MasterCard 2013 Annual Report Download - page 26

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22
Business Risks
Substantial and increasingly intense competition worldwide in the global payments industry may materially and
adversely affect our overall business and results of operations.
The global payments industry is highly competitive. Our payment programs compete against all forms of payment,
including paper-based transactions (principally cash and checks); card-based or other electronic payment programs or
systems, including credit, charge, debit, prepaid, private-label and other types of general purpose and limited use
programs; contactless, mobile and web-based payment platforms; and other electronic transactions such as wire transfers
and Automated Clearing House payments. Within the global general purpose payments industry, we face substantial
and increasingly intense competition worldwide from systems such as Visa, American Express, Discover, UnionPay,
JCB and PayPal among others. In certain jurisdictions, including the United States, Visa has greater volume, scale and
market share than we do, which may provide significant competitive advantages. Moreover, some of our traditional
competitors, as well as alternative payment service providers, may have substantially greater financial and other
resources than we have, may offer a wider range of programs and services than we offer or may use more effective
advertising and marketing strategies to achieve broader brand recognition or merchant acceptance than we have. Our
ability to compete may also be affected by the outcomes of litigation, competition-related regulatory proceedings,
central bank activity and legislative activity.
Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative
payments systems, operate end-to-end payments systems with direct connections to both merchants and consumers.
These competitors seek to derive competitive advantages from their business models. For example, operators of end-
to-end payments systems tend to have greater control over consumer and merchant customer service than operators of
four-party payments systems such as ours, in which we must typically rely on our issuing and acquiring financial
institution customers. In addition, even when they operate programs that utilize a four-party system, these competitors
have generally not attracted the same level of regulatory or legislative scrutiny of their pricing and business practices
as have operators of four-party payments systems such as ours. If we continue to attract more regulatory scrutiny than
these competitors because we operate a four-party system, or we are regulated because of the system we operate in a
way in which our competitors are not, we could lose business to these competitors. See “Business-Competition” in
Part I, Item 1.
If we are not able to differentiate ourselves from our competitors, drive value for our customers and/or effectively align
our resources with our goals and objectives, we may not be able to compete effectively against these threats. Our
competitors may also more effectively introduce their own innovative programs and services that adversely impact our
growth. Our customers can also develop their own competitive services. We also compete against new entrants that
have developed alternative payments systems, e-commerce payments systems and payments systems for mobile devices,
as well as physical store locations. A number of these new entrants rely principally on the Internet to support their
services and may enjoy lower costs than we do, which could put us at a competitive disadvantage. Our failure to
compete effectively against any of the foregoing competitive threats could materially and adversely affect our overall
business and results of operations.
Potential future changes in the competitive landscape, including disintermediation from other participants in
the payments value chain, also could harm our business.
We expect that there may be future changes in the competitive landscape, including:
• Parties that process our transactions in certain countries may try to eliminate our position as an intermediary
in the payment process. For example, merchants could process transactions directly with issuers, or processors
could process transactions directly between issuers and acquirers. Large scale consolidation within processors
could result in these processors developing bilateral agreements or in some cases processing the entire
transaction on their own network, thereby disintermediating us.
• Rapid and significant technological changes could occur, resulting in new and innovative payment programs
that could place us at a competitive disadvantage and that could reduce the use of MasterCard products.