MasterCard 2008 Annual Report Download - page 14

other fees charged to cardholders by issuers, or establish the merchant discount charged by acquirers in
connection with the acceptance of cards that carry our brands.
Our business has a global reach and has continued to experience growth. Gross dollar volume (“GDV”) on
cards carrying the MasterCard brand as reported by our customers was approximately $2.5 trillion in 2008, an
11.5% increase in U.S. dollar terms and a 10.7% increase in local currency terms over the GDV reported in 2007.
In 2008, we processed 21.0 billion transactions, an 11.8% increase over the number of transactions processed in
2007.
We believe the trend within the global payments industry from paper-based forms of payment, such as cash
and checks, toward electronic forms of payment, such as card payment transactions, creates significant
opportunities for the growth of our business. Our strategy is to continue to grow by further penetrating our
existing customer base and by expanding our role in targeted geographies and higher-growth segments of the
global payments industry (such as premium/affluent and contactless cards, commercial payments, debit, prepaid
and issuer processor and terminal driving services), enhancing our merchant relationships, expanding points of
acceptance for our brands, seeking to maintain unsurpassed acceptance and continuing to invest in our brands.
We also intend to pursue incremental payment processing opportunities throughout the world. We are committed
to providing our customers with coordinated services through integrated, dedicated account teams in a manner
that allows us to capitalize on our expertise in payment programs, marketing, product development, technology,
processing and consulting and information services for these customers. By investing in strong customer
relationships over the long term, we believe that we can increase our volume of business with customers over
time.
We operate in a dynamic and rapidly evolving legal and regulatory environment. In recent years, we have
faced heightened regulatory scrutiny and other legal challenges, particularly with respect to interchange fees.
Interchange fees, which represent a sharing of payment system costs among acquirers and issuers, have been the
subject of increased regulatory and legislative scrutiny and litigation as card-based forms of payment have
become relatively more important to local economies. Although we establish certain interchange rates and collect
and remit interchange fees on behalf of our customers, we do not earn revenues from interchange fees. However,
if issuers were unable to collect interchange fees or were to receive reduced interchange fees, we may experience
a reduction in the number of financial institutions willing to participate in a four-party payment card system such
as ours and/or a reduction in the rate of number of cards issued, as well as lower overall transaction volumes.
Proprietary end-to-end networks or other forms of payment may also become more attractive. Issuers might also
decide to charge higher fees to cardholders, thereby making our card programs less desirable and reducing our
transaction volumes and profitability. They also may attempt to decrease the expense of their card programs by
seeking a reduction in the fees that we charge. In addition to those challenges relating to interchange fees, we are
also exposed to a variety of significant lawsuits and regulatory actions, including federal antitrust claims, and
claims under state unfair competition statutes. See “Risk Factors—Legal and Regulatory Risks” in Item 1A of
this Report.
MasterCard Incorporated was incorporated as a Delaware stock corporation in May 2001. We conduct our
business principally through MasterCard Incorporated’s principal operating subsidiary, MasterCard International
Incorporated (“MasterCard International”), a Delaware membership corporation that was formed in November
1966. Our financial institution customers are generally either principal members of MasterCard International,
which participate directly in MasterCard International’s business, or affiliate members of MasterCard
International, which participate indirectly in MasterCard International’s business through a principal member. In
May 2006, we completed a plan for a new ownership and governance structure for MasterCard Incorporated,
which we refer to as the “ownership and governance transactions”, and which included the appointment of a new
Board of Directors comprised of a majority of directors who are independent from our financial institution
customers and the establishment of a charitable foundation incorporated in Canada, The MasterCard Foundation
(the “Foundation”). Part of the ownership and governance transactions included an initial public offering of a
new class of common stock (the “IPO”) in May 2006. Prior to our change in governance and ownership structure,
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