The major payment giant Visa is undergoing a new review by the U.S. Department of Justice over the use of a technology known as "tokenization," as reported by the Bloomberg news agency.
Complaints about the company's actions came shortly after the initiation of an antitrust investigation into Visa. According to sources from the agency, law enforcement agencies have started examining the approach of the payment giant, which includes charging higher fees to retail merchants who do not use Visa's patented tokenization technology.
This solution allows for the substitution of confidential card numbers with unique tokens that are only valid on specific devices or with specific merchants, with the aim of enhancing the security of each transaction.
The principle of Visa's tokenization technology is that it was first introduced in 2014. This service replaces the 16-digit account number with a special token that can only be recognized by the Visa system. Such an approach ensures the protection of cardholder information when transmitting their data between retail merchants and banks. Since the introduction of this service, the company has issued over four billion tokens. Moreover, more than 13,000 merchants have already implemented this technology, including companies such as Netflix Inc., Microsoft Corp., and Fitbit Alphabet Inc.
"In addition to enhancing security, tokenization can reduce the complexities arising in the payment process by allowing financial institutions to automatically update outdated or compromised payment data without the customer's manual involvement in case of loss, theft, or card expiration," Visa said in a statement.
Visa's competitor, Mastercard, introduced tokenized bank deposits earlier.
Earlier, Mastercard, a major competitor to Visa, began testing the Multi-Token Network (MTN) using tokenized bank deposits. MTN provides a blockchain framework for secure, scalable, and interoperable transactions, facilitating more efficient payments and settlements.
In the summer, Mastercard plans to release a beta version of MTN for residents of the United Kingdom. The company claims that this will be a "testing ground for real pilot applications." In the initial stage, the company will explore how applications can utilize tokenized bank deposits. Gradually, the MTN technology will become available in other markets around the world.