No, it does not. A bank still chooses which networks to do business with and which networks they put on their debit cards.The law ensures that every debit card has a back-up network over which a debit transaction can be sent if one of the networks on a card is not working or has been compromised by hackers.This enables merchants and acquirers to do “smart” routing to the most efficient and economical network. The law ensures merchants have a choice between at least two networks/lanes over which to send a transaction.The debit reform law prevents Visa and MasterCard from striking exclusive bank deals that result in zero competition for network routing services.Although, the intent is for robust competition with multiple network/lane options. The law requires banks to put only a minimum of two unaffiliated network/lane choices on every card.Debit reform requires competition for network routing on every transaction.See report What did Debit Reform accomplish? Morgan analyst report, “About 50% of Visa’s debit cards no second unaffiliated network,” in 2010. This decreased efficiency, increased prices, and threatened system integrity.Īccording to a J.P. Before the 2010 debit reforms there was only one network/lane on many debit cards.79% of Visa debit volume at the top 10 Visa banks ran on cards with no competing network option available. Post Debit ReformįAQS About Routing Pre debit reform, 40 to 50% of all debit cards only had one network/lane available for routing transactions. EMV smart chip routing is similar, but still has some significant barriers to competition.ĭebit Transaction Routing on Magnetic Stripe Cards: Pre Debit Reform vs. Here’s how debit reforms have changed debit routing on magnetic stripe transactions. It also greatly inhibited the ability of domestic debit networks, who have a better track record on security, to compete for both issuer and merchant business. This practice created significant market inefficiencies that increased debit swipe fee prices to businesses and consumers. Signature debit card providers – Visa and MasterCard – were striking deals with the largest card issuing banks to make their networks the exclusive and only options for transaction routing services on a given debit card. Prior to debit reforms, there was no choice and no competition for these network routing services on roughly half of all debit cards in the marketplace. Network routing is the behind-the-scenes technology dictating how information about a debit transaction is sent between payment system stakeholders. Smart Routing: The Highway to increased competition in the debit marketplaceĬurrent debit reforms require competition for network routing services to be made available on every debit card, including debit cards stored in digital wallets.
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