The Federal Trade Commission (FTC) has ordered Mastercard to provide competing payment networks with the necessary information to process debit card payments. This comes after the FTC alleged that Mastercard violated the Durbin Amendment, a provision of the Dodd-Frank Act, by preventing merchants from routing transactions over alternative networks. The Durbin Amendment requires banks to support two competing payment networks on all debit cards in order to promote competition among networks.
This proposed enforcement action specifically targets “tokenization,” the technology that underlies mobile payment applications like Apple Pay, Google Pay, and Samsung Pay. When a debit or credit card purchase is made through a mobile wallet, the software substitutes sensitive information, such as the primary account number, with a set of single-use “tokens.” Mastercard and Visa claim that this practice prevents fraud because tokens do not contain any exploitable information while they are in transit. It is only when they reach Mastercard or Visa’s servers and are mapped back to their original account holders that they are linked to a specific person.
According to the FTC, Mastercard has historically restricted access to its token vault for competing networks. This means that whenever consumers choose to pay with a mobile wallet, merchants have to route the transactions through Mastercard (or Visa) and pay the company’s higher transaction fees. The FTC plans to collect public comments before voting to finalize the order against Mastercard. It is unclear if the FTC reached a similar agreement with Visa.