Mastercard and Visa Unite on Electronic Credit Card Transactions Standard

Mastercard International and Visa International have joined forces to establish a standard for electronic credit card transactions, aiming to make online purchases as simple as pushing a button. The new system, developed in collaboration with Microsoft, is designed to be open and inclusive, allowing other card companies and software vendors to participate. By adopting a single standard, the card associations hope to overcome obstacles to electronic commerce on the Internet.

Key Takeaways:

• Mastercard and Visa have agreed to a joint standard for electronic credit card transactions, with Mastercard making minor modifications to a system developed by Visa and Microsoft.
• The system is intended to be open, inviting other card companies and software vendors to participate.
• Visa pays a fee to Microsoft for every transaction using certain Microsoft software, while Mastercard will either license this software or write its own.
• Mastercard intends to ban its cards from being used in Internet transactions that do not use the new security software, citing concerns over credit card security and fraud.
• Consumers will need an updated version of their viewer software to use the system, with viewer manufacturers such as Netscape Communications and Microsoft planning to offer the updated software by early next year.
• The system is expected to be free to consumers, with the bank that issues the card paying a fee of less than $1 to Mastercard or Visa whenever a certificate is issued.
• Merchants may see reduced fees due to the system's expected reduction in credit card fraud.

Statistics:

• The new system aims to reduce credit card fraud, which currently costs merchants 1 to 2 percent of each charge for accepting credit cards.
• Mastercard and Visa expect consumers to need an updated version of their viewer software by early next year to use the new system.
• The bank that issues the card will pay a fee of less than $1 to Mastercard or Visa whenever a certificate is issued.

Sources:

• "Mastercard, Visa Agree to Standard for Internet-Based Credit Card Transactions," The New York Times, [undated]
• Statement from Mastercard International, undated
• Statement from Visa International, undated
• Microsoft Corporation, [undated]
• Netscape Communications, [undated]
• Windows 95 operating system, [undated]