MasterCard 2010 Annual Report Download - page 68

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Other revenues—The increases in 2010 and 2009 of 1.0% and 4.4%, respectively, were due to:
• In 2010, there was a slight increase in consulting and cardholder services fees, partially offset by a
decrease in fees from the excessive chargeback program and warning bulletins.
• In 2009 compared to 2008, there were increased compliance and penalty fees, implementation and
cardholder services fees and fees for fraud products and services, partially offset by a decline in
consulting and research fees.
• The net impact of foreign currency relating to the translation of other revenues from the euro and
Brazilian real to U.S. dollars unfavorably impacted growth by approximately 1 percentage point in both
2010 and 2009.
Rebates and incentives—Rebates and incentives increased 24.8% and 10.1% in 2010 and 2009, respectively.
Rebates and incentives as a percentage of gross revenues were 26.7%, 24.1% and 22.7% in 2010, 2009 and 2008,
respectively. The amount of rebates and incentives increased due to the following:
• The 2010 increase was primarily due to higher rebates and incentives for certain new and renewed
agreements as well as increased volumes. The Company intends to continue to enter into and maintain
business agreements that provide rebates and incentives to certain customers and merchants. The 2009
growth in rebates and incentives was primarily driven by certain new and renewed agreements, some of
which included shorter performance periods for specific customers. This was partially offset by reduced
estimates for rebates and incentives for certain customers which did not achieve contractual
performance hurdles, lower cross-border rebates due to a decline in cross-border volume growth and
less marketing activity with merchants.
• Cross-border pricing actions in October 2009 as discussed above under “- Cross-border volume fees”,
included an increase to cross-border rebates to encourage certain behaviors of our customers. In 2010,
the increase in cross-border rebates contributed approximately 10 percentage points to the increase in
rebates and incentives, partially offset by the effects of the pricing structure change in October 2010.
The pricing actions in October 2009 contributed approximately 3 percentage points to the increase in
rebates and incentives in 2009.
• There was a minimal net impact of foreign currency relating to the translation of rebates and incentives
from the euro and Brazilian real to U.S. dollars in 2010. In 2009, the net impact of foreign currency
relating to the translation of rebates and incentives from the euro and Brazilian real to U.S. dollars
decreased rebates and incentives by approximately 1 percentage point.
Operating Expenses
Our operating expenses are comprised of general and administrative, advertising and marketing, litigation
settlements and depreciation and amortization expenses. During 2009, the Company reclassified certain
cardholder-related enhancement expenses, which were previously classified as advertising and marketing
expenses, to general and administrative expenses. These cardholder benefit programs, such as insurance and card
replacements, were previously deemed promotional features of the cards and over time have become standard
product offerings in certain card categories. Approximately $83 million of these expenses have been reclassified
in 2008, to conform to the 2009 presentation.
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