Under the FTC card data routing order, Mastercard must start providing competing networks with customer account information they need to process debit payments
The Federal Trade Commission (FTC) issued a news release on Tuesday, May 30, stating that it approved the final order requiring Mastercard to stop blocking the use of competing debit payment networks.
This order settles charges that Mastercard had unlawfully forced merchants to route debit card payments through its network, in violation of the 2010 Dodd Frank Act’s Durbin Amendment.
The Durbin Amendment obliges banks to give merchants more flexibility and data routing choices, allowing for at least two unaffiliated networks on each debit card. At the same time, it prohibits payment card networks to prevent merchants from using other networks.
Back in December 2022, FTC ordered Mastercard to stop blocking competitors. The Commission alleged Mastercard has been employing illegal business tactics, blocking the use of competing debit payment networks and withholding needed customer information from competitors. The company’s policies prevented merchants from routing e-commerce transactions using Mastercard-branded debit cards saved in e-wallets to alternative payment card networks.
Although Mastercard didn’t consider its policies to be illegal, the payment service provider did make efforts to update the processes in order “to comply with the consent order and provide even greater choice.”
The FTC order focused on tokenized transactions. The regulator has also started investigating whether Mastercard’s competitor – Visa – has its security tokens prevent debit-card routing competition for some digital payments.
Tokenization in the payment industry means replacing sensitive data like a client’s PAN (primary account number) with a unique randomly generated string of numbers called tokens. Tokens can be generated through mathematically reversible algorithms, one-way non-reversible cryptographic functions, or static tables mapped to randomly generated token values.
The main aim of tokenization is to prevent fraud. Therefore, although Mastercard would comply with the FTC order, the company shall continue to use the innovative payment technology, stating that “there should be no question that tokenized transactions provide an increased level of protection to both consumers and merchants.”