Visa claims least cost routing will impact fraud detection
(18 February 2020 – Australia) Global payments giant Visa has broken ranks with Australian banks and merchants on a once unified stance on electronic and digital payments security, claiming that efforts to reduce card fees could hit fraud detection.
In a clear signal that the Reserve Bank of Australia’s push to allow merchants to choose what rails electronic and digital payments ride on is starting to sting, Visa has used a submission to the central bank’s review of payments regulation to assert that “consumers and banks would not benefit from Visa’s innovations, including enhanced security, if transactions were routed on another platform.”
The claim opens a new front in the ongoing battle between US-founded global payment schemes Visa and Mastercard to preserve their network dominance in the tap-and-go payments market by opposing a push to let shopkeepers decide who processes payments to them.
Grocery giant Coles recently switched its transaction routing for tap payments to run through the eftpos network in an effort to cut costs across billions of dollars of purchases a year made at its checkouts.
The grocery sector for more than a decade has been pushing back against Visa and Mastercard’s lucrative interchange fee structure that creates a revenue stream worth hundreds of millions between issuing and acquiring banks.
However the issue of security has been, until now, regarded as an unofficial no-go zone in terms of mudslinging in financial services industry because of the urgent need to maintain public trust and push down escalating card fraud losses; most of them generated across Visa, Mastercard and American Express’ networks.
The RBA has been pushing banks hard to offer the option for tap payments to maintain competition in the local market, especially as payments increasingly head to ‘glass’ and taps purchases are made from phones.
“We do not recommend that the RBA mandate MCR. Mandating routing would likely limit innovation and further inhibit consumer choice. As a result, consumers and banks would not benefit from Visa’s innovations, including enhanced security, if transactions were routed on another platform,” Visa said.
Visa claims that on dual network debit cards the possibility that merchants can control the routing “has the potential to undermine consumers’ confidence and trust that their chosen financial products and services will meet their expectations.”
“For example, financial institutions are increasingly offering services to consumers that enable more robust security solutions, provide access to their financial data, create broader controls over their payment products and generate more consumer-friendly means of payment,” Visa said.
“From early fraud detection and liability protections to setting limits on everyday spend, these services are not necessarily network agnostic and often depend on transactions being routed over a specific network.”
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