America's FTC Demands End to Mastercard's 'Illegal' Blocking of Competing Debit Card Payment Networks

Friday America's Federal Trade Commission issued an announcement on what it called 'illegal business tactics that Mastercard has been using to force merchants to route debit card payments through its payment network,' saying the FTC is now requiring Mastercard 'to stop blocking the use of competing debit payment networks.'

The popularity of debit cards has been growing especially quickly for purchases consumers make using their personal devices equipped with ewallet applications such as Apple Pay, Google Pay, and Samsung Wallet. Payment card networks play a critical role in those debit card transactions....

Payment card networks compete for the business of banks that issue cards and for the business of merchants that accept card payments. Mastercard, along with Visa, is one of the two leading payment card networks in the United States. The processing fees charged by networks total billions of dollars every year, affecting every purchase made with a debit card, according to the FTC. Most of these fees are paid by the merchants to the card-issuing banks and the payment card networks....

Mastercard was flouting the law by setting policies to block merchants from routing ecommerce transactions using Mastercard-branded debit cards saved in ewallets to alternative payment card networks, including networks that may charge lower fees than Mastercard, the FTC alleged. Specifically, Mastercard used its control over a process called 'tokenization' to block the use of competing payment card networks, the agency alleged. Transactions commonly are 'tokenized' by replacing the cardholder's primary account number with a different number to protect the account number during some stages of a debit transaction. Tokens are stored in ewallets such as Apple Pay, Google Pay, and Samsung Wallet and serve as a substitute credential to provide additional protection for a cardholder's account number....

According to the FTC, Mastercard refuses to provide conversion services to competing networks for remote ewallet debit transactions...thereby making it impossible for merchants to route their ewallet transactions on a network other than Mastercard.

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