MasterCard 2009 Annual Report Download - page 16

Regional and domestic/local PIN-based debit brands are the primary brands in many countries. In these
markets, issuers have historically relied on the Maestro and Cirrus brands (and other brands) to enable cross-
border transactions, which typically constitute a small portion of the overall number of transactions.
In addition to general purpose cards, private label cards comprise a portion of all card-based forms of
payment. Typically, private label cards are “pay later” cards issued by, or on behalf of, a merchant (such as a
department store or gasoline retailer) and can be used only at the issuing merchant’s locations.
Payment Services and Solutions
We provide transaction processing and other payment-related services to our customers. We also offer a
wide range of payment solutions to enable our customers to design, package and implement programs targeted to
the specific needs of their customers (which include cardholders and commercial clients). We deploy customer
relationship management teams to our customers to provide them with customized solutions built upon our
expertise in payment programs, marketing, product development, payment processing technology and consulting
and information services. We also manage and promote our brands for the benefit of all customers through brand
advertising, promotional and interactive programs and sponsorship initiatives.
We generate revenues from the fees we charge our customers for providing transaction processing and other
payment-related services. We also earn revenues by charging our customers assessments based on the GDV of
activity on the cards that carry our brands. Accordingly, our revenues are impacted by the number of transactions
that we process and by the use of cards carrying our brands.
Transaction Processing
Introduction. We operate the MasterCard Worldwide Network, which links issuers and acquirers around
the globe for transaction processing services and, through them, permits MasterCard cardholders to use their
cards at millions of merchants worldwide. A typical transaction processed over our network involves four
participants in addition to us: cardholder, merchant, issuer (the cardholder’s bank) and acquirer (the merchant’s
bank). The following diagram depicts a typical point-of-sale card transaction.
In a typical transaction, a cardholder (A) purchases goods or services from a merchant (B) using a card.
After the transaction is authorized by the issuer (D) using our network, the acquirer (C) pays the amount of the
purchase, net of a discount, to the merchant. This discount, which we refer to as the merchant discount, takes into
consideration the amount of the interchange fee described below. The issuer pays the acquirer an amount equal to
the value of the transaction minus any interchange fee and posts the transaction to the cardholder’s account. Our
rules generally guarantee the payment of transactions using MasterCard-branded cards and certain transactions
using Cirrus and Maestro-branded cards between issuers and acquirers.
6