WASHINGTON–The Federal Trade Commission is investigating whether Visa’s and Mastercard’s security tokens restrict debit-card routing competition on online payments, according to a new report.
The FTC for the past few years has already been probing whether Visa and Mastercard block merchants from routing payments over other debit-card networks, as the networks have acknowledged in regulatory filings in recent years, the Wall Street Journal reported.
Now the FTC expanded its focus to routing challenges that stem from the networks’ security tokens, individuals familiar with the matter told the Journal, which added it couldn’t be determined if the investigation is a new probe or part of the previous one.
How it Works
As CUToday.info has reported and the Journal also noted, federal law requires that merchants have the ability to choose from at least two unaffiliated debit-card networks to route transactions. The objective is to give merchants the option to send debit-card payments over the network that sets lower fees.
“In most cases, when a person stores a card in a digital wallet such as Apple Pay, the 16-digit card number gets replaced by a ‘security token’— essentially a line of random numbers,” the Journal report explained. “The token is typically provided by the network listed on the card—often Visa or Mastercard. When a debit-card number is tokenized by Visa for example, only Visa can understand the token so that it can be reassociated with an actual card. That makes it easy for the payment to go over Visa’s network.”
At Center of Huge Volume
But that setup reinforces the two companies position at the center of a huge volume of payments, even those merchants want to send over other networks, the Journal report further explained.
“The FTC is looking into whether Visa and Mastercard have been limiting the information they send when they enable an online payment to go over a different network,” the Journal reported. “That alleged practice, according to merchants, increases the chances that the card’s issuing bank will reject the transaction when it is handled by a different network.”
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