MasterCard 2009 Annual Report Download - page 44

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• Competitors, customers and other industry participants may develop products that compete with or
replace value-added services we currently provide to support our transaction processing which could, if
significant numbers of cardholders choose to use them, replace our own processing services or could
force us to change our pricing or practices for these services.
• Participants in the payments industry may merge, create joint ventures or form other business
combinations that may strengthen their existing business services or create new payment services that
compete with our services.
Our failure to compete effectively against any of the foregoing competitive threats could materially and
adversely affect our revenues, operating results, prospects for future growth and overall business.
We face increasingly intense competitive pressure on the prices we charge our customers, which may
materially and adversely affect our revenue and profitability.
We generate revenue from the fees that we charge our customers for providing transaction processing and
other payment-related services and from assessments on the dollar volume of activity on cards carrying our
brands. In order to increase transaction volumes, enter new markets and expand our card base, we seek to enter
into business agreements with customers through which we offer incentives, pricing discounts and other support
to customers that issue and promote our cards. In order to stay competitive, we may have to increase the amount
of these incentives and pricing discounts. Over the past several years, we have experienced continued pricing
pressure. The demand from our customers for better pricing arrangements and greater rebates and incentives
moderates our growth. We may not be able to continue our expansion strategy to process additional transaction
volumes or to provide additional services to our customers at levels sufficient to compensate for such lower fees
or increased costs in the future, which could materially and adversely affect our revenue and profitability. In
addition, increased pressure on prices enhances the importance of cost containment and productivity initiatives in
areas other than those relating to customer incentives. We may not succeed in these efforts.
Our strategy is to grow our business by, among other things, focusing on our customers and entering into
customized business agreements with customers around the globe. In the future, we may not be able to enter into
such agreements on terms that we consider favorable, and we may be required to modify existing agreements in
order to maintain relationships and to compete with others in the industry. Some of our competitors are larger
and have greater financial resources than we do and accordingly may be able to charge lower prices to our
customers. In addition, to the extent that we offer discounts or incentives under such agreements, we will need to
further increase transaction volumes or the amount of services provided thereunder in order to benefit
incrementally from such agreements and to increase revenue and profit, and we may not be successful in doing
so. Our customers also may implement cost reduction initiatives that reduce or eliminate payment card marketing
or increase requests for greater incentives or greater cost stability. Furthermore, a number of customers from
which we earn substantial revenue are principally aligned with one of our competitors. A significant loss of our
existing revenue or transaction volumes from these customers could have a material adverse impact on our
business.
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.
Over the last several years, the banking industry has undergone substantial accelerated consolidation, and
we expect some consolidation to continue in the future. Consolidation represents a competitive threat to us
because our strategy contemplates entering into business agreements with our largest customers in exchange for
significant business commitments. Recent 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 the substantial loss of business for MasterCard, which could
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