MasterCard 2013 Annual Report Download - page 43

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39
The price structure for our products and services is complex and is dependent on the nature of volumes, types of
transactions and type of products and services we offer to our customers. Our revenue can be significantly impacted
by the following:
• Domestic or cross-border transactions;
• Signature-based or PIN-based transactions;
• Geographic region or country the transaction occurs in;
• Volumes/transactions subject to tiered rates;
• Processed or not processed by MasterCard and;
• Amount of usage of our other products or services.
The Company classifies its net revenue into the following five categories:
1. Domestic assessments: Domestic assessments are fees charged to issuers and acquirers based primarily
on the dollar volume of activity on cards and other devices that carry our brands where the merchant
country and the issuer country are the same. Domestic assessments include items such as card assessments,
which are fees charged on the number of cards issued or assessments for specific purposes, such as
acceptance development or market development programs.
2. 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 the
issuer country are different. In general, a cross-border transaction generates higher revenue than a domestic
transaction since cross-border fees are higher than domestic fees, and in most cases also include fees for
currency conversion.
3. Transaction processing fees: Transaction processing fees are charged for both domestic and cross-border
transactions and are primarily based on the number of transactions. Transaction processing fees include
charges to issuers for the following:
• Transaction Switching fees for the following services:
Authorization is the process by which a transaction is routed to the issuer for approval.
In certain circumstances such as when the issuer's systems are unavailable or cannot
be contacted, MasterCard or others on behalf of the issuer approve in accordance with
either the issuer's instructions or applicable rules (also known as "stand-in").
Clearing is the exchange of financial transaction information between issuers and
acquirers after a transaction has been successfully conducted at the point of interaction.
MasterCard clears transactions among customers through our central and regional
processing systems.
Settlement is facilitating the exchange of funds between parties.
• Connectivity fees are charged to issuers and acquirers for network access, equipment and the
transmission of authorization and settlement messages. These fees are based on the size of the
data being transmitted through and the number of connections to the Company’s network.
4. Other revenues: Other revenues consist of other payment-related products and services and are primarily
associated with the following:
• Consulting and research fees are primarily generated by MasterCard Advisors, the Company’s
professional advisory services group.
• Fraud products and services used to prevent or detect fraudulent transactions. This includes
fees for warning bulletins provided to issuers and acquirers either electronically or in paper form.