The European Commission has given the go-ahead to new rules on the establishment of databases containing details of merchants that are no longer allowed to accept card payments, in a move which could save banks EUR200 million a year in fraud costs.
Local data protection laws in EU countries have made the establishment of an EU-wide database impossible before. But the new rules, which have been endorsed by the EU Committee of Data Protection Authorities, will enable payment service providers to operate cross-border databases on merchants who have had their contracts terminated due to business "irregularities or risks", mostly linked to fraud.
The guidelines were negotiated with Visa and MasterCard and stipulate who can use the database, for what purposes, how long data can be kept and how and when merchants should be informed.
In the UK, one of the countries where such databases do not pose any legal problems, substantial fraud savings have been made.
MasterCard has already announced plans to extablish its own cross-border merchant fraud database, called Match (member alert to control high risk).
Walter Hansen, VP, global security and risk services, MasterCard, says: "The use of anti-payment fraud databases is critical to helping the banking industry manage risk and could generate estimated cost savings of up to EUR200 million per annum in the European Union alone, according to cardholder disputes on identified merchants."