Debit card issuers should enable, and allow merchants to choose from, at least two unaffiliated networks for card-not-present debit card transactions, such as online purchases, the Federal Reserve proposed Friday.
The agency said its proposed changes to Regulation II (Debit Card Interchange Fees and Routing) are necessary “in light of information indicating that often only one network is enabled for such transactions.”
Under the regulation, at least two unaffiliated payment card networks must be enabled on a debit card to process debit card transactions. The Fed asserted that when it promulgated the rule, the market had not developed solutions to broadly support multiple networks over which merchants could choose to route card-not-present transactions.
The agency said that its proposal would clarify that card-not-present transactions are a “particular type of transaction” for which two unaffiliated payment card networks must be available. The proposed revisions would further clarify, the agency said, the responsibility of the debit card issuer in ensuring that at least two unaffiliated networks have in fact been enabled to comply with the regulation.
“Although technology has subsequently evolved to address these barriers, data collected by the Board and information from industry participants indicate that two unaffiliated networks are often not available to process card-not-present debit card transactions because some issuers do not enable two networks for those transactions,” the Fed said in a release. “The absence of at least two unaffiliated networks for card-not-present transactions forecloses the ability of merchants to choose between competing networks when routing such transactions, an issue that has become increasingly pronounced because of continued growth in online transactions, particularly in the COVID-19 environment.”
Federal Reserve Board invites public comment on proposed changes to Regulation II regarding network availability for card-not-present debit card transactions and publishes a biennial report containing summary information on debit card transactions in 2019