Global: DOJ Launches Inquiry into Visa’s Tokenization Practices

The Department of Justice (DOJ) is reportedly conducting an investigation into Visa’s tokenization practices, as part of an ongoing examination, as indicated by recent reports from Bloomberg.

The investigation delves into Visa’s strategy of imposing higher charges on merchants who opt out of using its tokenization system. This system safeguards cardholder data by substituting card numbers with tokens that are exclusively compatible with specific devices and merchants.

This news emerges several months after Visa disclosed its cooperation with a DOJ investigation concerning its practices related to debit cards. This particular probe sought “documents and information focusing on U.S. debit and competition with other payment methods and networks,” as noted in a Securities and Exchange Commission (SEC) filing made by Visa in January.

The DOJ’s antitrust division initiated the investigation against Visa in 2021 over alleged anticompetitive conduct in the debit card sector.

In a similar context, rival company Mastercard, last year, consented to a Federal Trade Commission (FTC) directive mandating the sharing of customer account details necessary for processing debit payments with competing networks. The order centered around Mastercard’s utilization of tokens.

A June report examined the significance of network tokenization in relation to payment vaults. It highlighted that network tokens can autonomously conduct transactions apart from the credit card’s payment account number (PAN).

“Modern vaults can provision network tokens automatically when a new card is being stored. That network token can then transact independently of the underlying PAN,” the report explained.

This approach not only diminishes reliance on manual updates to card information by customers but also reduces expenses while offering added benefits such as enhanced throughput and diminished processing costs.

This framework is pivotal for consumers seeking both convenience and security in transactions, with a significant 56% preferring stored credit cards over manual input of payment details due to the convenience factor.

Recent reports highlithed “The less customers must do to complete transactions, the happier they are — and the more likely they are to complete them,”