The Federal Trade Commission (FTC) commanded Mastercard to stop denying other debit payment networks access to the client information they use to process payments.
According to a statement made by the FTC, Mastercard must give competitor networks access to customer account information in order for them to process debit payments since doing otherwise would be in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In order to give merchants a choice of networks to use for a debit transaction, the Durbin Amendment to the Dodd-Frank Act mandates banks to permit at least two unaffiliated networks on every debit card. Additionally, it forbids payment card networks from preventing retailers from utilizing different networks.
However, the FTC asserts that Mastercard has been compelled to route debit card payments through its network by employing unethical commercial practices.
“This is a victory for consumers and the merchants who rely on debit card payments to operate their businesses. Congress directed the FTC to enforce this part of the Dodd-Frank Act and prevent precisely this kind of illegal behavior. We take this responsibility seriously, as demonstrated by our action today,” said the director of the FTC’s Bureau of Competition, Holly Vedova.
According to the press release, Mastercard prevented the deployment of competitor networks by exerting control over a procedure known as tokenization. According to the FTC, the process of tokenization involves replacing a cardholder’s primary account number with a new number in order to secure the account number during specific phases of a debit transaction.
The tokens offer added security for a cardholder’s account number and are kept in e-wallets like Apple Pay as well as Google Pay.
When a cardholder uses an e-wallet to make a debit purchase, the merchant receives a token from the device, and the token is forwarded to the merchant’s bank and subsequently to a payment card network for processing.
According to the FTC, banks that issue debit cards bearing the Mastercard logo “nearly universally” utilize Mastercard to create tokens and keep the main account details in their “token vault.” According to the FTC, under this method, merchants could only utilize Mastercard to transform a token into an account number.
When a competitive network obtains a token to process a debit payment, the order mandates that Mastercard give that network the personal account number of the consumer.
In a statement, Mastercard said that it had reached a deal with the FTC over the routing of tokenized debit transactions at online retailers. The business added that it thinks its current policies are legitimate and have given retailers an option.
The business declared that it would keep working to modernize its procedures so that it complied with the decision as well as offered more options.
Mastercard spokesperson Seth Eisen said, “While we are taking these steps to bring this matter to a close, there should be no question that tokenized transactions provide an increased level of protection to both consumers and merchants. This focus on security guides our efforts in a highly competitive market and provides the incentive for us to continue investing in innovations that promote the peace of mind every person expects.”
According to the FTC’s press statement, the commission decided 4-0 to file a complaint as well as accept a consent agreement, and it will shortly release a description of the latter. After receiving feedback from the general public. The finalization of the agreement will be decided by the FTC.