Visa, Mastercard Face Emerging Competition in Online Payments

Competition for the online debit card transaction business is poised to become more heated as a federal rule change aims to boost smaller companies that square up against dominant giants Visa Inc. and Mastercard Inc.

The Federal Reserve now requires banks and other card issuers to offer merchants at least two options for the middleman companies that route debit card payments at brick-and-mortar stores. A new rule, which will take effect in July, expands that requirement to online purchases and other “card-not-present” payments using Apple Pay and other mobile apps.

Customers largely won’t notice the change. But banks oppose the ...