MasterCard 2013 Annual Report Download - page 9

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5
We generate revenue by charging fees to issuers and acquirers for providing transaction processing and other payment-
related products and services, as well as by assessing these customers based, primarily, on the dollar volume of activity,
or gross dollar volume (“GDV”), on the cards and other devices that carry our brands.
MasterCard operates in a dynamic and rapidly evolving legal and regulatory environment with heightened regulatory
and legislative scrutiny and other legal challenges, particularly with respect to interchange fees. See “Risk Factors-
Legal and Regulatory Risks” in Part I, Item 1A of this Report.
Payment Services and Solutions
We provide transaction processing and a wide range of payment-related products and services to enable the design,
packaging and implementation of our products and programs. Our payment solutions are built upon our expertise in
payment programs, product development, payment processing technology, loyalty and rewards solutions, payment
security, consulting and information services and marketing.
Our Operations and Transaction Processing Network
Introduction. We operate the MasterCard Network, our unique and proprietary global payments network that links
issuers and acquirers around the globe to facilitate the processing of transactions, permitting MasterCard cardholders
to use their cards and other payment devices at millions of merchants worldwide. Our network facilitates an efficient
and secure means for merchants to receive payments, and a convenient, quick and secure payment method for consumers
and businesses that is accepted worldwide. We process transactions through our network for our issuer customers in
more than 150 currencies in more than 210 countries and territories.
Typical Transaction. With a typical transaction involving four participants in addition to us, our network supports what
is often referred to as a “four-party” payments network. The following diagram depicts a typical point-of-interaction
transaction:
In a typical transaction, a cardholder (or an account holder who may not be using a physical card) purchases goods or
services from a merchant using a card or other payment device. After the transaction is authorized by the issuer, the
issuer pays the acquirer an amount equal to the value of the transaction, minus the interchange fee (described below),
and then posts the transaction to the cardholder's account. The acquirer pays the amount of the purchase, net of a
discount (referred to as the “merchant discount” rate, as further described below), to the merchant. The merchant
discount rate, among other things, takes into consideration the amount of the interchange fee.
Typical Point of Interaction Payment Transaction
Acquirer
(merchant’s
financial institution
)
Transaction
Data
Issuer
(cardholder’s
financial institution)
$
Bill
$
(less merchant discount)
Settlement Bank
Merchant Cardholder
$$
Present Card or Other Device
Goods and Services
Authorization and
Transaction Data
Authorization and
Transaction Data