3 PAYMENT METHOD SCORECARD: CARD | DEBIT
Governance Metrics
the networks themselves have network rules that determine interchange fees, card acceptance requirements, and surcharging rules among others. Decision-Making Forums The card industry has many forums bringing stakeholders together including the U.S. Payments Forum, Merchant Advisory Group (MAG), and Merchant Risk Council (MRC). However, the major strategic governance decisions are made by EMVCo, a global technical body with six member organizations, American Express, Discover, JCB, Visa, Mastercard, and UnionPay which are card networks. 815 While EMVCo invites participation from non-card network industry stakeholders, our understanding is that those other stakeholders do not have as much representation in the decision- making processes at the organization. Decision-Making Balance The card industry seemingly does not have a balanced governance structure between stakeholder groups. EMVCo may consult with stakeholder groups such as merchants and consumers; however, we understand decision-making is centralized. Fee Setting In most countries the card networks determine interchange and network fees for card payments. Debit card interchange is regulated in many markets by central banks or other government agencies. Central Bank Support While in countries like the U.S. and Australia, the Federal Reserve and the Reserve Bank of Australia oversee regulation over interchange fees, most countries do not have central bank active oversight for card payments.
Weight Score
Presence of Regulation (Merchant) Presence of Regulation (Consumer) Central Monitoring (Public/ Private) Decision-Making Forums Decision-Making Balance
13% 4.0
13% 5.0
13% 1.0
13% 5.0 25% 1.0 13% 3.0 13% 2.5
Fee Setting
Central Bank Support
TOTAL SCORE
2.8
Regulation Presence (Merchant) There are debit card co-badging mandates and/ or merchant choice routing requirements in the U.S. and Australia; it is prevalent but not mandated in several European countries. Co-badging, whether through mandates or voluntary action, creates downward pressure on fees for merchants. Routing, however, still has the potential to be restricted, e.g., PINless enablement issues in the U.S. 812 The increased use of network tokens has also presented challenges to the routing options for merchants. 813 Regulation Presence (Consumer) Consumers do not bear most of the weight for fraudulent transactions when debit cards are involved. A study by the Federal Reserve in 2021 showed cardholders on average were responsible for around 19% of the fraud loss (including card- not-present, counterfeit, and lost and stolen fraud) with merchants and issuers covering the other loss, 47% and 34%, respectively. 814 Central Monitoring (Public/Private) Card standards (i.e., technical specifications, such as EMV and 3D Secure) are governed by EMVCo for most card transactions. EMVCo is a consortium consisting of global networks Visa, MasterCard, American Express, Discover, JCB, and Union Pay. When not otherwise dictated by local governments,
175
Powered by FlippingBook