MasterCard 2011 Annual Report Download - page 19

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• We seek to increase usage of our programs at selected 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.
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, mobile operator 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 continue to be 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.
Many opportunities exist to enhance our relationships with merchants and provide them value, while
continuing to expand acceptance of our products. In addition to partnering with merchants to increase
opportunities for acceptance using PayPass, we also work with merchants to convert private label cards into
co-branded cards. We have also partnered with merchants to provide value to consumers, providing cardholders
with enhanced benefits, experiences and offers. Moreover, we work with merchants to provide employees the
option of being paid on MasterCard payroll cards, and to enable merchants the ability to collect payments using
MasterCard payment solutions. We also offer 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 and Partner Relationship Management
We are committed to providing financial institutions, merchants, government entities, telecommunications
companies and our other business partners 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 and other partners 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.
We enter into business agreements pursuant to which we offer customers financial incentives and other
support benefits to issue and promote our branded cards and other payment programs. Financial incentives may
be based on GDV or other performance-based criteria, such as issuance of new cards, launch of new programs or
execution of marketing initiatives. We believe that our business agreements with customers have contributed to
our volume and revenue growth in recent years. In addition, we have standard licensing arrangements with all of
our customers that permit them to use our trademarks and subject them to the standards governing our payment
programs.
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