercard allegedly violated a provision of the Dodd-Frank act known as the Durbin Amendment by prohibiting merchants from routing transactions through alternative networks.
The action targets “tokenization,” which underpins mobile payment applications such as Apple Pay, Google Pay, and Samsung Pay. When you make a debit or credit card purchase using your mobile wallet, the software replaces sensitive information, including the primary number associated with your account, with a separate set of single-use “tokens.” Mastercard and Visa say the practice prevents fraud because tokens do not contain exploitable information while in transit. It is only when they arrive at Mastercard or Visa’s server, and they go back to their original account holder, that they point to someone.
According to the FTC, Mastercard has historically stopped competing networks from accessing its token vault. This means that when consumers decided to pay with a mobile wallet, merchants had to route the transactions through Mastercard (or Visa) and pay the company’s transaction fees, which are typically higher than those of its competitors. . The Durbin Amendment calls for banks to support two competing payment networks on all bank cards. It was a provision introduced by Congress to promote competition between networks. The FTC has not said whether it has reached a similar agreement with Visa.
“While we are taking these steps to bring this matter to an end, there should be no question that tokenized transactions provide an increased level of protection for consumers and merchants,” said Mastercard spokesman Seth Eisen. . “This focus on safety guides our efforts in a highly competitive market and provides the incentive for us to continue to invest in innovations that promote the peace of mind that every person expects.” Eisen added that Mastercard would “continue to work to update our processes to maintain consent order and offer even greater selection.”
The FTC plans to collect comments from the public before voting to finalize the order against Mastercard.
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