Retailers Say FTC Order on Debit Card Routing Builds on Earlier Federal Reserve Ruling

"The card industry has been trying to do end runs around the rules on debit card routing for far too long."

NRF Vice President Leon Buck

WASHINGTON – The National Retail Federation welcomed an order issued by the Federal Trade Commission today that requires Mastercard to share data that competing networks need in order to process online transactions made with Mastercard debit cards.

“The card industry has been trying to do end runs around the rules on debit card routing for far too long, driving up prices for consumers in the process,” NRF Vice President for Government Relations, Banking and Financial Services Leon Buck said. “This order goes hand in hand with the Federal Reserve making it clear this year that routing rules apply the same online as they do in-store. Congress said a dozen years ago that networks have to compete over debit card transactions, and this is another important step in making sure that finally happens. Nonetheless, we are carefully reviewing the order to ensure that it achieves its intended result of making the card industry play by the rules.”

The FTC today said Mastercard has effectively blocked lower-cost networks like NYCE, Star and Shazam from being able to handle ecommerce debit card transactions by tokenizing data from the transactions and then refusing to detokenize the data for competitors. The commission said the practice violates the Durbin Amendment, a 2010 law that said debit cards must be able to be processed over at least one unaffiliated network in addition to Visa or Mastercard. The FTC ordered Mastercard to make the data available in the future.

The commission cited Mastercard’s practices involving digital wallets, but the order applies to all ecommerce transactions, including both digital wallets and online purchases.

The order comes two months after the Federal Reserve issued updated regulations clarifying that the Durbin Amendment applies the same online as it does for in-store transactions. Competing networks handle about 40% of in-store debit transactions but only about 6% of online debit transactions, according to the Fed.

The Durbin Amendment has saved retailers over $100 billion since it took effect in 2011, with about 70% of the savings passed on to consumers. But “swipe” fees banks and networks charge to process debit card purchases still cost merchants and their customers $32.6 billion last year, including $28.1 billion for transactions routed over the Visa and Mastercard networks.

About NRF
The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs – 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.