MasterCard 2010 Annual Report Download - page 24

merchants by sponsoring a wide range of promotional programs on a global basis. We also enter into
arrangements with selected merchants under which these merchants receive performance incentives for the
increased use of MasterCard-branded programs or indicating a preference for MasterCard-branded programs
when accepting payments from consumers.
Contactless Payment Solutions. Our acceptance initiatives include MasterCard PayPass, a “contactless”
payment solution that utilizes wireless technology to enable consumers simply to tap their payment card or other
payment device, such as a phone, key fob, wristband or Mobile PayPass tag that adheres to the back of a mobile
device on a PayPass-enabled terminal to complete a transaction. Our PayPass program primarily targets low
value purchases and is designed to help our customers further expand their businesses by capturing a portion of
transactions that were previously cash-based, resulting in increased card activity. PayPass reduces transaction
times, which appeals to merchants in quick service businesses (i.e., ballparks, fast food restaurants and gas
stations) and allows us to expand the number of locations that accept our cards. We have also developed an
innovative transit platform solution to address the needs of various transit acceptance environments and
cardholders. PayPass programs expanded in 2010 to include customers and merchants in 36 countries as of
December 31, 2010, an increase from 33 countries as of December 31, 2009. As of December 31, 2010,
approximately 88 million PayPass cards and devices were issued globally with acceptance at approximately
276,000 merchant locations worldwide.
Additional Services. In addition, we provide research, marketing support and financial assistance to our
customers and their marketing partners in connection with the launch and marketing of co-branded and affinity
card programs. Co-branded cards are payment cards bearing the logos or other insignia of an issuer and a
marketing partner, such as an airline or retail merchant. Affinity cards are similar to co-branded cards except that
the issuer’s marketing partner is typically a charitable, educational or other non-profit organization.
Merchants. Merchants are an important constituency in the MasterCard payment system and we are
working to further develop our relationships with them. We believe that consolidation in the retail industry is
producing a set of larger merchants with increasingly global scope. These merchants are having a significant
impact on all participants in the global payments industry, including MasterCard. We believe that the growing
role of merchants in the payments system represents both an opportunity and a challenge for MasterCard. In
particular, large merchants are supporting many of the litigation, legislative and regulatory challenges related to
interchange fees that MasterCard is now defending against, since interchange fees can represent a significant
component of the costs that merchants pay to accept payment cards. See “Risk Factors—Legal and Regulatory
Risks” and “Risk Factors—Business Risks—Merchants are increasingly focused on the costs of accepting card-
based forms of payment, which may lead to additional litigation and regulatory proceedings and may increase the
costs of our incentive programs, which could materially and adversely affect our profitability” in Part I, Item 1A.
Nevertheless, we believe many opportunities exist to enhance our relationships with merchants and to continue to
expand acceptance of our cards. Over the years, for example, we have made available directly to merchants our
standards that apply to card acceptance and related activities, thereby increasing the level of transparency and
predictability of our payment system for merchants. We have also recently introduced a suite of information
products, data analytics and marketing services which can help merchants understand specific activity in their
industry, evaluate their sales performance against competitors and focus direct marketing efforts to target
desirable prospects and hard to reach segments.
Customer Relationship Management
We are committed to providing our customers with coordinated services in a manner that allows us to take
advantage of our expertise in payment programs, product development, technology, operations, processing,
consulting and information services and marketing. We manage our relationships with our customers on a global
and regional basis to ensure that their priorities are consistently identified and incorporated into our product,
brand, processing, technology and related strategies.
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