The FTC is asking Mastercard to stop blocking debit payments from competitors

The Federal Trade Commission ordered Mastercard to end a set of business practices intended to force competitors to use its payment network.

According to the Federal Trade Commission (FTC), the world’s second-largest payment processing company has intentionally blocked sellers’ abilities to route e-commerce transactions through third-party payment networks such as virtual wallets.

The commission alleges that this violates a provision in the 2010 Dodd-Frank Act that requires banks to allow sellers to choose at least two unaffiliated payment networks.

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Close-up of the Mastercard logo on the front view of the envelope used to mail statements. Financial Industry, Toronto, Ontario, Canada, May 13, 2019. (Roberto Machado Noa/LightRocket via Getty Images/Getty Images)

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Master’s MASTERCARD INC. 343.60 +2.08 +0.61%

“The FTC is ordering an end to the illegal business tactics Mastercard uses to coerce merchants to route debit card payments through its payment network, and is ordering Mastercard to stop blocking the use of competing debit payment networks,” the FTC said. in a statement on Friday.

At the heart of the dispute is Mastercard’s implementation of the payment token – the process by which payment networks replace a cardholder’s sensitive financial information with alternative, less sensitive identifiers.

These digital identifiers may be held by third party services such as virtual wallets and payment applications.

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In this illustrated illustration, there are three MasterCard credit cards. Branding and marketing logo for a financial company. The conceptual image of the work. (Photo illustration by Roberto Machado-Noa/LightRocket via Getty Images)

Mastercard has complete control over the cardholders’ tokenization process, forcing third parties to work with the company to use the cards.

A Mastercard spokesperson confirmed the agreement with the FTC, telling FOX Business that the company believes its practices were lawful, but that changes will be made to comply with the FTC’s demands.

“We believe our current routing practices are legal and have always provided options for merchants. We will continue to work to modernize our processes to comply with the approval order and provide greater choice.” The company told FOX Business in an exclusive statement.

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Several Visa credit cards

Visa credit cards are arranged at the desk. (Justin Sullivan/Getty Images/Getty Images)

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Fifth Visa company 205.83 +0.77 +0.38%

Mastercard went on to tell FOX Business that it stands by its tokenization practices as a form of business security.

“While we take these steps to end this matter, there should be no doubt that token transactions provide a higher level of protection for both consumers and merchants,” Mastercard stated.

The Wall Street Journal reported in October that the Federal Trade Commission was investigating Mastercard and Visa over security tokens. The FTC had been investigating the two companies for years, people told the newspaper, but recently broadened the investigation to focus on routing challenges caused by security tokens.

The report said the two companies are promoting the technology because they believe tokenization helps protect against fraud.

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