The Federal Trade Commission (FTC) is investigating payment networks Visa (NYSE:V) and Mastercard (NYSE:MA) for possible fraud in their tokenization practices, a WSJ report stated. Network processors use “security tokens” for routing payments made using debit cards. These tokens are often random numbers or unique codes created by payment processors.
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The FTC is investigating if Visa and Mastercard are using these tokens as a means to stop the payment from being transmitted via other payment networks. A recent federal ruling stated that merchants must have the option of at least two separate debit-card networks to route their transactions. Merchants pay a fee to network providers for using their services, which is set by the network providers. Hence, to ensure healthy competition, the law requires merchants to have the option of selecting which network they wish to use.
Typically, when a consumer uses a debit card for making a payment, the card’s 16-digit number is converted to a security token that can be identified by a network processor. It is alleged that Visa and Mastercard unscramble these tokens in a way that makes them difficult to use by other networks, thereby limiting transactions on other networks.
Notably, Visa and Mastercard are the two unchallenged payment processors worldwide. Their network and payment processing have taken center stage after a majority of the consumer base globally has shifted to card payments. Now, however, with the advent of more cashless payment options such as mobile payments and digital wallets, the usage of debit and credit cards has taken a minor hit.
Is Visa Stock a Buy or Sell?
On TipRanks, Visa stock commands a Strong Buy consensus rating. This is based on 20 Buys and two Hold ratings. The average Visa price target of $250.67 implies 35.3% upside potential to current levels. Meanwhile, V stock has lost 15.9% so far this year.
What is the forecast for Mastercard Stock?
On TipRanks, the average Mastercard price forecast is $400.80, which implies 35.9% upside potential to current levels. MA stock has a Strong Buy consensus rating based on 20 Buys and one Hold. Year to date, the stock has lost 20%.
