MasterCard plans debit share grab by 2012

MasterCard Inc expects to start taking debit processing business from Visa Inc within one to two years as a result of the financial reform law, an executive told Reuters on Thursday.   

MasterCard will start taking more share in U.S. debit processing in the "second half of next year, into 2012," Tim Murphy, MasterCard's chief product officer, said in an interview at the company's headquarters. 

Banks and processing networks are still awaiting rules from the Federal Reserve on how exactly they will implement the law. Most banks will likely wait until the Fed releases final network rules in July before signing new contracts with MasterCard, Murphy said.

But the law is expected to widely restrict the profits that banks and networks receive for processing debit card transactions.                                           

MasterCard, the second-largest credit and debit card network, has long lagged arch-rival Visa in processing US debit transactions. But chief executive Ajay Banga has predicted that part of the Dodd-Frank law will help MasterCard increase its share of the US debit market.

The law prohibits exclusive debit processing contracts, meaning that banks that have exclusive contracts with Visa or another network will have to start doing business with other networks. 

A Visa spokesman said by email that the company "is committed to building upon our leadership position and accelerating growth in the debit category."

MasterCard shares closed up slightly at $219.43, and Visa rose 0.5% to $70.98, both on the New York Stock Exchange.