Mastercard, Visa, agree to debit card routing choice – in Australia

Mastercard and Visa entered into an agreement with the Reserve Bank of Australia, that country's central bank and payment systems regulator, not to dissuade merchants from routing debit card transactions through alternative networks. The news out of the RBA follows a Federal Trade Commission order that Mastercard cease "illegal business tactics" that force merchants to route debit card payments through Mastercard.

The FTC has been investigating since 2019 claims that Mastercard and Visa block merchants from routing payments over other debit card networks. Debit networks, which require PIN authorization, are generally less expensive clearing options. Most are owned by card brands, or acquirers. Pulse, for example, is owned by Discover, and Interlink is owned by Visa. Fiserv owns Star (acquired with First Data) and Accel, while FIS owns NYCE.

The Durbin Amendment to the 2010 Dodd-Frank Act requires that merchants get to choose between at least two unaffiliated networks for processing debit card paymets.

In May, the FTC released a final consent order settling the charges against Mastercard. The order requires Mastercard to eighty-six policies that effectively blocked ecommerce merchants from routing payments using Mastercard-branded debit cards saved in e-wallets through non-Mastercard networks. It also bans Mastercard from taking new actions to inhibit merchant choice in debit card routing.

Visa so far seems to have escaped a similar fate. But both companies are targets of legislation now pending in Congress – the Credit Card Competition Act – that would mandate merchant choice in the routing of credit card payments.

RBA seeks end to 'tying conduct'

The RBA and the Australian Competition and Consumer Commission both have been investigating Visa and Mastercard over alleged anticompetitive conduct. The ACCC has taken both companies to court in recent years over allegations they offered some merchants lower interchange on credit card processing in exchange for routing debit card payments through the same network.

The RBA's action, disclosed June 21, 2023, makes it clear the card brands "will not engage in 'tying conduct' involving their credit and debit card products." The two agreements are identical. The agreements ("undertakings" in Australian legal parlance) were published "to provide transparency about the commitments given by the international [card] schemes," the RBA said in a statement. Compliance will be monitored by external and independent auditors approved by RBA, as well as through annual self-certifications.

"Merchants operating in Australia should be able to make decisions with regard to the routing of dual-network debit card transactions without implications for the interchange rates that are applied to their credit transactions," the undertakings state. "Payment schemes offering, or negotiating arrangements for the processing of debit and credit card transactions should not incentivize merchants to route dual-network debit card transactions through their debit network by leveraging their credit card scheme of interchange rates."

The agreements are an outgrowth of a 2021 review of retail payment systems undertaken by the RBA that found instances where credit card pricing was tied to the value or volume of a merchant's debit card transactions.

"The undertakings from Mastercard and Visa will support competition in the debit card market by ensuring the debit schemes compete solely on the basis of their debit card offerings," said RBA Deputy Governor Michele Bullock.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.