Mastercard moves to protect 'risky and frisky' crypto transactions
(2022/10/10)
- Reference: 1665385029
- News link: https://www.theregister.co.uk/2022/10/10/mastercard_crypto_secure/
- Source link:
Supposedly ingenious schemes to revolutionize the finance industry with crypto are not hard to find – nor are their failures. And scarcely a day passes on which a cryptocurrency venture's infosec is not found wanting. That sad situation is causing financial institutions sufficient pain that Mastercard thinks the time is ripe for a service that helps lenders to understand if their customers' crypto purchases are dangerous.
MasterCard has [1]named its effort Crypto Secure and says it "allows [card issuers] to better assess the risk profile of crypto exchanges or other providers."
Card issuers are nearly always banks, and laws around the world mean issuers are often on the hook for fraudulent transactions made with credit cards.
[2]
The service therefore helps card issuers to:
Accurately identify the crypto exchanges;
Measure transaction approvals and declines;
Understand, at a portfolio level, their exposure to crypto risk through a single score;
Access a benchmark rating for comparison to a peer group of financial institutions.
The Register asked Mastercard if it has ever offered a service of this sort for any other class of asset or merchant. The company didn't offer a direct answer, saying only that it is a "first-of-its kind technology which is offered globally … to help card issuers stay compliant with the complex regulatory landscape of the digital assets sector [and] better assess the risk profile of crypto exchanges or other providers."
Independent payments expert Brad Kelly, managing director of Australian company Payment Services, said he's never seen a similar sector-specific service offered by a card scheme.
[3]
[4]
Kelly told The Register that crypto exchanges are currently rated as similar risks to purveyors of gambling and prostitution – sectors known as "risky and frisky" in the payments industry.
[5]India lets Mastercard issue new cards again
[6]PayPal, Visa, Mastercard suspend Russian services
[7]Binance robbed of $600 million in crypto-tokens
[8]South Korea cancels passport of Terraform Lab's Do Kwon
[9]Open up, it's the IRS. We're here about the crypto tax you dodged
Both sectors struggle to attract "acquirers" – the intermediaries that connect merchants to card issuers – because the risk of payments going bad is so high. Which is why Mastercard is helping issuers to identify which crypto exchanges are real and/or trustworthy!
Kelly therefore feels that Mastercard's move is designed to reduce risk for issuers but also give some comfort to acquirers. As such it's designed to protect Mastercard from two threats.
One is the increasing volumes of crypto payments that reduce demand for credit cards. Credit card providers like Mastercard and Visa make their money from transaction fees, and therefore want as many transactions as possible to be conducted on their platforms. Taking steps to encourage issuers to allow transactions with crypto exchanges might not affect the number of crypto transactions, but may mean more Mastercards are used to make them.
[10]
The other threat is rival card dealer Visa's recent crypto maneuvers. Kelly noted that Mastercard recently decided to emphasize buy-now-pay-later transactions – its tech will power Apple's forthcoming offering in the field – while Visa has invested more in cryptocurrency transaction processing. Crypto Secure thereby enables Mastercard to address the threat of Visa dominating the crypto market and transactions in virtual assets.
All of which leaves both of the major card providers clearing the way for cardholders to acquire crypto assets – even as authorities around the world increasingly warn they're a terribly risky investment and clamp down on their use by criminals, terrorists, ransomware scum, and pariah nations like North Korea. ®
Get our [11]Tech Resources
[1] https://www.mastercard.com/news/press/2022/october/mastercard-makes-it-easier-safer-to-buy-crypto/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.theregister.com/2022/06/17/mastercard_india_new_cards_again/
[6] https://www.theregister.com/2022/03/07/multiple_tech_firms_suspend_russian_ops/
[7] https://www.theregister.com/2022/10/07/binance_hack_566m/
[8] https://www.theregister.com/2022/10/06/south_korea_to_invalidate_passport/
[9] https://www.theregister.com/2022/09/23/irs_cryptocurrency_income_tax/
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://whitepapers.theregister.com/
MasterCard has [1]named its effort Crypto Secure and says it "allows [card issuers] to better assess the risk profile of crypto exchanges or other providers."
Card issuers are nearly always banks, and laws around the world mean issuers are often on the hook for fraudulent transactions made with credit cards.
[2]
The service therefore helps card issuers to:
Accurately identify the crypto exchanges;
Measure transaction approvals and declines;
Understand, at a portfolio level, their exposure to crypto risk through a single score;
Access a benchmark rating for comparison to a peer group of financial institutions.
The Register asked Mastercard if it has ever offered a service of this sort for any other class of asset or merchant. The company didn't offer a direct answer, saying only that it is a "first-of-its kind technology which is offered globally … to help card issuers stay compliant with the complex regulatory landscape of the digital assets sector [and] better assess the risk profile of crypto exchanges or other providers."
Independent payments expert Brad Kelly, managing director of Australian company Payment Services, said he's never seen a similar sector-specific service offered by a card scheme.
[3]
[4]
Kelly told The Register that crypto exchanges are currently rated as similar risks to purveyors of gambling and prostitution – sectors known as "risky and frisky" in the payments industry.
[5]India lets Mastercard issue new cards again
[6]PayPal, Visa, Mastercard suspend Russian services
[7]Binance robbed of $600 million in crypto-tokens
[8]South Korea cancels passport of Terraform Lab's Do Kwon
[9]Open up, it's the IRS. We're here about the crypto tax you dodged
Both sectors struggle to attract "acquirers" – the intermediaries that connect merchants to card issuers – because the risk of payments going bad is so high. Which is why Mastercard is helping issuers to identify which crypto exchanges are real and/or trustworthy!
Kelly therefore feels that Mastercard's move is designed to reduce risk for issuers but also give some comfort to acquirers. As such it's designed to protect Mastercard from two threats.
One is the increasing volumes of crypto payments that reduce demand for credit cards. Credit card providers like Mastercard and Visa make their money from transaction fees, and therefore want as many transactions as possible to be conducted on their platforms. Taking steps to encourage issuers to allow transactions with crypto exchanges might not affect the number of crypto transactions, but may mean more Mastercards are used to make them.
[10]
The other threat is rival card dealer Visa's recent crypto maneuvers. Kelly noted that Mastercard recently decided to emphasize buy-now-pay-later transactions – its tech will power Apple's forthcoming offering in the field – while Visa has invested more in cryptocurrency transaction processing. Crypto Secure thereby enables Mastercard to address the threat of Visa dominating the crypto market and transactions in virtual assets.
All of which leaves both of the major card providers clearing the way for cardholders to acquire crypto assets – even as authorities around the world increasingly warn they're a terribly risky investment and clamp down on their use by criminals, terrorists, ransomware scum, and pariah nations like North Korea. ®
Get our [11]Tech Resources
[1] https://www.mastercard.com/news/press/2022/october/mastercard-makes-it-easier-safer-to-buy-crypto/
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.theregister.com/2022/06/17/mastercard_india_new_cards_again/
[6] https://www.theregister.com/2022/03/07/multiple_tech_firms_suspend_russian_ops/
[7] https://www.theregister.com/2022/10/07/binance_hack_566m/
[8] https://www.theregister.com/2022/10/06/south_korea_to_invalidate_passport/
[9] https://www.theregister.com/2022/09/23/irs_cryptocurrency_income_tax/
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_security/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Y0PtOQ5yp8cbjMgwG8NqfgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://whitepapers.theregister.com/
Crypto payments aren't cheaper than card payments
If crypto did all the things that the law requires card payments to do like (in the US at least) zero liability for fraud, and the fraud prevention they therefore feel compelled to do to limit that potential liability, police PCI compliance of vendors, and on and on, it would cost a lot more.
If the cost of actual transactions was basically free like card transactions are to Mastercard and Visa then the only difference would be the profit they make. If the profit is so high why have other card networks that take less profit not popped up? It can only be a combination of high barriers to entry (all the compliance, regulation, fraud prevention etc. a new entrant would have to set up) and whatever monopolistic barriers are set up by the current incumbents.
Crypto doesn't magically make all that stuff go away. Sure, they can operate today without any regulation, but long before they become a noticeable drain on Mastercard and Visa's bottom line they would be forced to comply with all the same regulations and the "decentralized" thing cryptobros claim to love so much would be a thing of the past.