MasterCard Plots Response to New Debit Card Rules
NEW YORK -- As MasterCard Inc. reported strong second-quarter results in its debit card business, company executives discussed their response to the new debit card rules issued by the Federal Reserve at the end of June. The rules, which cap debit card transaction fees at 21 cents, are set to go into effect Oct. 1.
In a report by the Associated Press, MasterCard U.S. Regional President Chris McWilton said, at this point, the company has no intentions of matching Visa's new fee structure. He added that "there are a lot of moving parts that need to be sorted through and to put in place."
In the same second-quarter earnings call, MasterCard CEO Ajay Banga explained that the company is in a different position because it has a lower market share. "We don't need to defend as much as find ways to find the chinks in the places that we can build and capitalize on. That's how we're looking at it, rather than driving blanket pricing, for merchants large or small or for issuers large or small," he said. "We still think our benefit comes from being flexible deal by deal and thoughtful deal by deal, because of where we stand vs. some of our large competitors, who I think are doing things that are appropriate for their market position."
The MasterCard execs' comments came a week after Visa offered some details on its strategy, which includes changing its fees and offering incentives to merchants for choosing Visa's network for handling debit purchases.
As CSNews Online previously reported, Visa said it will introduce a "network participation fee" in the United States for all of its debit, credit and prepaid card services -- a major change from its current per-transaction fee model. As part of the new policy, Visa will lower the variable rate charged for each transaction and add an as-yet-undetermined participation fee that will be based on a merchant's size and its number of locations.