Visa, MasterCard to Roll Out New Cybersecurity Features by Chelsey Dulaney for The Walls Street Journel

Updated Feb. 13, 2015 2:46 p.m. ET

Visa Inc. and MasterCard Inc. are taking long-awaited next steps to ramp up security of customer data as concerns over cyberattacks continue to mount.

The plans, unveiled separately by the world’s largest payments networks, include the expansion of tokenization—a way to obfuscate a customer’s information during a transaction—and biometrics verification.

The announcements come as President Barack Obama and a large group of government officials descended Friday on Stanford University to meet with top executives from a number of industries, including Apple Inc. Chief Executive Tim Cook , for a first-of-its kind cybersecurity “summit,” part of an effort to combat future cyberattacks.

Concerns over cybersecurity are growing as high-profile data breaches have hit nearly every corner of corporate America—from retailers like Target Corp. , to Sony Pictures Entertainment, to J.P. Morgan Chase & Co., to most recently health insurer Anthem Inc.

“Part of their role, part of what they charge for, is setting the rules of the road and enforcing them,” said Mr. Luria. “What hasn’t happened yet is that there’s been very little blame put at Visa and Mastercard’s doorstep.”

Visa said it would bring its Visa Token Service, which replaces cardholder information such as account numbers and expiration dates with a unique series of numbers that validates the customer’s identity, to device manufacturers beyond Apple. Visa launched the service on Apple devices in October, allowing users to wave an iPhone in front of a wireless reader and complete the transaction with a fingerprint.

Visa said it also plans to tokenize online transactions for retailers that use its Visa Checkout service, including Gap Inc. and Orbitz Worldwide Inc.

By getting rid of the sensitive card information, banks and merchants can leave hackers with nothing of value to steal if they break into their computer servers.

“Removing card account numbers from the processing and storage of payments represents one of the most innovative and promising technologies we’ve seen in decades,” said Visa Chief Executive Charlie Scharf in a news release.

MasterCard, meanwhile, said it plans to spend more than $20 million on its efforts, which include a pilot program to be rolled out later this year that will use a combination of biometrics, such as facial and voice recognition and fingerprint matching, to authenticate and verify transactions.

MasterCard said it would also continue to push forward with the rollout of chip cards.

The company teamed up with Visa last year to form a new group to speed up the adoption of technology aimed at improving credit- and debit-card security, including the use of chip technology in credit and debit cards. In chip technology, which many countries have already implemented, the magnetic strip found in credit and debit cards is replaced by a smart chip that stores customer data.

U.S. banks and retailers have dragged their feet on implementing new payment systems because it requires significant investments in new payment technologies.

It is estimated that half of all cards will be chip-enabled by the end of the year, according to MasterCard. Both Visa and MasterCard had originally set an October 2015 deadline for retailers to adopt the chip technology, known as EMV.

Still, Mr. Luria questioned whether the initiatives would be enough.

“Nobody’s really come up with a foolproof way to safeguard consumer information,” he said. “At the end of the day, it’s the retailer, the bank that has to keep it secure. [Visa and MasterCard] can only do so much to set the rules, enforce them.”

Write to Chelsey Dulaney at


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Visa and MasterCard Cut Interchange Fees to 1.5% in Canada by Bloomberg News

Visa Inc. and MasterCard Inc., facing pressure from Canada’s federal government, agreed to lower credit-card transaction fees for the nation’s merchants by about 10 percent.

The two payment networks submitted proposals to reduce their average effective interchange rate in Canada to 1.5 percent on consumer credit cards, the finance department said in a statement posted on its website today. The rate will stand for five years and take effect no later than April, it said.

Prime Minister Stephen Harper’s Conservative government, which has been rolling out consumer-focused policies ahead of next year’s federal election, pledged in its 2014 budget to take additional measures to lower card fees for retailers, a move that would also reduce revenue for Canada’s banks. Merchant groups including the Retail Council of Canada have been the biggest advocates for government action on the fees, which the government claims are among the highest in the world.

“These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers,” Finance Minister Joe Oliver said in the statement. “As a result of the voluntary proposals, there is no need for the government to regulate the interchange rates set by the credit card networks.”

In a separate statement, Visa said it is entering the agreement on the expectation there will be a level playing field in the industry.

“If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it,” the Foster City, California-based company said today in a statement.


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ALTO GLOBAL PROCESSING: Why Some Businesses Don’t Like Virtual Cards

By Jeff Green for @pymnts
Virtual card use is gaining momentum in the B2B market, with their use growing particularly in travel, invoice and health care payments, where use of paper checks remains common. But not all companies favor network automatic opt-in rules tied to acceptance of virtual card products.

Through virtual card products, issuers provide to companies specific 16-digit card numbers they may use online or by phone to apply to specific transactions or payees, thus providing an extra layer of security compared with traditional card products. There is no actual plastic card issued.

Visa reportedly soon will launch a B2B tool to make it simpler for corporations to pay supplier invoices using virtual payment cards. The offering would complement a cloud-based payment initiative Visa launched last year using the SAP Financial Services Network.

Virtual card use for invoicing is especially important for the card brands, as nearly half of all corporate payments are still paid by check, according to Visa, which estimates global commercial consumption expenditures at US$112 trillion.

Firms may embed the Visa tool, which is scheduled to launch later this summer, into their general ledger software, reports In doing so, companies would make it simpler to choose Visa’s virtual credit card offerings when companies pick their payment method online.

“One of the big areas of opportunity for the B2B payments industry is moving upstream into the accounts-payable process, where corporations are making decisions on how to pay invoices,” Tad Fordyce, Visa head of global commercial solutions, told the publication. “Visa has virtual card products that address this opportunity, and one of the challenges we face, as checks are being displaced by electronic payments, is we want to make sure that Visa’s virtual card solutions are present and available for the corporates to use at that time of the payment decision.”

Visa said it expects a new solution in launched recently with SAP to help corporations who want to move toward electronic B2B payments and easily automate and process their invoice payments without the need for significant investment in custom software.

“As companies shift from labor-intensive, paper-based processes to more efficient electronic procurement systems, having the option to pay with Visa will help simplify the process and bring many benefits,” Fordyce said in a Visa/SAP announcement. “We anticipate that being able to make Visa payments via connection to the SAP Financial Services Network will help corporations streamline accounts payable processing, while avoiding the upfront and ongoing costs that would be associated with custom software for the payment process.”

Opt-out request

Virtual cards also have caught the attention of health care providers, which have mixed feeling about the products when used to settle claims.

Last month, a hospital representative told the Department of Health and Human Services’ National Committee on Vital Health Statistics Subcommittee on Standards that some health plans are automatically using virtual credit cards to pay claims, resulting in significant banking charges and administrative work for health care providers.

In his testimony, Doug Downey, speaking for Hospital Corporation of America (HCA), said the committee should discourage health plans from imposing a transaction fee for electronic payment or requiring hospitals to “opt out” of virtual card payments.

Health plans or their agents switch payments from check to virtual cards with no business discussion between the two parties, effectively automatically enrolling the provider in the program automatic opt-in. Health plans or their agents are also incorrectly leveraging the card-network rules, which apply to consumer-to-business payments, and applying these rules to B2B payments, Downey said.

“This is a misapplication of the rules,” he said. “HCA merchant credit card fees in 2013 increased by an estimated $3 million as a result of the un-negotiated use of [virtual credit card] payments by health plans and/or their clearinghouse/aggregator payment service agents.”

HCA is not opposed to virtual card use because it may be appropriate for some providers, but it is against network rules that automatically opt in providers to accept such payments, Downey said.

A long history

Virtual cards have been around for some time. One of the first companies to introduce them was Ireland-based Orbiscom, which MasterCard acquired in 2009. MasterCard also works with other virtual card companies, including Europe’s Conferma, which also does business with Visa Europe issuers, according to Business Travelers News.

Though initially marketed primarily as a way for consumers to improve the security of online payments, virtual cards more recently have gained the interest of B2B companies, including firms in the travel industry.

Last fall, MasterCard announced MasterCard Travel Controller, which provides companies with information necessary to allocate charges to appropriate cost centers and allows them to expand control over travel spend by setting customer virtual accounts for each transaction.

Virtual fleet cards

Fleet card specialist Wex is among the major issuers of B2B virtual cards, providing a MasterCard-branded product to its fleet customers.

Last year, the company added 700,000 new fleet cards globally, growing its virtual card volume by 20 percent, according to the company’s fourth quarter earnings release.

In April, Wex’s European unit signed an international deal with Conferma, bringing to that company a prepaid virtual product for the first
time. It enabled Conferma’s partners to optimize travel payments by selecting the payment method that is most appropriate for each transaction type.


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Alto Global Processing: MasterCard, Visa Propose Tokenization Standard for Digital Commerce

The three biggest U.S. payment card networks on Tuesday together proposed the framework for a new standard for online and mobile purchases they said will more effectively protect consumers and businesses from fraud. The fierce competitors said they are responding to increasing consumer demand to protect digital purchases, which make up a growing portion of retail sales.alto global processing visa mastercard

The agreement is not a full-fledged solution, but signals a willingness of the networks and their issuers to work with merchants, acquirers and processors on a standard for widespread “tokenization” of payment information. Many processors have been substituting tokens for actual consumer card account numbers during transactions for some time so that fewer parties have to store payment account details.

The new standard would draw on technology already in place, but the networks said their cooperation and ability to bring all players in the payments ecosystem together would ensure broad acceptance of tokens, enable all participants in the value chain to route and pass through tokens, spur innovation in the digital wallet and mobile app space and improve cardholder security.

“By working together to form a common global standard for online and mobile shopping, we will be able to provide enhanced security, interoperability and consistency for all participants within the digital payments ecosystem,” said Mike Matan, head of Global Network Business for American Express. “In addition, we will be able to drive the rapid adoption and expansion of digital payments, delivering innovative new products and services that will allow consumers to realize the full potential of digital commerce in today’s world.”

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Alto Global Processing: MasterCard to deploy 410,000 Contactless Terminals In Japan

MasterCard has announced that it will deploy a target of 410,000 MasterCard PayPass– enabled point of sale (POS) terminals throughout Japan over the next three years, enabling travellers visiting the country to enjoy the speed and convenience of making contactless transactions.

In February, MasterCard announced strong growth of contactless payments on MasterCard-enabled cards across the Asia/Pacific, Middle East and Africa region in 2012, citing a 28% (YoY) increase in Mastercard_220_1000merchant locations, reflecting a strong demand from consumers in the region for simple and secure ways to make everyday payments.

The early adoption and penetration of contactless payments in Japan, ahead of other countries, saw transactions amounting to over 2 trillion yen in 2011, according to the Bank of Japan. Contactless payments continue to expand at a rapid rate, in part due to the increased use of NFC payments.

The 410,000 MasterCard contactless terminals will be deployed by domestic card companies including Mitsubishi UFJ NICOS, Sumitomo Mitsui Card, Orient Corporation and UC Card.

Robert Luton, division president of MasterCard Japan said, “Consumers around the world are embracing the contactless payment experience. With the introduction of MasterCard’s contactless terminals across the country, cardholders traveling from abroad will get the benefit of safe and secure contactless payments in Japan. We look forward to providing more contactless payments opportunities for cardholders around the globe when they visit Japan, through a wider range of MasterCard-enabled cards and devices.”


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Alto Global Processing: Credit card settlement unlikely to help stores charge fees

By Jessica Dye

NEW YORK | Mon Jul 23, 2012 5:47pm EDT

(Reuters) – Stores may not find it easier to charge shoppers fees for paying by credit card as a result of a $7.25 billion class action settlement with Visa Inc. and MasterCard Inc, a problem that may delay or derail its approval, an analyst said on Monday.

The proposed settlement between retailers and the two biggest credit card companies would resolve stores’ claims that Visa and MasterCard conspired with major banks to fix swipe fees—- the amount paid to process debit and credit card payments.

In addition to a $6.05 billion payment and temporary $1.2 billion swipe-fee reduction, the deal would also allow stores to start charging so-called checkout fees to customers who pay with MasterCard or Visa credit and debit cards.

But senior Bernstein Research analyst Rod Bourgeois wrote in a July 23 report that retailers would in reality not get much help from the deal in offsetting the swipe fees by charging customers more.

“We think the settlement’s much-touted surcharging provisions (as currently written) actually have no real usefulness to merchants,” he said.

Buried in the fine print of the agreement are provisions that undercut the stated intent of the settlement, he said.

For example, if retailers force customers to pay more for using Visa and MasterCards, they essentially must charge consumers more when they pay using other credit card networks, such as American Express, according to Bouregois’ analysis of the proposed settlement.

But American Express prohibits merchants from implementing policies that discriminate against its cards, like discounts designed to steer customers to different forms of payment, Bourgeois said.

The settlement is subject to approval by a federal judge.

The surcharge rules will also not apply in the 10 states that prohibit that practice, including Texas, California and New York.

“This situation could undermine the settlement if merchants voice their objections to this provision during fairness hearings prior to the court’s final approval,” Bourgeois wrote. Such objections may open the door for some stores, particularly large ones, to object to the settlement or appeal its approval, he said.

Some stores have said they will not impose extra fees for paying with plastic, even if they can. One of the largest U.S. retailers, Target Corp., issued a statement Friday saying it did not intend to impose checkout fees, and calling it “bad for both retailers and consumers.”

Hours after the proposed settlement was filed, the National Association of Convenience Stores rejected the deal, saying it did not alleviate stores’ long-standing concerns over how Visa and Mastercard set swipe-fee rates.


Craig Wildfang, a lawyer for merchants who helped negotiate the deal, said the settlement would give retailers several different options should they choose to pursue checkout fees.

For instance, stores could choose not to assess the fees, or if they did, they could re-examine their agreements with competing card issuers or even drop those other cards altogether, he said.

“We see the settlement agreement as providing freedom to merchants to make those choices that they think are in the best interest of their business and their customers,” Wildfang said.

Noah Hanft, general counsel for Mastercard, said it was unlikely that many merchants would wind up charging checkout fees, largely because of anticipated customer feedback.

“The value merchants get from Mastercard acceptance is far in excess of the actual cost of acceptance, and we think that when merchants consider all those factors they’re not likely to impose checkout fees,” Hanft said.

Visa declined to comment.

Ultimately, it will be up to U.S. District Court Judge John Gleeson to approve or reject the proposed settlement, a process that will play out in Brooklyn federal court over the next few months.

Objectors will be given a chance to voice their positions at a fairness hearing in Brooklyn federal court. Stores will also have the opportunity to opt out of the settlement altogether, although that would only apply to their share of damages, and not the rule changes outlined in the proposal.

The case is In re Payment Interchange Fee and Merchant Discount Antitrust Litigation, in the U.S. District Court for the Eastern District of New York, No. 05-1720.

(Reporting by Jessica Dye; Editing by Cynthia Osterman)


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