Mastercard is one of the largest global electronic payment solutions company in the world and provides its clients authorizing, clearing and settling of transactions, and other support services.
It operates as an open-loop payments network, where it does not act as an Issuer (financial institutions that issue credit/debit card to customers) or an Acquirer (financial institutions that acquire merchants to increase credit/debit card acceptability).
What Are The Alternatives?
Open-Loop Payment Processing Industry: Mastercard is the second-largest global payment solutions company in the world and recorded nearly $4 trillion of payments volume in 2018. Visa, the global leader in payment processing industry, is the direct competitor to Mastercard and processed nearly $8 trillion of payments volume in 2018.
Closed-Loop Payment Processing Industry: American Express and Discover are alternatives to Mastercard but, operate a closed-loop payment network (The company acts as an issuer and acquirer). In 2018, payments volume of American Express and Discover were around $1.2 trillion and $376 billion, respectively.
What Is The Basis of Competition?
Competition is based on network’s acceptance, availability, service quality, and cost.
Has 5 Revenue Components-
1. Domestic Assessments: These are fees charged to clients (Issuer & Acquirer) based on dollar volume of activity on Mastercard branded products for domestic transactions.
2. Transaction Processing Revenues: Transaction processing services involve routing of payment information and related data to facilitate authorization, clearing, and settlement of transactions on Mastercard network. We also recognize these services as a function of payments volume.
3. Cross Border Volume Fees: There are earned on cross-border transaction processing and currency conversion services based on dollar volume of activity on Mastercard branded products.
4. Other Revenues: These consist of income from additional services offered along-with payment services such as consulting, data analytics, rewards solutions, etc.
5. Rebates & Incentives: These are rebates offered to financial institutions for entering into a long-term contract with Mastercard to enhance the acceptance of Mastercard branded products.