Visa and Mastercard say security tokens make card transactions safer. The FTC wonders if it also serves to safeguard those companies' dominant positions.
, widening a probe that's looking at whether the San Francisco company and fellow card giant Mastercard are putting up roadblocks to keep rival payments networks from processing debit card transactions.
Citing unnamed people with knowledge of the matter, the Journal said the FTC is now looking at the two networks’ use of security tokens — an encrypted string of numbers that replaces the actual 16-digit card number when a debit or credit card is used for a transaction from an Apple digital wallet or via a similar app. For security reasons, it is the token, not the card number, that moves through a payment network when a cardholder makes a purchase. The token is provided by the company whose name is on the card, so it’s most often Visa or Mastercard. If the token can only be understood and correctly linked to a card by the company that provided it, it means the payment moves most seamlessly over that company’s network. Critics of the companies say that entrenches the duo's dominant position over smaller, rival payment networks and restricts merchants from sending payments over other networks. It also increases the possibility the transaction will be rejected by the bank that issued the card. The FTC is looking at whether Visa and Mastercard have been restricting the information they share on tokens when payments move over other networks, the Journal reported. Visa and Mastercard’s continued dominance over payments has long been a sore point with regulators, rivals and merchants who accept the cards. The FTC was already investigating whether the two were otherwise unfairly discouraging merchants and others from moving payments through alternative networks. The Journal said it was not clear if the probe into tokens is part of that investigation or a new one. The U.S. Justice Department is also been reportedly looking at the two companies’ control of the credit and debit card market. Last month a bipartisan group of U.S. Representatives introduced a bill designed to foster greater competition among payments networks by loosening Visa and Mastercard's control.
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