MasterCard and Visa stepped up their rivalry with PayPal this month, with expansions of their own digital wallet initiatives and the threat of raising fees for third-party merchant processors. According to published news reports, the moves come as PayPal has ventured into point-of-sale transactions at physical checkout counters while offering customers lines of credit through its BillMeLater subsidiary.

eBay, PayPal's parent company, saw its stock value decline by over 10 percent after a February regulatory filing warning shareholders of potential fallout from future processing surcharges. In an investor note, analysts Bill Carcache and Brian Nowak of Nomura Equity Research advised clients that MasterCard's planned June rollout of new digital wallet surcharges would ensure proper compensation for use of the payment network.

MasterCard powering loyalty programs with its own digital wallet

In an interview with financial trade publication, MasterCard spokesman Nandan Mer said that his company focuses on loyalty among consumers, merchants, and card issuers. Mer outlined plans that would enable MasterCard to track merchants' and banks' own customer loyalty programs more effectively, without the need to engage third-party processing platforms.

The payment platform aims to accomplish some of these goals by rolling out MasterPass, a proprietary digital wallet service that works both online and in physical retail stores. Canadians get a first look at the service when it launches there this spring, followed by a rollout in Australia before its United States release. MasterCard officials have told reporters and analysts that the program supports "omnichannel sales experiences" that combine online transactions with real-world interactions.

Visa's has already launched in the United States, but on a bank-by-bank basis through partners such as PNC Bank, U.S. Bank, and Pentagon Federal Credit Union. Like Google Wallet and PayPal, Visa's digital wallet solution stores credit card details on a secure server and passes a token to online merchants instead of a raw account number.