MasterCard 2009 Annual Report Download - page 27

Rebates and incentives (contra-revenue): Rebates and incentives are provided to certain MasterCard
customers and are recorded as contra-revenue in the same period that performance occurs. Performance
periods vary depending on the type of rebate or incentive, including commitments to the agreement
term, hurdles for volumes, transactions or issuance of new cards and the launch of new programs or the
execution of marketing programs. Rebates and incentives are calculated based on estimated
performance, the timing of new and renewed agreements and the terms of the related business
agreements.
Our pricing is complex and is dependent on the nature of the volumes, types of transactions and other
products and services we offer to our customers. A combination of the following factors determines the pricing:
• Domestic or cross-border
• Signature-based or PIN-based
• Tiered pricing, with rates decreasing as customers meet incremental volume/transaction hurdles
• Geographic region or country
• Retail purchase or cash withdrawal
Cross-border transactions generate greater revenue than do domestic transactions. We review our pricing
and implement pricing changes on an ongoing basis and expect pricing to continue to be a component of revenue
growth in the future. In addition, standard pricing varies among our regional businesses, and such pricing can be
customized further for our customers through incentive and rebate agreements. Revenues from processing cross-
border transactions fluctuate with cross-border activities. See “Risk Factors—Business Risks—A decline in
cross-border travel could adversely affect our revenues and profitability, as a significant portion of our revenue is
generated from cross-border transactions” in Part I, Item 1A.
In 2009, net revenues from our five largest customers accounted for approximately $1.4 billion, or 28% of
our total revenue. No single customer generated 10% of total revenue.
Membership Standards
We establish and enforce rules and standards surrounding membership in MasterCard International and the
use and acceptance of cards carrying our brands.
Rulemaking and Enforcement
Membership in MasterCard International and its affiliates is generally open to financial institutions and
other entities that are our customers. Applicants for membership must generally meet specified membership
eligibility requirements.
In general, MasterCard grants licenses by territory to applicants able to perform all obligations required of
members. Licenses provide members with certain rights, including access to the network and usage of our
brands. Anti-money laundering due diligence reviews and customer risk management reviews are conducted on
all new members prior to admission, as well as on existing members. All applicants and members must meet the
requirements of MasterCard’s anti-money laundering program, and MasterCard can block authorization of
transactions and ultimately terminate membership for non-compliance with the program. As a condition of our
licenses, members agree to comply with our bylaws, policies, rules and operating regulations and procedures (the
“Standards”). MasterCard International and certain of its affiliates are the governing bodies that establish and
enforce the Standards, which relate to such matters as membership eligibility and financial soundness criteria; the
standards, design and features of cards and card programs; the use of MasterCard trademarks; merchant acquiring
activities (including acceptance standards applicable to merchants); and guaranteed settlement and member
failures. To help ensure that members conform to the Standards, we review card programs proposed by members.
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