MasterCard 2009 Annual Report Download - page 32

Finally, suits against us have been filed in several state and federal courts because of our currency conversion
practices. Although we have settled these matters, the settlements are still subject to appeal and could be
overturned. We cannot predict what the final outcome will be of our various litigations and other regulatory
proceedings. For a description of these and other matters, see Note 21 (Legal and Regulatory Proceedings) to the
consolidated financial statements included in Part II, Item 8.
Customers.
•Pricing. We face increasingly intense competitive pressure on the prices we charge our customers. In
order to stay competitive, we may have to increase the amount of rebates and incentives we provide to
our customers and merchants, as we have in the last several years. We seek to enter into business
agreements with customers through which we offer incentives and other support to issue and promote
our cards. However, our customers can terminate their business agreements with us in a variety of
circumstances. See “Risk Factors—Business Risks—We face increasingly intense competitive pressure
on the prices we charge our customers, which may materially and adversely affect our revenue and
profitability” in Part I, Item 1A.
•Banking Industry Consolidation. The banking industry has recently undergone substantial accelerated
consolidation, and we expect some consolidation to continue in the future. Consolidation represents a
competitive threat for MasterCard because our business and pricing strategy is intended to enable
MasterCard to achieve targeted financial performance by providing incentives to customers for
incremental business. Furthermore, our business strategy contemplates entering into business
agreements with our largest customers in exchange for significant business commitments to MasterCard.
In recent years, consolidations have included customers with a substantial MasterCard portfolio being
acquired by institutions with a strong relationship with a competitor. Significant ongoing consolidation
in the banking industry may result in a substantial loss of business for MasterCard. The continued
consolidation in the banking industry, whether as a result of an acquisition of a substantial MasterCard
portfolio by an institution with a strong relationship with a competitor or the combination of two
institutions with which MasterCard has a strong relationship, would also produce a smaller number of
large customers, which generally have a greater ability to negotiate pricing discounts with MasterCard.
Consolidations could prompt our customers to renegotiate our business agreements to obtain more
favorable terms. This pressure on the prices we charge our customers could materially and adversely
affect our revenue and profitability. See “Risk Factors—Business Risks—Consolidation or other
changes affecting the banking industry could result in a loss of business for MasterCard and may result
in lower prices and/or more favorable terms for our customers, which may materially and adversely
affect our revenue and profitability” in Part I, Item 1A.
Competitive Position. We believe that the principal factors affecting our competitive position in the global
payments industry are:
• pricing;
• customer relationships;
• the impact of existing and future litigation, legislation and government regulation;
• the impact of globalization and consolidation of financial institutions and merchants;
• the acceptance base, reputation and brand recognition of payment cards;
• the success and scope of marketing and promotional campaigns;
• the quality, security and integrity of transaction processing;
• the relative value of services and products offered;
• regulation and local laws;
22