MasterCard 2010 Annual Report Download - page 66

The pricing structure for our acquirer revenues from cross-border transactions was simplified in the fourth
quarter of 2010. Pursuant to the previous structure, MasterCard charged a cross-border volume fee but provided a
rebate if MasterCard was allowed to perform the currency conversion. Beginning in October 2010, if MasterCard
performs the currency conversion, the cross border volume fee charged is lower and no rebate is provided. This
prospective change has no impact to net revenues.
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 pricing change included an approximately 1 percentage point decrease relating to an
increase in cross-border rebates to encourage certain behaviors of customers and an 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point decrease relating to the October 2008 pricing changes which were repealed at the end of June 2009 as part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.
A significant portion of our revenue is concentrated among our five largest customers. In 2010, the net
revenues from these customers were approximately $1.5 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—Additional consolidation or other changes in or affecting the banking industry
could result in a loss of business for MasterCard and create pressure on the fees we charge our customers,
resulting 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.
The significant components of our net revenues were as follows:
For the Years Ended December 31,
Dollar Increase
(Decrease) Percent Increase (Decrease)
2010 2009 2008 2010 2009 2010 2009
(in millions, except percentages)
Domestic assessments ......... $2,642 $ 2,382 $ 2,386 $ 260 $ (4) 10.9% (0.2)%
Cross-border volume fees ...... 1,927 1,509 1,547 418 (38) 27.7% (2.5)%
Transaction processing fees ..... 2,198 2,042 1,777 156 265 7.6% 14.9%
Other revenues ............... 791 784 751 7 33 1.0% 4.4%
Gross revenues ............... 7,558 6,717 6,461 841 256 12.5% 4.0%
Rebates and incentives (contra-
revenues) ................. (2,019) (1,618) (1,469) (401) (149) 24.8% 10.1%
Net revenues ................ $5,539 $ 5,099 $ 4,992 $ 440 $ 107 8.6% 2.1%
Domestic assessments—There was an increase in domestic assessments of 10.9% in 2010, as compared to a
0.2% decrease in 2009, due to:
• GDV increased 9.1% during 2010, when measured in local currency terms, and increased 10.7% when
measured on a U.S. dollar-converted basis, versus 2009. In 2009, GDV increased 1.7% when measured
in local currency terms, and declined 3.0% when measured on a U.S. dollar-converted basis, versus
2008.
• The net impact of pricing changes increased domestic assessments growth by approximately 4
percentage points in 2010 which included the April 2010 price increase. The October 2008 pricing
changes which were repealed at the end of June 2009 as part of our interim arrangement with the
European Commission had an approximate 1 percentage point unfavorable impact on domestic
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