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Visa, Mastercard Draw New Government Scrutiny Over Debit-Card Routing

The Wall Street Journal

The Federal Trade Commission is investigating whether Visa Inc. V -0.32%▼ and Mastercard Inc.’s MA -0.36%▼ security tokens restrict debit-card routing competition on online payments, according to people familiar with the matter. 

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 couldn’t be determined 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.