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Fed consults on debit card standards and fintech access to payment network

Fed consults on debit card standards and fintech access to payment network

The US Federal Reserve is to push through new rules to ensure that merchants can choose between multiple networks for routing card-not-present transactions, as well as guidelines for allowing newly-chartered fintechs direct access to the Fed's payment network.

IN the first instances, the Fed is inviting public comment on proposals which clarify that 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 changes apply to the Fed's Regulation II, which implements section 920 of the Electronic Fund Transfer Act. When first introduced, the central bank says the market had not developed solutions to broadly support multiple networks over which merchants could choose to route card-not-present transactions.

"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," states the Fed. "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."

In a sperate move, the Fed has also invited public comment on proposed guidelines to evaluate requests for accounts and payment services at Federal Reserve Banks by newly chartered fintechs.

Federal Reserve Board governor Lael Brainard, says: "With technology driving rapid change in the payments landscape, the proposed Account Access Guidelines would ensure requests for access to the Federal Reserve payments system from novel institutions are evaluated in a consistent and transparent manner that promotes a safe, efficient, inclusive, and innovative payment system, consumer protection, and the safety and soundness of the banking system."

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