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 a proposed implementing measure the FTC said Mastercard violated a provision of the Dodd-Frank Act known as the Durbin Amendment by prohibiting merchants from routing transactions through alternate networks.

The action targets “tokenization”, the that underpins mobile payment apps like Pay Apple, Google Pay and Samsung Pay. When you make a debit or credit card purchase with your phone’s 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 this practice prevents fraud because the tokens contain no actionable information while in transit. It’s only when they arrive at Mastercard’s or Visa’s servers, and are mapped to their original account holder, that they point to someone.

According to the FTC, Mastercard has historically blocked competing networks from accessing its token vault. This means that whenever consumers decided 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 its competitors. The Durbin Amendment asks banks to support two concurrent payment networks on all debit cards. This was a provision introduced by Congress to promote competition between networks. The FTC did not say whether it had entered into a similar agreement with Visa.

“While we take these steps to close this case, there is no doubt that tokenized transactions provide an increased level of protection for consumers and merchants,” said Mastercard spokesperson Seth Eisen. . “This focus on security guides our efforts in a highly competitive marketplace and inspires us to continue to invest in innovations that deliver the peace of mind everyone 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 seek public comment before voting to finalize the order against Mastercard.

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