Visa, Mastercard Draw New Government Scrutiny Over Debit-Card Routing (wsj.com) 7
The Federal Trade Commission is investigating whether Visa and Mastercard's security tokens restrict debit-card routing competition on online payments, WSJ reported Monday, citing people familiar with the matter. From the report: The FTC for the past few years has already been probing whether Visa and Mastercard block merchants from routing payments over other debit-card networks. The networks acknowledged an FTC probe in regulatory filings in recent years. In recent months, the FTC expanded its focus to routing challenges that stem from the networks' security tokens, the people familiar with the matter said. It isn't clear if the investigation is a new probe or part of the previous one.
Visa and Mastercard are by far the two biggest card networks in the U.S., building and maintaining the plumbing that allows Americans to use credit and debit cards at stores and online. Their lion's share of that market has drawn increasing scrutiny from regulators and fueled tension with merchants, which pay fees set by the networks when a customer pays via card. A Justice Department investigation on whether Visa has unlawfully maintained a dominant market share in debit cards is ongoing, according to people familiar with the matter. Federal law requires that merchants have the ability to choose from at least two unaffiliated debit-card networks to route transactions. That is supposed to give merchants the option to send debit-card payments over the network that sets lower fees. In most cases, when a person stores a card in a digital wallet such as Apple Pay, the 16-digit card number gets replaced by a "security token" -- essentially a line of random numbers. The token is typically provided by the network listed on the card -- often Visa or Mastercard.
Visa and Mastercard are by far the two biggest card networks in the U.S., building and maintaining the plumbing that allows Americans to use credit and debit cards at stores and online. Their lion's share of that market has drawn increasing scrutiny from regulators and fueled tension with merchants, which pay fees set by the networks when a customer pays via card. A Justice Department investigation on whether Visa has unlawfully maintained a dominant market share in debit cards is ongoing, according to people familiar with the matter. Federal law requires that merchants have the ability to choose from at least two unaffiliated debit-card networks to route transactions. That is supposed to give merchants the option to send debit-card payments over the network that sets lower fees. In most cases, when a person stores a card in a digital wallet such as Apple Pay, the 16-digit card number gets replaced by a "security token" -- essentially a line of random numbers. The token is typically provided by the network listed on the card -- often Visa or Mastercard.
Plumbing? (Score:2)
Visa and Mastercard are by far the two biggest card networks in the U.S., building and maintaining the plumbing that allows Americans to use credit and debit cards at stores and online.
So they're not just using the Internet then?
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Maybe they invented some sort of virtual private network... I hope they come up with a good acronym for it...
Virtual Private Networks use the Internet. As opposed to actual private networks.
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They generally work with SIM cards. So GSM/G3/G4 whatever's available into a central server.
Old portable ones actually made calls, nowadays I think it's almost entirely through standard (inter)networking.
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These are "service" networks.
The transactions travel financial paths and go through financial institutions. Some times, they could be traveling the Internet on VPNs, and other times they could be using private physical networks.
In fact, these networks predate the Internet by years
When you check your credit card, you will notice a VISA, Mastercard or similar logo together with your Bank's one. This means that the card can be used in any device from that particular "service network" to pay something. And w
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Their "networks" predate widespread usage of the internet. Often telephone lines and dial-up modems were involved.
Here's the problem, in general, VISA is afraid of vampires. What? No I'm serious. VISA goes after people selling cosplay photos/props/costumes, adult or not. Why does VISA give a sh*t?
So now look at this routing problem. In order to route transactions, everyone has to agree to the same cruel rules imposed by VISA, even if they accept Mastercard. Non-compliance? No routing.
The routing problem wil
Good background for Canadians to understand (Score:3)
Many Canadians don't understand why there is a Visa or MasterCard logo on their debit cards. And this is because in Canada, the credit card companies are not part of the debit system, they aren't allowed to be. Meanwhile in the USA, all debit transactions go through Visa or MC, and they have direct access to your bank accounts.
In Canada, there is a bank semi-independent agency that handles all debit transactions; and it is mandated by the government not to profit from providing debit card services. That agency is called Interac and it is a joint implementation by all the major banks in Canada. The transactions through it are direct to and from your banking institution between you and the vendor. There is a minor charge to the vendors, as it does cost, but it is around twenty-five cents per transaction, or something like that. And businesses are allowed to set a minimum charge for use of debit cards, but pretty much only mom and pop stores do this.
And maybe of interest to Americans who often have to deal with what seems to be very disjointed implementations at different stores, Interac by now has become quite standardized as to what customers can expect. Even with different terminal types, the steps are almost always identical. And it has become standardized due to the length of time it has been around. Interac and ATMs/bank machines have been functioning pretty much ubiquitously in Canada since around 1982. In fact Canadian banks flirted with ATM only bank branches around that time. They realized pretty quickly that people-less branches didn't work, as there still needs to be people to handle the many cases that ATMs can't handle. But for example, in the early and middle of the 1980s you could go into a mom and pop general store with wooden shelves behind the counter full of cigarettes and plywood shelves for the rest of their goods, like something out of the 1930s or 40s, and pay with a debit card. It was a kind of strange but cool as fuck perceptual shock. :)
So with the chip cards and central Interac service, there really isn't any need to use a phone or any other kind of 'time saving device'. You can tap with most stuff up to a limit, and the transactions don't go through a whole bunch of unnecessary third parties like Visa, MasterCard, Google, or Apple. Many younger people do use phones because they have been sold on that, but personally I think it isn't too bright to do, as you are giving yet someone else access to your accounts. Yet another place for a security failure.