MasterCard 2012 Annual Report Download - page 20

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online and on tablets and mobile devices. We can also help merchants improve efficiencies with solutions such as
our contactless technology and our internet payment gateways. Merchants can address fraud concerns with fraud
detection and prevention solutions like our Expert Monitoring System. Finally, we provide merchant forums and
anti-piracy programs to inform, educate and share information with merchants on topics that are relevant to them
such as fraud.
Despite these opportunities, we also face challenges in our relationships with merchants. 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. In particular, large merchants have supported many of the litigation, legislative and regulatory
challenges related to interchange fees that MasterCard and others in the industry have been defending against.
This includes the U.S. merchant litigations as to which the Company recently entered into a settlement agreement
(subject to final court approval). See our risk factor in “Risk Factors—Legal and Regulatory Risks” in Part I,
Item 1A of this Report related to merchants’ continued focus on the costs of accepting electronic forms of
payment.
Governments. We work closely with national, state and local governments (including regulators and
agencies) around the world to not only help shape payments regulation, but to work together strategically with
governments to help them provide safe, efficient and transparent ways to serve their payment needs and that of
their people. We provide governments with solutions that help them reduce costs, gain efficiencies, curtail fraud
and corruption and advance social programs. We work with governments to reduce costs by providing electronic
payment solutions that save the expense of producing, managing and disbursing currency. In addition, we help
drive government efficiency by providing ways to eliminate paper systems, implement identification solutions,
manage social payments, improve procurement (through travel and entertainment, procurement cards and
purchasing payment automation) and deploy improved transit payment options (using chip and our contactless
technology). We also work with governments to provide them with more efficient ways to deliver social benefits
(including through prepaid cards), as well as products and solutions to help reduce errors and curtail fraud. Our
products and programs can help governments drive financial inclusion by providing initial or improved access to
financial services for the underbanked. We work with governments to provide payment solutions such as
reloadable, prepaid or debit payroll or other social benefit cards (including cards to aid victims of natural
disasters) and products and solutions that enable mobile commerce payments.
MasterCard Revenue Sources
We generate revenues by charging fees to our customers for providing transaction processing and other
payment-related services and assessing our customers based on GDV on the cards and other devices that carry
our brands. Accordingly, our revenues are impacted both by the number of transactions that we process and by
the use of cards and other devices carrying our brands. Our net revenues are classified into the following five
categories:
•Domestic assessments: Domestic assessments are fees charged to issuers and acquirers based
primarily on the volume of activity on cards and other devices that carry our brands where the merchant
country and the issuer country are the same.
•Cross-border volume fees: Cross-border volume fees are charged to issuers and acquirers based on the
volume of activity on cards and other devices that carry our brands where the merchant country and
issuer country are different.
•Transaction processing fees: Transaction processing fees are charged for both domestic and cross-
border transactions and are primarily based on the number of transactions.
•Other revenues: Other revenues for other payment-related services include fees associated with fraud
products and services, cardholder service fees, consulting and research fees, program management
service fees and a variety of other payment-related services.
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