FTC orders Mastercard to stop blocking competitor debit payments
The Federal Trade Commission has ordered Mastercard to end a set of business practices intended to force competitors to use its proprietary payment network.
According to the FTCThe world’s second-largest payment processing corporation, intentionally blocked the ability of providers to route e-commerce transactions through third-party payment networks, such as virtual wallets.
This, the commission alleges, violates a provision in the Dodd-Frank Act of 2010 which requires banks to allow providers to choose between at least two unaffiliated payment networks.
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“The Federal Trade Commission is ordering an end to the illegal business tactics that Mastercard has been using to force merchants to route debit card payments through its payment network, and is demanding that Mastercard stop blocking the use of from competing debit payment networks,” the FTC said. in a statement on Friday.
The crux of the dispute is from mastercard implementation of payment tokenization: the process through which payment networks replace sensitive cardholder financial information with alternative, less sensitive identifications.
These numerical IDs may be held by third-party services, such as virtual wallets and payment applications.
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Mastercard has full control over its card holders tokenization process, forcing third parties to work with the company to use the cards.
A Mastercard spokesperson confirmed the settlement with the FTC, telling FOX Business that the company believes its practices have been legal, but changes will be made to comply with the FTC’s demands.
“We believe our existing routing practices are legal and have always provided merchants with choice. We will continue to work to update our processes to comply with the consent order and provide even more choice.” the company told FOX Business in an exclusive statement.
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Mastercard went on to tell FOX Business that it supports its tokenization practices as a way of commercial security.
“While we are taking these steps to close this matter, there should be no question that tokenized transactions provide a higher level of protection for both consumers and merchants,” Mastercard stated.
The Wall Street Journal reported in October that the FTC was investigating Mastercard and Visa over security tokens. The people told the Journal that the FTC had been investigating the two companies for years, but recently expanded the investigation to focus on routing challenges stemming from security tokens.
Both companies have been promoting The technology because they believe that tokenization helps protect against fraud, according to the report.
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