MasterCard 2009 Annual Report Download - page 64

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4. Other revenues: Other revenues for other payment-related services are primarily dependent on the
nature of the products or services provided to our customers but are also impacted by other factors,
such as contractual agreements. Examples of other revenues are fees associated with the following:
•Fraud products and services used to prevent or detect fraudulent transactions. This includes warning
bulletin fees which are charged to issuers and acquirers for listing invalid or fraudulent accounts
either electronically or in paper form and for distributing this listing to merchants.
•Cardholder services fees are for benefits provided with MasterCard-branded cards, such as
insurance, telecommunications assistance for lost cards and locating automated teller machines.
•Consulting and research fees are primarily generated by MasterCard Advisors, the Company’s
professional advisory services group. The Company’s business agreements with certain customers
and merchants may include consulting services as an incentive. The contra-revenue associated with
these incentives is included in rebates and incentives.
• The Company also charges for a variety of other payment-related services, including compliance
and penalty fees, account and transaction enhancement services, holograms and publications.
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.
Revenue Analysis
In 2009 and 2008, gross revenues grew 4.0% and 19.8%, respectively. Revenue growth in 2009 was
primarily due to changes in pricing, increased transactions and increases in the volume of activity on cards
carrying our brands, partially offset by unfavorable foreign currency exchange impacts. The revenue growth in
2008 was the result of increased transactions and GDV, as well as price increases and currency fluctuation.
Rebates and incentives as a percentage of gross revenues were 24.1%, 22.7% and 24.6% in 2009, 2008 and 2007,
respectively. Our net revenues in 2009 and 2008 increased 2.1% and 22.7% versus 2008 and 2007, respectively.
Pricing changes increased net revenues by approximately 6 percentage points in 2009. The price increases
primarily related to increases to transaction processing fees in April 2009 and cross-border volume fees in
October 2009. The net price change include approximately 1 percentage point decrease relating to an increase in
cross-border rebates to encourage certain behaviors of customers and approximately 1 percentage point decrease
relating to the October 2008 pricing changes which were repealed at the end of June 2009 as part of our interim
arrangement with the European Commission. See Note 21 (Legal and Regulatory Proceedings) to the
consolidated financial statements included in Part II, Item 8 for more information.
A significant portion of our revenue is concentrated among our five largest customers. In 2009, the net
revenues from these customers were approximately $1.4 billion, or 28%, of total net revenues. The loss of any of
these customers or their significant card programs could adversely impact our revenues and net income. 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. In addition, as part
of our business strategy, MasterCard, among other efforts, enters into business agreements with customers. These
agreements can be terminated 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.
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