UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-32877
Mastercard Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2000 Purchase Street
Purchase, NY
(Address of principal executive offices)
13-4172551
(IRS Employer
Identification Number)
10577
(Zip Code)
(914) 249-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange of which registered
Class A Common Stock, par value $0.0001 per share
1.1% Notes due 2022
2.1% Notes due 2027
2.5% Notes due 2030
MA
MA22
MA27
MA30
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B common stock, par value $0.0001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☒
Yes ☐
No ☐
No ☒
Yes ☒
No ☐
Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer ☒
Non-accelerated filer
☐ (do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
☒
No ☒
The aggregate market value of the registrant’s Class A common stock, par value $0.0001 per share, held by non-affiliates (using the New York Stock Exchange
closing price as of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $261.3 billion.
There is currently no established public trading market for the registrant’s Class B common stock, par value $0.0001 per share. As of February 9, 2021, there
were 985,146,914 shares outstanding of the registrant’s Class A common stock, par value $0.0001 per share and 8,215,424 shares outstanding of the registrant’s
Class B common stock, par value $0.0001 per share.
Portions of the registrant’s definitive proxy statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
MASTERCARD INCORPORATED FISCAL YEAR 2020 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
PART II
PART III
PART IV
6
20
33
33
33
33
34
38
40
41
55
56
105
105
105
107
107
107
107
107
109
109
Item 1.
Business
Item 1A. Risk factors
Item 1B. Unresolved staff comments
Item 2.
Properties
Item 3.
Legal proceedings
Item 4. Mine safety disclosures
-
Information about our executive officers
Item 5. Market for registrant’s common equity, related stockholder matters and issuer
purchases of equity securities
Item 6.
Selected financial data
Item 7. Management’s discussion and analysis of financial condition and results of operations
Item 7A. Quantitative and qualitative disclosures about market risk
Item 8.
Financial statements and supplementary data
Item 9.
Changes in and disagreements with accountants on accounting and financial disclosure
Item 9A. Controls and procedures
Item 9B. Other Information
Item 10. Directors, executive officers and corporate governance
Item 11.
Executive compensation
Item 12.
Security ownership of certain beneficial owners and management and related
stockholder matters
Item 13. Certain relationships and related transactions, and director independence
Item 14. Principal accountant fees and services
Item 15.
Exhibits and financial statement schedules
Item 16.
Form 10-K summary
MASTERCARD 2020 FORM 10-K 3
In this Report on Form 10-K (“Report”), references to the “Company,” “Mastercard,” “we,” “us” or “our” refer to the business
conducted by Mastercard Incorporated and its consolidated subsidiaries, including our operating subsidiary, Mastercard International
Incorporated, and to the Mastercard brand.
Forward-Looking Statements
This Report contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. All statements other than statements of historical facts may be forward-looking statements. When used in this Report,
the words “believe”, “expect”, “could”, “may”, “would”, “will”, “trend” and similar words are intended to identify forward-looking
statements. Examples of forward-looking statements include, but are not limited to, statements that relate to the Company’s future
prospects, developments and business strategies.
Many factors and uncertainties relating to our operations and business environment, all of which are difficult to predict and many of
which are outside of our control, influence whether any forward-looking statements can or will be achieved. Any one of those
factors could cause our actual results to differ materially from those expressed or implied in writing in any forward-looking
statements made by Mastercard or on its behalf, including, but not limited to, the following factors:
•
•
•
•
regulation directly related to the payments industry (including regulatory, legislative and litigation activity with respect to
interchange rates and surcharging)
the impact of preferential or protective government actions
regulation of privacy, data, security and the digital economy
regulation that directly or indirectly applies to us based on our participation in the global payments industry (including anti-
money laundering, counter financing of terrorism, economic sanctions and anti-corruption; account-based payment systems; and
issuer practice legislation and regulation)
•
the impact of changes in tax laws, as well as regulations and interpretations of such laws or challenges to our tax positions
• potential or incurred liability and limitations on business related to any litigation or litigation settlements
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the global coronavirus (COVID-19) pandemic and containment measures taken in response
the impact of competition in the global payments industry (including disintermediation and pricing pressure)
the challenges relating to rapid technological developments and changes
the challenges relating to operating a real-time account-based payment system and to working with new customers and end
users
the impact of information security incidents, account data breaches or service disruptions
issues related to our relationships with our customers (including loss of substantial business from significant customers,
competitor relationships with our customers and banking industry consolidation), merchants and governments
exposure to loss or illiquidity due to our role as guarantor and other contractual obligations
the impact of global economic, political, financial and societal events and conditions, including adverse currency fluctuations and
foreign exchange controls
reputational impact, including impact related to brand perception and lack of visibility of our brands in products and services
the inability to attract, hire and retain a highly qualified and diverse workforce, or maintain our corporate culture
issues related to acquisition integration, strategic investments and entry into new businesses
issues related to our Class A common stock and corporate governance structure
Please see “Risk Factors” in Part I, Item 1A for a complete discussion of these risk factors. We caution you that the important factors
referenced above may not contain all of the factors that are important to you. Our forward-looking statements speak only as of the
date of this Report or as of the date they are made, and we undertake no obligation to update our forward-looking statements.
4 MASTERCARD 2020 FORM 10-K
PART I
Item 1. Business
Item 1A. Risk factors
Item 1B. Unresolved staff comments
Item 2. Properties
Item 3. Legal proceedings
Item 4. Mine safety disclosures
Information about our executive officers
PART I
ITEM 1. BUSINESS
Item 1. Business
Overview
Mastercard is a technology company in the global payments industry that connects consumers, financial institutions, merchants,
governments, digital partners, businesses and other organizations worldwide, enabling them to use electronic forms of payment
instead of cash and checks. We make payments easier and more efficient by providing a wide range of payment solutions and
services using our family of well-known brands, including Mastercard®, Maestro® and Cirrus®. We operate a multi-rail network that
offers customers one partner to turn to for their domestic and cross-border payment needs. Through our unique and proprietary
global payments network, which we refer to as our core network, we switch (authorize, clear and settle) payment transactions and
deliver related products and services. We have additional payment capabilities that include automated clearing house (“ACH”)
transactions (both batch and real-time account-based payments). We also provide integrated value-added offerings such as cyber
and intelligence products, information and analytics services, consulting, loyalty and reward programs, processing and open banking.
Our payment solutions offer customers choice and flexibility and are designed to ensure safety and security for the global payments
system.
A typical transaction on our core network involves four participants in addition to us: account holder (a person or entity who holds a
card or uses another device enabled for payment), issuer (the account holder’s financial institution), merchant and acquirer (the
merchant’s financial institution). We do not issue cards, extend credit, determine or receive revenue from interest rates or other
fees charged to account holders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of
our products. In most cases, account holder relationships belong to, and are managed by, our customers.
We generate revenues from assessing our customers based on the gross dollar volume (“GDV”) of activity on the products that carry
our brands, from the fees we charge to our customers for providing transaction switching and from other payment-related products
and services.
For a full discussion of our business, please see page 8.
Our Performance
The following are our key financial and operational highlights for 2020, including growth rates over the prior year:
Net revenue
$15.3B
down 9%
Net revenue
$15.3B
down 8%
$6.1B
in capital returned
to stockholders
GAAP
Net income
$6.4B
down 21%
Diluted EPS
$6.37
down 20%
Non-GAAP 1 (currency-neutral)
Adjusted net income
Adjusted diluted EPS
$6.5B
down 17%
$4.5B
Repurchased shares
$1.6B Dividends paid
$6.43
down 16%
$7.2B
cash flows
from operations
Gross dollar volume
(growth on a local currency basis)
Cross-border volume growth
(on a local currency basis)
Switched transactions
$6.3T
flat
down 29%
90.1B
up 3%
1
Non-GAAP results exclude the impact of gains and losses on equity investments, Special Items and/or foreign currency. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Financial Results Overview” in Part II, Item 7 for the reconciliation to
the most direct comparable GAAP financial measures.
6 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1. BUSINESS
The coronavirus (“COVID-19”) outbreak and its negative impact on the global economy affected our 2020 performance, during which
we saw unfavorable trends compared to historical periods. For a full discussion of this impact, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operation” in Item II, Part 7.
Our Strategy
We grow, diversify and build our business through a combination of organic and inorganic strategic initiatives. Our ability to grow
our business is influenced by:
• personal consumption expenditure (“PCE”) growth
• driving cash and check transactions toward electronic forms of payment
•
increasing our share in the payments space
• providing integrated value-added products and services
• providing enhanced payment capabilities to capture new payment flows, such as business to business (“B2B”), person to person
(“P2P”), business to consumer (“B2C”) and government payments.
GROW
CORE
Credit
Debit
Commercial
Prepaid
Digital-Physical Convergence
Acceptance
DIVERSIFY
CUSTOMERS AND GEOGRAPHIES
Financial Inclusion
New Markets
Businesses
Governments
Merchants
Digital Players
Local Schemes/Switches
BUILD
NEW AREAS
Data Analytics
Consulting
Marketing Services
Loyalty
Cyber and Intelligence
Processing
New Payment Flows
Open Banking
ENABLED BY BRAND, DATA, TECHNOLOGY AND PEOPLE
Grow. We focus on growing our core business globally, including growing our consumer and commercial products and solutions, as
well as increasing the number of payment transactions we switch. We also look to provide effective and efficient payments
solutions that cater to the evolving ways people interact and transact in the growing digital economy. This includes expanding
merchant access to electronic payments through new technologies in an effort to deliver a better consumer experience, while
creating greater efficiencies and security.
Diversify. We diversify our business by:
• working with new customers, including governments, merchants, financial technology companies (fintechs), digital players,
mobile providers and other corporate businesses
•
scaling our capabilities and business into new geographies, including growing acceptance in markets with limited electronic
payments acceptance today
• broadening financial inclusion for the unbanked and underbanked
Build. We build our business by:
•
creating and acquiring differentiated products and platforms to provide unique, innovative solutions that we bring to market to
support new payment flows and related applications, such as real-time account-based payments and the Mastercard Track™
suite of products
• providing services across data analytics, consulting, marketing services, loyalty, cyber and intelligence, and processing
• providing open banking capabilities to enable the reliable access, transmission and management of consumer-consented data
Strategic Partners. We work with a variety of stakeholders. We provide financial institutions with solutions to help them increase
revenue by driving preference for our products and services. We help merchants, financial institutions, governments, and other
organizations by delivering data-driven insights and other services that help them grow and create simple and secure customer
MASTERCARD 2020 FORM 10-K 7
PART I
ITEM 1. BUSINESS
experiences. We partner with technology companies such as digital players, fintechs and mobile providers to deliver digital payment
solutions powered by our technology, expertise and security protocols. We help national and local governments improve financial
inclusion and efficiencies, reduce costs, increase transparency of financial transactions and data to reduce crime and corruption and
advance social programs. For consumers, we provide faster, safer and more convenient ways to pay and transfer funds and
exchange information to enable services.
Talent and Culture. Our success is driven by the skills, experience, integrity and mindset of the talent we hire. We attract and retain
top talent from diverse backgrounds and industries by building a world-class culture based on decency, respect and inclusion where
people have opportunities to perform purpose-driven work that impacts customers, communities and co-workers on a global scale.
The diversity and skill sets of our people underpin everything we do.
Our Business
Our Operations and Network
We operate a multi-rail network that offers our customers one partner to turn to for their domestic and cross-border needs. Our
core network links issuers and acquirers around the globe to facilitate the switching of transactions, permitting account holders to
use a Mastercard product at millions of acceptance locations worldwide. Our core network facilitates an efficient and secure means
for receiving payments, a convenient, quick and secure payment method for consumers to access their funds and a channel for
businesses to receive insight through information that is derived from our network. We enable transactions for our customers
through our core network in more than 150 currencies and in more than 210 countries and territories. Our range of capabilities
extend beyond our core network into real-time account-based payments and open banking.
Core Network Transactions. Our core network supports what is often referred to as a “four-party” payments network. The
following diagram depicts a typical transaction on our core network, and our role in that transaction:
In a typical transaction, an account holder purchases goods or services from a merchant using one of our payment products. 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 account holder’s account. The acquirer pays the amount of
the purchase, net of a discount (referred to as the “merchant discount” rate), to the merchant.
•
Interchange Fees. Interchange fees reflect the value merchants receive from accepting our products and play a key role in
balancing the costs and benefits that consumers and merchants derive. Generally, interchange fees are collected from acquirers
and paid to issuers to reimburse the issuers for a portion of the costs incurred. These costs are incurred by issuers in providing
services that benefit all participants in the system, including acquirers and merchants, whose participation in the network
enables increased sales to their existing and new customers, efficiencies in the delivery of existing and new products, guaranteed
payments and improved experience for the customers. We (or, alternatively, financial institutions) establish “default interchange
fees” that apply when there are no other established settlement terms in place between an issuer and an acquirer. We
administer the collection and remittance of interchange fees through the settlement process.
8 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1. BUSINESS
• Additional Four-Party System Fees. The merchant discount rate is established by the acquirer to cover its costs of both
participating in the four-party system and providing services to merchants. The rate takes into consideration the amount of the
interchange fee which the acquirer generally pays to the issuer. Additionally, acquirers may charge merchants processing and
related fees in addition to the merchant discount rate. Issuers may also charge account holders fees for the transaction,
including, for example, fees for extending revolving credit.
Switched Transactions
• Authorization, Clearing and Settlement. Through our core network, we enable the routing of a transaction to the issuer for its
approval, facilitate the exchange of financial transaction information between issuers and acquirers after a successfully
conducted transaction, and help to settle the transaction by facilitating the exchange of funds between parties via settlement
banks chosen by us and our customers.
• Cross-Border and Domestic. Our core network switches transactions throughout the world when the merchant country and
country of issuance are different (“cross-border transactions”), providing account holders with the ability to use, and merchants
to accept, our products and services across country borders. We also provide switched transaction services to customers where
the merchant country and the country of issuance are the same (“domestic transactions”). We switch over 55% of all
transactions for Mastercard and Maestro-branded cards, including nearly all cross-border transactions. We switch the majority
of Mastercard and Maestro-branded domestic transactions in the United States, United Kingdom, Canada, Brazil and a select
number of other countries.
Core Network Architecture. Our core network features a globally integrated structure that provides scale for our issuers, enabling
them to expand into regional and global markets. It is based largely on a distributed (peer-to-peer) architecture with an intelligent
edge that enables the network to adapt to the needs of each transaction. Our core network accomplishes this by performing
intelligent routing and applying multiple value-added services (such as fraud scoring, tokenization services, etc.) to appropriate
transactions in real time. Our core network’s architecture enables us to connect all parties regardless of where or how the
transaction is occurring. It has 24-hour a day availability and world-class response time.
Real-time Account-based Payment Infrastructure and Applications. Augmenting our core network, we offer real-time account-
based payment capabilities, enabling payments between bank accounts in real-time in countries in which it has been deployed.
Open Banking. We offer a platform that enables data providers and third parties to reliably access, securely transmit and
confidently manage customer-consented data to improve the customer experience.
Payments System Security. Our payment solutions and products are designed to ensure safety and security for the global payments
system. Our core network and additional platforms incorporate multiple layers of protection, providing greater resiliency and best-
in-class security protection. Our programs are assessed by third parties and incorporate benchmarking and other data from peer
companies and consultants. We engage in many efforts to mitigate information security challenges, including maintaining an
information security program, an enterprise resilience program and insurance coverage, as well as regularly testing our systems to
address potential vulnerabilities. Through the combined efforts of our Security Operations Centers, Fusion Centers and Mastercard
Intelligence Center, we work with experts across the organization (as well as through other sources such as public-private
partnerships), to monitor and respond quickly to a range of cyber and physical threats.
As part of our multi-layered approach to protect the global payments system, we also work with issuers, acquirers, merchants,
governments and payments industry associations to help develop and put in place standards (e.g., EMV) for safe and secure
transactions.
Digital Payments. Our network supports and enables our digital payment platforms, products and solutions, reflecting the growing
digital economy where consumers are increasingly seeking to use their payment accounts to pay when, where and how they want.
For a full discussion of the ways our innovation capabilities enable digital payments, see “Our Products and Services - Digital
Enablement” below.
Customer Risk. We guarantee the settlement of many of the transactions from issuers to acquirers to ensure the integrity of our
core network. We refer to the amount of this guarantee as our settlement exposure. We do not, however, guarantee payments to
merchants by their acquirers or the availability of unspent prepaid account holder account balances.
Our Franchise. We manage an ecosystem of stakeholders who participate in our network. Our franchise creates and sustains a
comprehensive series of value exchanges across our ecosystem. We ensure a balanced ecosystem where all participants benefit
from the availability, innovation and safety and security of our network. We achieve this through the following key activities:
• Participant Onboarding. We ensure the capability of new customers to use our network, and define the roles and
responsibilities for their operations once on the network
MASTERCARD 2020 FORM 10-K 9
PART I
ITEM 1. BUSINESS
•
Safety and Security. We establish the core principles, including ensuring consumer protections and integrity, so participants feel
confident to transact on the network.
• Operating Standards. We define the operational, technical and financial policies to which network participants are required to
adhere.
• Responsible Stewardship. We establish performance standards to support ecosystem growth and optimization and establish
proactive monitoring to ensure participant performance.
•
Issue Resolution. We operate a framework to enable the resolution of disputes for both customers and consumers.
Our Products and Services
We provide a wide variety of integrated products and services that support products that customers can offer to their account
holders and merchants. These offerings facilitate transactions across our multi-rail payment network among account holders,
merchants, financial institutions, businesses, governments and other organizations in markets globally.
Core Payment Products
Consumer Credit. We offer a number of products that enable issuers to provide consumers with credit that allow them to defer
payment. These programs are designed to meet the needs of our customers around the world and address standard, premium and
affluent consumer segments.
Consumer Debit. We support a range of payment products and solutions that allow our customers to provide consumers with
convenient access to funds in deposit and other accounts. Our debit and deposit access programs can be used to make purchases
and to obtain cash in bank branches, at ATMs and, in some cases, at the point of sale. Our branded debit programs consist of
Mastercard (including standard, premium and affluent offerings), Maestro (the only PIN-based solution that operates globally) and
Cirrus (our primary global cash access solution).
Prepaid. Prepaid accounts are a type of electronic payment that enables consumers to pay in advance whether or not they
previously had a bank account or a credit history. These accounts can be tailored to meet specific program, customer or consumer
needs, such as paying bills, sending person-to-person payments or withdrawing cash from an ATM. Our focus ranges from digital
accounts (such as fintech and gig economy platforms) to business programs such as employee payroll, health savings accounts and
solutions for small business owners). Our prepaid programs also offer opportunities in the private and public sectors to drive
financial inclusion of previously unbanked individuals through social security payments, unemployment benefits and salary cards.
10 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1. BUSINESS
We also provide prepaid program management services, primarily outside of the United States, that provide processing and end-to-
end services on behalf of issuers or distributor partners such as airlines, foreign exchange bureaus and travel agents.
Commercial Credit and Debit. We offer commercial credit and debit payment products and solutions that meet the payment needs
of large corporations, midsize companies, small businesses and government entities. Our solutions streamline procurement and
payment processes, manage information and expenses (such as travel and entertainment) and reduce administrative costs. Our card
offerings include travel, small business (debit and credit), purchasing and fleet cards. Our SmartData platform provides expense
management and reporting capabilities. Our Mastercard In Control™ platform generates virtual account numbers which provide
businesses with enhanced controls, more security and better data. Our Mastercard Track Business Payment Service™ (Track BPS) is
aimed at improving the way businesses pay and get paid by providing a single connection enabling access to multiple payment rails,
greater control and richer data to optimize B2B transactions for both buyers and suppliers.
The following chart provides GDV and number of cards featuring our brands in 2020 for select programs and solutions:
Year Ended December 31, 2020
As of December 31, 2020
GDV
Cards
(in billions)
Growth (Local)
% of Total GDV
(in millions)
Percentage
Increase from
December 31,
2019
Mastercard-branded Programs1,2
Consumer Credit
$
Consumer Debit and Prepaid
Commercial Credit and Debit
2,425
3,230
682
(7) %
8 %
(6) %
38 %
51 %
11 %
894
1,338
102
2 %
11 %
22 %
1
2
Excludes Maestro and Cirrus cards and volume generated by those cards.
Prepaid includes both consumer and commercial prepaid.
New Payment Products and Open Banking
In addition to the switching capabilities of our core network, we offer platforms with payment capabilities that support new
payment flows and related applications:
• We offer real-time account-based payments for ACH transactions. This platform enables payments between bank accounts in
real time and provides enhanced data and messaging capabilities.
• We offer applications including those that make it easier for consumers to view, manage and pay their bills either with cards or
real-time and batch ACH payments from their bank accounts, and that enable consumers, businesses, governments and
merchants to send and receive money beyond borders with greater speed and ease.
• We offer an open banking platform that allows data providers and third parties to reliably access, securely transmit and
confidently manage customer-consented data to improve the customer experience.
Value-Added Products and Services
Cyber and Intelligence. We offer integrated products and services to prevent, detect and respond to fraud and cyber-attacks and to
ensure the safety of transactions made using Mastercard products. We do this using a multi-layered safety and security strategy:
•
•
•
•
The “Prevent” layer protects infrastructure, devices and data from attacks. We have continued to grow global usage of EMV chip
and contactless security technology, helping to reduce fraud. Greater usage of this technology has increased the number of EMV
cards issued and the transaction volume on EMV cards.
The “Identify” layer allows us to help banks and merchants verify the authenticity of consumers during the payment process
using various biometric technologies, including fingerprint, face and iris scanning technology to verify online purchases on mobile
devices, as well as a card with biometric technology built in.
The “Detect” layer spots fraudulent behavior and cyber-attacks and takes action to stop these activities once detected. Our
offerings in this space include alerts when accounts are exposed to data breaches or security incidents, fraud scoring technology
that scans billions of dollars of money flows each day while increasing approvals and reducing false declines, and network-level
monitoring on a global scale to help identify the occurrence of widespread fraud attacks when the customer (or their processor)
may be unable to detect or defend against them.
The “Experience” layer improves the security experience for our stakeholders in areas from the speed of transactions, enhancing
approvals for online and card-on-file payments, to the ability to differentiate legitimate consumers from fraudulent ones. Our
offerings in this space include solutions for consumer alerts and controls and a suite of digital token services. We also offer an e-
MASTERCARD 2020 FORM 10-K 11
PART I
ITEM 1. BUSINESS
commerce fraud and dispute management network that enables merchants to stop delivery when a fraudulent or disputed
transaction is identified, and issuers to refund the cardholder to avoid the chargeback process. Moreover, we use our AI and
data analytics, along with our cyber risk assessment capabilities, to help financial institutions, merchants, corporations and
governments secure their digital assets
We have also worked with our customers to provide products to consumers globally with increased confidence through the benefit
of “zero liability”, where the consumer bears no responsibility for counterfeit or lost card losses in the event of fraud.
Loyalty and Rewards. We have built a scalable rewards platform that enables customers to provide consumers with a variety of
benefits and services, such as personalized offers and rewards, access to a global airline lounge network, concierge services,
insurance services, emergency card replacement, emergency cash advances and a 24-hour account holder service center. For
merchants, we provide campaigns with targeted offers and rewards, management services for publishing offers, and accelerated
points programs for co-brand and rewards program members. We also provide a loyalty platform that enables stronger
relationships with retailers, restaurants, airlines and consumer packaged goods companies by creating experiences that drive loyalty
and impactful consumer engagement.
Processing. We extend our processing capabilities in the payments value chain in various regions and across the globe with an
expanded suite of offerings, including:
•
Issuer solutions designed to provide customers with a complete processing solution to help them create differentiated products
and services and allow quick deployment of payments portfolios across banking channels.
• Payment gateways that offer a single interface to provide e-commerce merchants with the ability to process secure online and
in-app payments and offer value-added solutions, including outsourced electronic payments, fraud prevention and alternative
payment options.
• Mobile gateways that facilitate transaction routing and processing for mobile-initiated transactions.
Data Analytics and Consulting. We provide proprietary analysis, data-driven consulting and marketing services solutions to help
clients optimize, streamline and grow their businesses, as well as deliver value to consumers.
Our capabilities incorporate payments expertise and analytical and executional skills to create end-to-end solutions which are
increasingly delivered via platforms embedded in our customers’ day-to-day operations. By observing patterns of payments
behavior based on billions of transactions switched globally, we leverage anonymized and aggregated information and a consultative
approach to help our customers make better business decisions. Our executional skills such as marketing, digital implementation
and program management allow us to assist customers to implement actions based on these insights.
We utilize our expertise and tools to collaborate with, and increasingly drive, innovation at financial institutions, merchants and
governments. Through our global innovation and development arm, Mastercard Labs, we offer “Launchpad,” a five-day app
prototyping workshop, as well as other customized innovation programs such as in-lab usability testing and concept design. Through
our Test & Learn software as a service platform, we can help our customers conduct disciplined business experiments for in-market
tests to drive more profitable decision making.
Digital Enablement
Our innovation capabilities enable broader reach to scale digital payment services beyond cards to multiple channels, including
mobile devices, and our standards, services and governance model help us to serve as the connection that allows financial
institutions, fintechs and technology companies to interoperate and enable consumers to engage through digital channels:
• Delivering better digital experiences everywhere. We are using our technologies and security protocols to develop solutions to
make digital shopping and selling experiences, such as on smartphones and other connected devices, simpler, faster and safer for
both consumers and merchants. We also offer products that make it easier for merchants to accept payments and expand their
customer base, as well as products and practices to facilitate acceptance via mobile devices.
•
Securing more transactions. We are leveraging tokenization, biometrics and machine learning technologies in our push to secure
every transaction. These efforts include driving EMV-level security and benefits through all our payment channels.
• Digitizing personal and business payments. We provide solutions that enable our customers to offer consumers the ability to
send and receive money quickly and securely domestically and around the world. These solutions allow our customers to
address new payment flows from any funding source, such as cash, card, bank account or mobile money account, to any
destination globally, securely and often in real time.
•
Simplifying access to, and integration of, our digital assets. Our Mastercard Developer platform makes it easy for customers and
partners to leverage our many digital assets and services. By providing a single access point with tools and capabilities to find
what we believe are some of the best-in-class Application Program Interfaces (“APIs”) across a broad range of Mastercard
services, we enable easy integration of our services into new and existing solutions.
12 MASTERCARD 2020 FORM 10-K
•
Identifying and experimenting with future technologies, start-ups and trends. Through Mastercard Labs, we continue to bring
customers and partners access to thought leadership, innovation methodologies, new technologies and relevant early-stage
fintech players.
Brand
PART I
ITEM 1. BUSINESS
Our family of well-known brands includes Mastercard, Maestro and Cirrus. We manage and promote our brands and brand
identities (including our sonic brand identity) through advertising, promotions and sponsorships, as well as digital, mobile and social
media initiatives, in order to increase people’s preference for our brands and usage of our products. We sponsor a variety of
sporting, entertainment and charity-related marketing properties to align with consumer segments important to us and our
customers. Our advertising plays an important role in building brand visibility, preference and overall usage among account holders
globally. Our “Priceless®” advertising campaign, which has run in more than 50 languages and in more than 120 countries
worldwide, promotes Mastercard usage benefits and acceptance, markets Mastercard payment products and solutions and provides
Mastercard with a consistent, recognizable message that supports our brand around the globe.
Human Capital Management
As of December 31, 2020, we employed approximately 21,000 persons globally.
We are dedicated to supporting our workforce during the global COVID-19 pandemic:
• We had no COVID-19 related layoffs in 2020
• We introduced a COVID-19 global employee benefit providing up to 10 business days of additional paid leave for sick, childcare
or eldercare related needs
• We covered 100% of the costs associated with COVID-19 testing for all employees and provided access to free COVID-related
telemedicine consultations for our U.S. employees
• We provided employees with flexibility for how and where they get work done and put precautionary health and safety
measures in place at each office location
Management regularly reviews our people strategy and culture, as well as related risks, with our Human Resources and
Compensation Committee, and reviews this annually with our Board of Directors. Our strategy focuses on recruitment,
development, succession and retention, including:
• Attracting top talent with the strength of our talent brand, which includes our culture of being a “force for good”
• Developing our depth of talent through acquisitions and recruitment
•
Strong development and succession planning for key roles, including talent and leadership programs across various levels that:
◦
◦
◦
Embed our culture principles
Focus on diverse populations and
Aim to develop talent and people managers through personalized and group executive development programs
• Using learning to drive innovation and growth, including a focus on scaling digital fluency globally, product training certification,
creating an environment for employees to drive their own learning, and focusing on developing capability in key skill areas
• Retaining and growing an inclusive workforce, including:
◦
◦
◦
Ongoing development conversations and personalized development plans
A focus on talent movement, including career moves and rotations and
Competitive and differentiated pay and benefits, including pay equity on the basis of gender and (in the U.S.) race and
ethnicity, as well as a flexible work model
As an organization, we are focused on maintaining a world-class culture, built on a foundation of decency:
• We are mindful of the health of our culture, looking at retention of critical roles, our external brand reputation, internal levels of
engagement, and diverse representation
MASTERCARD 2020 FORM 10-K 13
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ITEM 1. BUSINESS
• We are committed to providing a safe and respectful workplace built on a culture of decency and a focus on the well-being of our
employees, as well as monitoring for potential disruptions to our culture and reputation - especially with respect to such events
as the COVID-19 pandemic
• We are focused on providing and supporting a culture of volunteering
• We have established a culture of high ethical business practices and compliance standards, grounded in honesty, decency, trust
and personal accountability. It is driven by “tone at the top,” reinforced with regular training, fostered in a speak-up
environment, and measured by a risk culture and climate survey
Diversity and inclusion underpin everything we do:
• We look at our recruitment, development, succession and retention practices (including global attrition rates) with a focus on
gender, race (in the U.S.) and generational mix of our employee population
• We have developed regional and functional action plans to identify priorities and actions that will help us make more progress
for diversity and inclusion, including balance and inclusion in gender and racial representation
• As part of our commitment to racial justice, we have committed to our “In Solidarity” initiative, which focuses on people, market
and society to harness our culture of decency and build on our efforts to advance inclusion and equality
We encourage you to review our Sustainability Report (located on our website) for more detailed information regarding our people
strategy.
Recent Developments
We are focused on helping individuals and businesses weather the challenges presented by the COVID-19 pandemic by ensuring our
network remains secure, resilient and reliable. We are applying our technology, philanthropy, and data and cybersecurity expertise
to help rebuild communities, ensure that economic growth is inclusive and help address new challenges facing governments, small
businesses and consumers.
Consumer
While technology has increasingly changed the way people get information, interact, shop and make purchases, consumers continue
to expect a seamless experience where their payment is simple and secure. Our teams are creating innovative solutions that meet
the needs of consumers and merchants in a digital environment by applying emerging technologies. During the global COVID-19
pandemic, we have seen continued trends toward a preference for contactless and the rapid adoption of e-commerce. These trends
are further accelerating the secular shift to digital forms of payment. In 2020, we:
•
•
•
•
expanded “click to pay”, the activation of the EMV Secure Remote Commerce industry standard that enables a faster, more
secure checkout experience across web and mobile sites, mobile apps and connected devices. This checkout experience is
designed to provide consumers the same convenience and security in a digital environment that they have when paying in a
store, make it easier for merchants to implement secure digital payments and provide issuers with improved fraud detection and
prevention capability.
continued our focus on contactless payments technology to help deliver a simple and intuitive way to pay, as well as health and
safety benefits when consumers are looking for low-touch options. These efforts include raising contactless purchase limits in
virtually all geographies.
announced a suite of frictionless solutions in various markets designed to deliver low-touch high engagement experiences for
retailers and the consumer. For example, our Shop Anywhere platform enables merchants to create simple, personalized
shopping experiences in store, offering consumers no wait, no checkout lines and a secure way to pay.
expanded our Digital First Card Program to each of our regions to provide our customers with foundational guidelines that will
enable them to offer their cardholders a fully digital payment experience with an optional physical card. This solution enables
our customers to meet cardholder expectations of immediacy, safety, and convenience, including during card application,
authentication and instant card access, making secure purchases (whether contactless in-store, in-app, or via the web), and
managing alerts, controls, and benefits.
14 MASTERCARD 2020 FORM 10-K
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ITEM 1. BUSINESS
Commercial and B2B
Building on our corporate T&E, fleet, purchasing card and small business capabilities, we have been increasingly focused on
developing solutions to address other ways that businesses move money. In 2020, we:
•
•
added account-to-account payment functionality to Mastercard Track BPS, our open-loop commercial service platform built to
simplify and automate payments between suppliers and buyers. With this launch, businesses in the United States can now have
a similar experience within this service for account-to-account payments as they do for card payments - exchanging data with
greater efficiency and facilitating payments across multiple payment rails including real-time and batch ACH payments.
launched Digital Doors, a dedicated program to help small businesses successfully adapt to the changing needs of their
customers by establishing and protecting an online presence, including accepting digital payments. We have also created a free
Small Business Digital Readiness Diagnostic to identify the first steps needed in this transition.
New Payment Products and Open Banking
In order to help grow our business and offer more electronic payment options to consumers, businesses and governments,
Mastercard has developed and enhanced solutions beyond the principal switching capabilities available on our core network. We
believe this will allow us to capture more payment flows, including B2B, P2P, B2C and government disbursements. In 2020, we:
•
continued to expand our support of real-time payments globally, including being selected to build and operate a new real-time
clearing and settlement platform in Canada and partnering with the Saudi Arabian Monetary Authority to enable instant account-
to-account payments in the country for the first time. These developments build on other recent achievements, including our
selection to enhance the InstaPay real-time retail payment system in the Philippines (including operating the infrastructure for
and providing anti-money laundering tools to the its national clearing switch). As of December 31, 2020, we either operated or
were implementing real-time payments infrastructure in 12 of the top 50 markets as measured by GDP.
• positioned ourselves to add to our real-time payments solutions, including our pending acquisition of the majority of the
Corporate Services business of Nets Denmark A/S. The pending acquisition primarily comprises the clearing and instant payment
services, and e-billing solutions of the business.
•
•
•
strengthened Mastercard’s open-banking platform with our acquisition of Finicity, a leading North American provider of real-
time access to financial data and insights. The acquisition enables a greater choice of financial services, reinforcing our long-
standing partnerships with and commitment to financial institutions and fintechs across the globe. This acquisition also enables
us to expand our capabilities across North America and globally, and in particular accelerate the adoption of Finicity’s services in
North America. Together with Finicity, we will be able to focus on serving the needs of the lending market, including through
helping to streamline loan application processes and improve credit decisioning, thereby helping to drive further financial
inclusion.
further extended Mastercard Cross-Border Services to customers, including financial institutions and fintechs, in every region
across the globe. These services enable a wide range of payment flows and use cases, including trade, remittances and
disbursements. These flows are enabled via a distribution network that continues to evolve across multiple channels, including
account, card, and wallets. In particular, these services have enabled inbound B2B payments into China.
extended our blockchain initiatives, providing additional transparency and efficiencies to the cross-border B2B payments space
and proof of provenance - innovative, secure solutions across the global supply chain.
Value-Added Products and Services
We provide products and services including cyber and intelligence, loyalty, processing, data analytics and consulting that meet
evolving requirements and the expectations of our stakeholders. We recently:
•
extended our investments in Artificial Intelligence (“AI”) by:
◦
launching Mastercard ThreatScan, an AI-powered solution that helps banks proactively identify potential vulnerabilities in
their authorization systems. The service works alongside an issuer’s existing fraud tools, imitating known criminal transaction
behavior to identify potential weaknesses and prompt action before fraud potentially occurs.
MASTERCARD 2020 FORM 10-K 15
PART I
ITEM 1. BUSINESS
•
•
•
•
•
◦
scaling Decision Intelligence™, our fraud scoring technology, to score billions of transactions in real time every day while
increasing approvals and reducing false declines.
scaled digital services in our Loyalty and Engagement capabilities to support customers in their response to the accelerated
demand of digital services from consumers during the pandemic. This scaling includes additional capabilities for real-time
promotions and cash back offers, digital acquisition, digital training and online offers to bring a full suite of digital loyalty and
marketing solutions to merchants and financial institutions.
enhanced the services we are able to offer to customers based on account-to-account flows, including data insights we are
providing U.K. and U.S. customers to help them with anti-money laundering compliance and identification and prevention of
other financial crimes.
launched Recovery Insights, a set of data, tech and research tools that can help airlines, restaurants, consumer packaged goods
companies, banks, governments and others navigate the rise in e-commerce, fine-tune operations, and prioritize investments.
Key Initiatives
In light of the digital inequality gaps being exacerbated by COVID-19, we have expanded our worldwide commitment to financial
inclusion, pledging to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025.
As part of this effort, we are focused on providing 25 million women entrepreneurs with solutions that can help them grow their
businesses.
Engaged with several hundred national and local governments around the world to support their efforts to respond to the
pandemic crisis, including facilitating electronic disbursements of vital benefits and providing access to data-driven insights in
order to assess the impact of COVID-19 on their communities and optimize their recovery plans.
• We have committed $250 million in financial, technology, product and insight assets over the next five years to support the
financial security and vitality of small businesses and their workers, including supporting the transition of low-income
entrepreneurs to digital banking and helping small businesses access federal relief.
• We began to implement our “In Solidarity” initiative, which focuses on people, market and society to harness our culture of
decency and build on our efforts to advance inclusion and equality.
• We launched the Priceless Planet Coalition, a platform to unite corporate sustainability efforts and make meaningful investments
to preserve the environment. Together with partners who share a commitment to doing well by doing good, the coalition is
pledging to plant 100 million trees over five years.
• We announced the expansion of Start Path, our startup engagement program, adding new seed businesses and more technology
partners. Through this program, we provide entrepreneurs access to expert engineers and specialists that can help them deploy
new services quickly and efficiently and help them grow their businesses and scale sustainably.
Revenue Sources
We generate revenue primarily from assessing our customers based on GDV on the products that carry our brands, from the fees we
charge to our customers for providing transaction processing and from other payment-related products and services. Our net
revenues are classified into five categories: domestic assessments, cross-border volume fees, transaction processing, other revenues
and rebates and incentives (contra-revenue).
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Revenue” in Part II, Item 7 and Note 3,
Revenue for more detail about our revenue, GDV, processed transactions and our other payment-related products and services.
Intellectual Property
We own a number of valuable trademarks that are essential to our business, including Mastercard, Maestro and Cirrus, through one
or more affiliates. We also own numerous other trademarks covering various brands, programs and services offered by us to
support our payment programs. Trademark and service mark registrations are generally valid indefinitely as long as they are used
and/or properly maintained. Through license agreements with our customers, we authorize the use of our trademarks on a royalty-
free basis in connection with our customers’ issuing and merchant acquiring businesses. In addition, we own a number of patents
and patent applications relating to payment solutions, transaction processing, smart cards, contactless, mobile, biometrics, AI,
security systems, blockchain and other technologies, which are important to our business operations. These patents expire at
varying times depending on the jurisdiction and filing date.
16 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1. BUSINESS
Competition
We face competition in all categories of payment, including:
•
•
•
cash and checks
card-based payments, including credit, charge, debit, ATM and prepaid products, as well as limited-use products such as private
label
contactless, mobile and e-commerce payments, as well as cryptocurrency
• other electronic payments, including ACH payments and wire transfers
We face a number of competitors both within and outside of the global payments industry:
• Cash, Check and Legacy ACH. Cash and checks continue to represent one of the most widely used forms of payment. However,
an even larger share of payments on a U.S. dollar volume basis are made via legacy, or “slow,” ACH platforms.
• General Purpose Payment Networks. We compete worldwide with payment networks such as Visa, American Express, JCB,
China UnionPay and Discover, among others. Some competitors have more market share than we do in certain jurisdictions.
Some also have different business models that may provide an advantage in pricing, regulatory compliance burdens or
otherwise. Globally, financial institutions may issue both Mastercard and Visa-branded payment products, and we compete with
Visa for business on the basis of individual portfolios or programs. In addition, a number of our customers issue American
Express and/or Discover-branded payment cards in a manner consistent with a four-party system. We continue to face intense
competitive pressure on the prices we charge our issuers and acquirers, and we seek to enter into business agreements with
them through which we offer incentives and other support to issue and promote our payment products.
• Debit and Local Networks. We compete with ATM and point-of-sale debit networks in various countries. In addition, in many
countries outside of the United States, local debit brands serve as the main domestic brands, while our brands are used mostly to
enable cross-border transactions (typically representing a small portion of overall transaction volume). Certain jurisdictions have
also created domestic card schemes focused mostly on debit. In addition, several governments are promoting, or considering
promoting, local networks for domestic switching. See “Risk Factors” in Part I, Item 1A for a more detailed discussion of the risks
related to payments system regulation and government actions that may prevent us from competing effectively.
• Real-time Account-based Payment Systems. We face competition in the real-time account-based payment space from other
companies that provide infrastructure, applications and services to support these payment solutions.
• Alternative Payments Systems and New Entrants. As the global payments industry becomes more complex, we face increasing
competition from alternative payment systems and emerging payment providers. Many of these providers, who in many
circumstances can also be our partners or customers, have developed payments systems focused on online activity in e-
commerce and mobile channels (in some cases, expanding to other channels), and may process payments using in-house account
transfers, real-time account-based payment networks or global or local networks. Examples include digital wallet providers (such
as Paytm, PayPal, Alipay and Amazon), POS financing/buy now pay later providers (such as Klarna), mobile operator services,
mobile phone-based money transfer and microfinancing services (such as mPesa), handset manufacturers and cryptocurrencies.
We also compete with merchants and governments.
• Value-Added Products and Service Providers. We face competition from companies that provide alternatives to our value-
added products and services, including information services and consulting firms that provide consulting services and insights to
financial institutions, merchants and governments and technology companies that provide cyber and fraud solutions, as well as
companies that compete against us as providers of loyalty and program management solutions. Regulatory initiatives could also
lead to increased competition in this space.
Mastercard is a trusted intermediary in a complex system. Our competitive advantages include our:
•
globally recognized brands
• highly adaptable global acceptance network built over more than 50 years which can reach a variety of parties enabling
payments
•
•
global payments network with world-class operating performance
expertise in real-time account-based payments and open banking
• development and adoption of innovative products and digital solutions
•
•
•
safety and security solutions embedded in our networks
analytics insights and consulting services that help issuers and merchants optimize their payments and related businesses
loyalty solutions that enhance the payments value proposition for issuers and merchants
MASTERCARD 2020 FORM 10-K 17
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ITEM 1. BUSINESS
•
ability to serve a broad array of participants in global payments due to our expanded on-soil presence in individual markets and a
heightened focus on working with governments
• world class talent and culture, with a focus on inclusion and being a “force for good”
Government Regulation
General. Government regulation impacts key aspects of our business. We are subject to regulations that affect the payments
industry in the many countries in which our integrated products and services are used. We are committed to comply with all
applicable laws and regulations and implement policies, procedures and programs designed to promote compliance. We coordinate
globally while acting locally and leverage our relationships to manage the effects of regulation on us. See “Risk Factors” in Part I,
Item 1A for more detail and examples of the regulation to which we are subject.
Payments Oversight and Regulation. Central banks and other regulators in several jurisdictions around the world either have, or are
seeking to establish, formal oversight over the payments industry, as well as authority to regulate certain aspects of the payment
systems in their countries. Such authority has resulted in regulation of various aspects of our business. In the European Union,
Mastercard is subject to systemic importance regulation, which includes various requirements we must meet, including obligations
related to governance and risk management. In the U.K., the Bank of England designated Vocalink, our real-time account-based
payment network platform, to be a “specified service provider”, which includes supervisions and examination requirements. In
addition, European Union legislation requires us to separate our scheme activities (brand, products, franchise and licensing) from our
switching activities and other processing in terms of how we go to market, make decisions and organize our structure.
Interchange Fees. Interchange fees that support the function and value of four-party payments systems like ours are being reviewed
or challenged in various jurisdictions around the world via legislation to regulate interchange fees, competition-related regulatory
proceedings, central bank regulation and litigation. Examples include statutes in the United States that cap debit interchange for
certain regulated activities, our settlement with the European Commission resolving its investigation into our interregional
interchange fees and the European Union legislation capping consumer credit and debit interchange fees on payments issued and
acquired within the European Economic Area (the “EEA”). For more detail, see “Risk Factors - Other Regulation” in Part I, Item 1A
and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8.
Preferential or Protective Government Actions. Some governments have taken action to provide resources, preferential treatment
or other protection to selected domestic payments and processing providers, as well as to create their own national providers. For
example, governments in some countries mandate switching of domestic payments either entirely in that country or by only
domestic companies. In China, we are currently excluded from domestic switching and are seeking market access, which is uncertain
and subject to a number of factors, including receiving regulatory approval. We are in active discussions to explore different
solutions.
Anti-Money Laundering, Counter Financing of Terrorism, Economic Sanctions and Anti-Corruption. We are subject to anti-money
laundering (“AML”) and counter-financing of terrorism (“CFT”) laws and regulations globally, including the U.S. Bank Secrecy Act and
the USA PATRIOT Act, as well as the various economic sanctions programs, including those imposed and administered by the U.S.
Office of Foreign Assets Control (“OFAC”). We have implemented a comprehensive AML/CFT program, comprised of policies,
procedures and internal controls, including the designation of a compliance officer, which is designed to prevent our payment
network from being used to facilitate money laundering and other illicit activity and to address these legal and regulatory
requirements and assist in managing money laundering and terrorist financing risks. The economic sanctions programs administered
by OFAC restrict financial transactions and other dealings with certain countries and geographies (specifically Crimea, Cuba, Iran,
North Korea and Syria) and with persons and entities included in OFAC sanctions lists including its list of Specially Designated
Nationals and Blocked Persons (the “SDN List”). We take measures to prevent transactions that do not comply with OFAC and other
applicable sanctions, including establishing a risk-based compliance program that has policies, procedures and controls designed to
prevent us from having unlawful business dealings with prohibited countries, regions, individuals or entities. As part of this program,
we obligate issuers and acquirers to comply with their local sanctions obligations and the U.S. sanctions programs, including
requiring the screening of account holders and merchants, respectively, against OFAC sanctions lists (including the SDN List). Iran
and Syria have been identified by the U.S. State Department as terrorist-sponsoring states, and we have no offices, subsidiaries or
affiliated entities located in these countries and do not license entities domiciled there. We are also subject to anti-corruption laws
and regulations globally, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, which, among other things,
generally prohibit giving or offering payments or anything of value for the purpose of improperly influencing a business decision or
to gain an unfair business advantage. We have implemented policies, procedures and internal controls to proactively manage
corruption risk.
Financial Sector Oversight. We are or may be subject to regulations related to our role in the financial industry and our relationship
with our financial institution customers. In addition, we are or may be subject to regulation by a number of agencies charged with
18 MASTERCARD 2020 FORM 10-K
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ITEM 1. BUSINESS
oversight of, among other things, consumer protection, financial and banking matters. The regulators have supervisory and
independent examination authority as well as enforcement authority that we may be subject to because of the services we provide
to financial institutions that issue and acquire our products.
Issuer Practice Legislation and Regulation. Our customers are subject to numerous regulations and investigations applicable to
banks, financial institutions and others in their capacity as issuers and otherwise, impacting us as a consequence. Additionally,
regulations such as the revised Payment Services Directive (commonly referred to as “PSD2”) in the EEA require financial institutions
to provide third-party payment-processors access to consumer payment accounts, enabling them to route transactions away from
Mastercard products and provide payment initiation and account information services directly to consumers who use our products.
PSD2 also requires a new standard for authentication of transactions, which necessitates additional verification information from
consumers to complete transactions. This may increase the number of transactions that consumers abandon if we are unable to
ensure a frictionless authentication experience under the new standards.
Regulation of Internet and Digital Transactions. Various jurisdictions have enacted or have proposed regulation related to internet
transactions. The legislation applies to payments system participants, including us and our U.S. customers, and is implemented
through a federal regulation. We may also be impacted by evolving laws surrounding gambling, including fantasy sports. Certain
jurisdictions are also considering regulatory initiatives in digital-related areas that could impact us, such as cyber-security and
copyright and trademark infringement.
Privacy, Data and Information Security. Aspects of our operations or business are subject to increasingly complex privacy and data
protection laws in the United States, the European Union and elsewhere around the world. For example, in the United States, we
and our customers are respectively subject to Federal Trade Commission and federal banking agency information safeguarding
requirements under the Gramm-Leach-Bliley Act that require the maintenance of a written, comprehensive information security
program. In the European Union, we are subject to the General Data Protection Regulation (the “GDPR”), which requires a
comprehensive privacy and data protection program to protect the personal and sensitive data of EEA residents. A number of
regulators and policymakers around the globe are using the GDPR as a reference to adopt new or updated privacy and data
protection laws, including in the U.S. (California), Argentina, Brazil, Canada, Chile, India, Indonesia and Kenya. Some jurisdictions,
such as India, are currently considering adopting or have adopted “data localization” requirements, which mandate the collection,
processing, and/or storage of data within their borders. We believe that various forms of data localization requirements are under
consideration in other countries and jurisdictions, including the European Union. Due to increasing data collection and data flows,
numerous data breaches and security incidents as well as the use of emerging technologies such as artificial intelligence, regulations
in this area are constantly evolving with regulatory and legislative authorities in numerous parts of the world adopting proposals to
regulate data and protect information. In addition, the interpretation and application of these privacy and data protection laws are
often uncertain and in a state of flux, thus requiring constant monitoring for compliance.
Additional Regulatory Developments. Various regulatory agencies also continue to examine a wide variety of issues that could
impact us, including evolving laws surrounding marijuana, prepaid payroll cards, virtual currencies, identity theft, account
management guidelines, disclosure rules, security and marketing that would impact our customers directly.
Additional Information
Mastercard Incorporated was incorporated as a Delaware corporation in May 2001. We conduct our business principally through
our principal operating subsidiary, Mastercard International Incorporated, a Delaware non-stock (or membership) corporation that
was formed in November 1966. For more information about our capital structure, including our Class A common stock (our voting
stock) and Class B common stock (our non-voting stock), see Note 16 (Stockholders' Equity) to the consolidated financial statements
included in Part II, Item 8.
Website and SEC Reports
Our internet address is www.mastercard.com. From time to time, we may use our corporate website as a channel of distribution of
material company information. Financial and other material information is routinely posted and accessible on the investor relations
section of our corporate website. You can also visit “Investor Alerts” in the investor relations section to enroll your email address to
automatically receive email alerts and other information about Mastercard.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are
available for review, without charge, on the investor relations section of our corporate website as soon as reasonably practicable
after they are filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). The information contained on
our corporate website is not incorporated by reference into this Report. Our filings are also available electronically from the SEC at
www.sec.gov.
MASTERCARD 2020 FORM 10-K 19
PART I
ITEM 1A. RISK FACTORS
Item 1A. Risk factors
RISK HIGHLIGHTS
Legal and Regulatory
Business and Operations
Payments Industry Regulation
COVID-19
Global Economic and Political
Environment
Preferential or Protective Government
Actions
Competition and Technology
Brand and Reputational Impact
Privacy, Data and Security
Information Security and Service
Disruptions
Talent and Culture
Other Regulation
Stakeholder Relationships
Acquisitions
Litigation
Settlement and Third-Party Obligations
Class A Common Stock and Governance Structure
Legal and Regulatory
Payments Industry Regulation
Global regulatory and legislative activity directly related to the payments industry may have a material adverse impact on our
overall business and results of operations.
Regulators increasingly seek to regulate certain aspects of payments systems such as ours, or establish or expand their authority to
do so. Many jurisdictions have enacted such regulations, establishing, and potentially further expanding, obligations or restrictions
with respect to the types of products and services that we may offer, the countries in which our integrated products and services
may be used, the way we structure and operate our business and the types of consumers and merchants who can obtain or accept
our products or services. New regulations and oversight could also relate to our clearing and settlement activities (including risk
management policies and procedures, collateral requirements, participant default policies and procedures, the ability to complete
timely switching of financial transactions, and capital and financial resource requirements). Several jurisdictions have also inquired
about the network fees we charge to our customers (typically as part of broader market reviews of retail payments). In addition,
several central banks or similar regulatory bodies around the world have increased, or are seeking to increase, their formal oversight
of the electronic payments industry. In some cases, we have been designated as a “systemically important payment system”, and
other regulators may consider designating us as systemically important or in a similar category resulting in heightened regulatory
oversight. These obligations, designations and restrictions may further expand and could conflict with each other as more
jurisdictions impose oversight of payment systems. Moreover, as regulators around the world increasingly look to replicate similar
regulation of payments and other industries, efforts in any one jurisdiction may influence approaches in other jurisdictions.
Similarly, new initiatives within a jurisdiction involving one product may lead to regulation of similar or related products (for
example, debit regulations could lead to regulation of credit products). As a result, the risks to our business created by any one new
law or regulation are magnified by the potential it has to be replicated in other jurisdictions or involve other products within any
particular jurisdiction.
Increased regulation and oversight of payment systems may result in costly compliance burdens or otherwise increase our costs. As
a result, issuers and acquirers could be less willing to participate in our payments system, reduce the benefits offered in connection
with the use of our products (making our products less desirable to consumers), reduce the volume of domestic and cross-border
transactions or other operational metrics, disintermediate us, impact our profitability and limit our ability to innovate or offer
differentiated products and services, all of which could materially and adversely impact our financial performance. In addition, any
regulation that is enacted related to the type and level of network fees we charge our customers could also materially and adversely
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impact our results of operations. Regulators could also require us to obtain prior approval for changes to our system rules,
procedures or operations, or could require customization with regard to such changes, which could negatively impact us. Such
changes could lead to new or different criteria for participation in and access to our payments system by financial institutions or
other customers. Moreover, failure to comply with the laws and regulations to which we are subject could result in fines, sanctions,
civil damages or other penalties, which could materially and adversely affect our overall business and results of operations, as well as
have an impact on our brand and reputation.
Increased regulatory, legislative and litigation activity with respect to interchange rates could have an adverse impact on our
business.
Interchange rates are a significant component of the costs that merchants pay in connection with the acceptance of our products.
Although we do not earn revenues from interchange, interchange rates can impact the volume of transactions we see on our
payment products. If interchange rates are too high, merchants may stop accepting our products or route transactions away from
our network. If interchange rates are too low, issuers may stop promoting our integrated products and services, eliminate or reduce
loyalty rewards programs or other account holder benefits (e.g., free checking or low interest rates on balances), or charge fees to
account holders (e.g., annual fees or late payment fees).
Governments and merchant groups in a number of countries have implemented or are seeking interchange rate reductions through
legislation, competition law, central bank regulation and litigation. See “Business - Government Regulation” in Part I, Item 1 and
Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for more details.
If issuers cannot collect or we are forced to reduce interchange rates, issuers may be less willing to participate in our four-party
payments system, or may reduce the benefits offered in connection with the use of our products, reducing the attractiveness of our
products to consumers. In particular, changes to interregional interchange fees as a result of the resolution of the European
Commission’s investigation could impact our cross-border transaction activity disproportionately versus competitors that are not
subject to similar reductions. These and other impacts could lower transaction volumes, and/or make proprietary three-party
networks or other forms of payment more attractive. Issuers could reduce the benefits associated with our products or choose to
charge higher fees to consumers to attempt to recoup a portion of the costs incurred for their services. In addition, issuers could
seek a fee reduction from us to decrease the expense of their payment programs, particularly if regulation has a disproportionate
impact on us as compared to our competitors in terms of the fees we can charge. This could make our products less desirable to
consumers, reduce the volume of transactions and our profitability, and limit our ability to innovate or offer differentiated products.
We are devoting substantial resources to defending our right to establish interchange rates in regulatory proceedings, litigation and
legislative activity. The potential outcome of any of these activities could have a more positive or negative impact on us relative to
our competitors. If we are ultimately unsuccessful in defending our ability to establish interchange rates, any resulting legislation,
regulation and/or litigation may have a material adverse impact on our overall business and results of operations. In addition,
regulatory proceedings and litigation could result (and in some cases has resulted) in us being fined and/or having to pay civil
damages, the amount of which could be material.
Limitations on our ability to restrict merchant surcharging could materially and adversely impact our results of operations.
We have historically implemented policies, referred to as no-surcharge rules, in certain jurisdictions, including the United States, that
prohibit merchants from charging higher prices to consumers who pay using our products instead of other means. Authorities in
several jurisdictions have acted to end or limit the application of these no-surcharge rules (or indicated interest in doing so).
Additionally, we have modified our no-surcharge rules to permit U.S. merchants to surcharge credit cards, subject to certain
limitations. It is possible that over time merchants in some or all merchant categories in these jurisdictions may choose to surcharge
as permitted by the rule change. This could result in consumers viewing our products less favorably and/or using alternative means
of payment instead of electronic products, which could result in a decrease in our overall transaction volumes, and which in turn
could materially and adversely impact our results of operations.
Preferential or Protective Government Actions
Preferential and protective government actions related to domestic payment services could adversely affect our ability to
maintain or increase our revenues.
Governments in some countries have acted, or in the future may act, to provide resources, preferential treatment or other
protection to selected national payment and switching providers, or have created, or may in the future create, their own national
provider. This action may displace us from, prevent us from entering into, or substantially restrict us from participating in, particular
geographies, and may prevent us from competing effectively against those providers. For example:
• Governments in some countries have implemented, or may implement, regulatory requirements that mandate switching of
domestic payments either entirely in that country or by only domestic companies.
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•
Some jurisdictions are considering requirements to collect, process and/or store data within their borders, as well as prohibitions
on the transfer of data abroad, leading to technological and operational implications.
• Geopolitical events and resulting OFAC sanctions, adverse trade policies or other types of government actions could lead
jurisdictions affected by those sanctions to take actions in response that could adversely affect our business.
• Regional groups of countries are considering, or may consider, efforts to restrict our participation in the switching of regional
transactions.
Such developments prevent us from utilizing our global switching capabilities for domestic or regional customers. Our inability to
effect change in, or work with, these jurisdictions could adversely affect our ability to maintain or increase our revenues and extend
our global brand.
Additionally, some jurisdictions have implemented, or may implement, foreign ownership restrictions, which could potentially have
the effect of forcing or inducing the transfer of our technology and proprietary information as a condition of access to their markets.
Such restrictions could adversely impact our ability to compete in these markets.
Privacy, Data and Security
Regulation of privacy, data, security and the digital economy could increase our costs, as well as negatively impact our growth.
We are subject to increasingly complex regulations related to privacy, data and information security in the jurisdictions in which we
do business. These regulations could result in negative impacts to our business. As we continue to develop integrated and
personalized products and services to meet the needs of a changing marketplace, as well as acquire new companies, we have
expanded our information profile through the collection of additional data from additional sources and across multiple channels.
This expansion has amplified the impact of these regulations on our business. Regulation of privacy and data and information
security often times require monitoring of and changes to our data practices in regard to the collection, use, disclosure, storage,
transfer and/or security of personal and sensitive information, as well as increased care in our data management, governance and
quality practices. While we make every effort to comply with all regulatory requirements and we deploy a privacy-by-design and
data-by-design approach to all of our product development, the speed and pace of change may not allow us to meet rapidly evolving
expectations. We are also subject to enhanced compliance and operational requirements in the European Union, and policymakers
around the globe are using these requirements as a reference to adopt new or updated privacy laws that could result in similar or
stricter requirements in other jurisdictions. Some jurisdictions are also considering requirements to collect, process and/or store
data within their borders, as well as prohibitions on the transfer of data abroad, leading to technological and operational
implications. Other jurisdictions are considering adopting sector-specific regulations for the payments industry, including forced
data sharing requirements or additional verification requirements that overlap or conflict with, or diverge from, general privacy
rules. Failure to comply with these laws, regulations and requirements could result in fines, sanctions or other penalties, which
could materially and adversely affect our results of operations and overall business, as well as have an impact on our reputation.
New requirements or interpretations of existing requirements in these areas, or the development of new regulatory schemes related
to the digital economy in general, may also increase our costs and/or restrict our ability to leverage data for innovation. This could
impact the products and services we offer and other aspects of our business, such as fraud monitoring, the need for improved data
management, governance and quality practices, the development of information-based products and solutions, and technology
operations. In addition, these requirements may increase the costs to our customers of issuing payment products, which may, in
turn, decrease the number of our payment products that they issue. Moreover, due to account data compromise events and privacy
abuses by other companies, as well as the disclosure of monitoring activities by certain governmental agencies in combination with
the use of artificial intelligence and new technologies, there has been heightened legislative and regulatory scrutiny around the
world that could lead to further regulation and requirements and/or future enforcement. Those developments have also raised
public attention on companies’ data practices and have changed consumer and societal expectations for enhanced privacy and data
protection. Any of these developments could materially and adversely affect our overall business and results of operations.
In addition, fraudulent activity and increasing cyberattacks have encouraged legislative and regulatory intervention, which could
damage our reputation and reduce the use and acceptance of our integrated products and services or increase our compliance costs.
Criminals are using increasingly sophisticated methods to capture consumer personal information to engage in illegal activities such
as counterfeiting or other fraud. As outsourcing and specialization become common in the payments industry, there are more third
parties involved in processing transactions using our payment products. While we are taking measures to make card and digital
payments more secure, increased fraud levels involving our integrated products and services, or misconduct or negligence by third
parties switching or otherwise servicing our integrated products and services, could lead to legislative or regulatory intervention,
such as enhanced security requirements and liabilities, as well as damage to our reputation.
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Other Regulation
Regulations that directly or indirectly apply to Mastercard as a result of our participation in the global payments industry may
materially and adversely affect our overall business and results of operations.
We are subject to regulations that affect the payments industry in the many jurisdictions in which our integrated products and
services are used. Many of our customers are also subject to regulations applicable to banks and other financial institutions that, at
times, consequently affect us. Regulation of the payments industry, including regulations applicable to us and our customers, has
increased significantly in the last several years. See “Business - Government Regulation” in Part I, Item 1 for a detailed description of
such regulation and related legislation. Examples include:
• Anti-Money Laundering, Counter Financing of Terrorism, Economic Sanctions and Anti-Corruption - We are subject to AML and
CFT laws and regulations globally. Economic sanctions programs administered by OFAC restrict financial transactions and other
dealings with certain countries and geographies, and persons and entities. We are also subject to anti-corruption laws and
regulations globally, which, among other things, generally prohibit giving or offering payments or anything of value for the
purpose of improperly influencing a business decision or to gain an unfair business advantage.
• Account-based Payment Systems - In the U.K., aspects of our Vocalink business are subject to the U.K. payment system oversight
regime and are directly overseen by the Bank of England.
•
Issuer Practice Legislation and Regulation - Certain regulations (such as PSD2 in the EEA) may impact various aspects of our
business. For example, PSD2’s strong authentication requirement could increase the number of transactions that consumers
abandon if we are unable to secure a frictionless authentication experience under the new standards. An increase in the rate of
abandoned transactions could adversely impact our volumes or other operational metrics.
Increased regulatory focus on us, such as in connection with the matters discussed above, may result in costly compliance burdens
and/or may otherwise increase our costs. Similarly, increased regulatory focus on our customers may cause such customers to
reduce the volume of transactions processed through our systems, or may otherwise impact the competitiveness of our products.
Actions by regulators could influence other organizations around the world to enact or consider adopting similar measures,
amplifying any potential compliance burden. Finally, failure to comply with the laws and regulations discussed above to which we
are subject could result in fines, sanctions or other penalties. In particular, a violation and subsequent judgment or settlement
against us, or those with whom we may be associated, under economic sanctions and AML, CFT, and anti-corruption laws could
subject us to substantial monetary penalties, damages, and/or have a significant reputational impact. Each instance may individually
or collectively materially and adversely affect our financial performance and/or our overall business and results of operations, as
well as have an impact on our reputation.
We could be subject to adverse changes in tax laws, regulations and interpretations or challenges to our tax positions.
We are subject to tax laws and regulations of the U.S. federal, state and local governments as well as various non-U.S. jurisdictions.
Potential changes in existing tax laws, including future regulatory guidance, may impact our effective income tax rate and tax
payments. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in
which we operate, will not materially and adversely affect our effective income tax rate, tax payments, financial condition and
results of operations. Similarly, changes in tax laws and regulations that impact our customers and counterparties or the economy
generally may also impact our financial condition and results of operations.
In addition, tax laws and regulations are complex and subject to varying interpretations, and any significant failure to comply with
applicable tax laws and regulations in all relevant jurisdictions could give rise to substantial penalties and liabilities. Any changes in
enacted tax laws, rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any
jurisdiction; or any change in the pronouncements relating to accounting for income taxes could materially and adversely impact our
effective income tax rate, tax payments, financial condition and results of operations.
Litigation
Liabilities we may incur or limitations on our business related to any litigation or litigation settlements could materially and
adversely affect our results of operations.
We are a defendant on a number of civil litigations and regulatory proceedings and investigations, including among others, those
alleging violations of competition and antitrust law and those involving intellectual property claims. See Note 21 (Legal and
Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for more details regarding the allegations
contained in these complaints and the status of these proceedings. In the event we are found liable in any material litigations or
proceedings, particularly in the event we may be found liable in a large class-action lawsuit or on the basis of an antitrust claim
entitling the plaintiff to treble damages or under which we were jointly and severally liable, we could be subject to significant
damages, which could have a material adverse impact on our overall business and results of operations.
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Certain limitations have been placed on our business in recent years because of litigation and litigation settlements, such as changes
to our no-surcharge rule in the United States. Any future limitations on our business resulting from litigation or litigation
settlements could impact our relationships with our customers, including reducing the volume of business that we do with them,
which may materially and adversely affect our overall business and results of operations.
Business and Operations
COVID-19
The global COVID-19 pandemic and containment measures taken in response to it have adversely impacted our business, results
of operations and financial condition, and may continue to do so depending on future developments, which are uncertain.
Global health concerns relating to the COVID-19 outbreak have impacted the macroeconomic environment, and the outbreak has
significantly increased economic uncertainty. The outbreak resulted in governments in countries across the globe implementing
measures to try to contain the virus, such as travel restrictions, social distancing, and restrictions on business operations which have
impacted consumers and businesses. These measures have adversely impacted and may further impact our workforce and
operations and the operations of our customers, suppliers and business partners. While some of these measures have eased in
certain jurisdictions, others have remained in place. The extent to which current measures are removed or new measures are put in
place will depend how the pandemic evolves, as well as the progress of the global roll-out of vaccines.
The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, and
working in a remote environment), and we may take further actions as required by government authorities or that are in the best
interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate
the risks posed by the virus or otherwise be satisfactory to government authorities.
The COVID-19 pandemic has adversely impacted our business, results of operations and financial condition. There are no
comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a global pandemic, and, as a
result, the ultimate impact of COVID-19 or a similar health epidemic is highly uncertain and subject to change. The extent to which
COVID-19 further impacts our business, results of operations and financial condition will depend on future developments, which are
uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat
its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19
pandemic has subsided, we may continue to experience materially adverse impacts to our business and our result of operations as a
result of its global economic impact, including any recession that has occurred or may occur in the future.
Competition and Technology
Substantial and 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 cash
and checks; electronic, mobile and e-commerce payment platforms; cryptocurrencies; ACH payment services; and other payments
networks, which can have several competitive impacts on our business:
•
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 operate three-party payments systems with direct connections to both merchants and consumers and
these competitors may derive competitive advantages from their business models. 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
introduce their own innovative programs and services that adversely impact our growth. Beyond our traditional competitors, 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
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failure to compete effectively against any of the foregoing competitive threats could materially and adversely affect our overall
business and results of operations.
Disintermediation from stakeholders both within and outside of the payments value chain could harm our business.
As the payments industry continues to develop and change, we face disintermediation and related risks, 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 switch (and in some cases are switching) transactions directly with issuers. Additionally,
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 switching the entire transaction on their own
network, thereby disintermediating us.
• Regulation (such as PSD2 in the EEA) may disintermediate issuers by enabling third-party providers opportunities to route
payment transactions away from our network and products and towards other forms of payment by offering account
information or payment initiation services directly to those who currently use our products. This may also allow these
processors to commoditize the data that are included in the transactions. If our customers are disintermediated in their
business, we could face diminished demand for our integrated products and services.
• Although we partner with fintechs and technology companies (such as digital players and mobile providers) that leverage our
technology, platforms and networks to deliver their products, they could develop platforms or networks that disintermediate us
from digital payments and impact our ability to compete in the digital economy. This risk is heightened when we have
relationships with these entities where we share Mastercard data. While we share this data in a controlled manner subject to
applicable anonymization and privacy and data standards, without proper oversight we could give the partner a competitive
advantage.
• Competitors, customers, fintechs, technology companies, governments and other industry participants may develop products
that compete with or replace value-added products and services we currently provide to support our switched transaction and
payment offerings. These products could replace our own switching and payments offerings or could force us to change our
pricing or practices for these offerings. In addition, governments that develop or encourage the creation of national payment
platforms may promote their platforms in such a way that could put us at a competitive disadvantage in those markets, or
require us to compete differently.
• Participants in the payments industry may merge, create joint ventures or form other business combinations that may
strengthen their existing business services or create new payment products and services that compete with our products and
services.
Our failure to compete effectively against any of the foregoing competitive threats could materially and adversely affect our overall
business and results of operations.
Continued intense pricing pressure may materially and adversely affect our overall business and results of operations.
In order to increase transaction volumes, enter new markets and expand our Mastercard-branded cards and enabled products and
services, we seek to enter into business agreements with customers through which we offer incentives, pricing discounts and other
support that promote our products. In order to stay competitive, we may have to increase the amount of these incentives and
pricing discounts. We continue to experience pricing pressure. The demand from our customers for better pricing arrangements
and greater rebates and incentives moderates our growth. We may not be able to continue our expansion strategy to switch
additional transaction volumes or to provide additional services to our customers at levels sufficient to compensate for such lower
fees or increased costs in the future, which could materially and adversely affect our overall business and results of operations. In
addition, increased pressure on prices increases the importance of cost containment and productivity initiatives in areas other than
those relating to customer incentives.
In the future, we may not be able to enter into agreements with our customers if they require terms that we are unable or unwilling
to offer, and we may be required to modify existing agreements in order to maintain relationships and to compete with others in the
industry. Some of our competitors are larger and have greater financial resources than we do and accordingly may be able to charge
lower prices to our customers. In addition, to the extent that we offer discounts or incentives under such agreements, we will need
to further increase transaction volumes or the amount of services provided thereunder in order to benefit incrementally from such
agreements and to increase revenue and profit, and we may not be successful in doing so, particularly in the current regulatory
environment. Our customers also may implement cost reduction initiatives that reduce or eliminate payment product marketing or
increase requests for greater incentives or greater cost stability. These factors could have a material adverse impact on our overall
business and results of operations.
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Rapid and significant technological developments and changes could negatively impact our overall business and results of
operations or limit our future growth.
The payments industry is subject to rapid and significant technological changes, which can impact our business in several ways:
•
Technological changes, including continuing developments of technologies in the areas of smart cards and devices, contactless
and mobile payments, e-commerce, cryptocurrency and block chain technology, machine learning and AI, could result in new
technologies that may be superior to, or render obsolete, the technologies we currently use in our programs and services.
Moreover, these changes could result in new and innovative payment methods and products that could place us at a competitive
disadvantage and that could reduce the use of our products.
• We rely in part on third parties, including some of our competitors and potential competitors, for the development of and access
to new technologies. The inability of these companies to keep pace with technological developments, or the acquisition of these
companies by competitors, could negatively impact our offerings.
• Our ability to develop and adopt new services and technologies may be inhibited by industry-wide solutions and standards (such
as those related to EMV, tokenization or other safety and security technologies), and by resistance from customers or merchants
to such changes.
• Our ability to develop evolving systems and products may be inhibited by any difficulty we may experience in attracting and
retaining technology experts.
• Our ability to adopt these technologies can also be inhibited by intellectual property rights of third parties. We have received,
and we may in the future receive, notices or inquiries from patent holders (for example, other operating companies or non-
practicing entities) suggesting that we may be infringing certain patents or that we need to license the use of their patents to
avoid infringement. Such notices may, among other things, threaten litigation against us or our customers or demand significant
license fees.
• Our ability to develop new technologies and reflect technological changes in our payments offerings will require resources, which
may result in additional expenses.
• We work with fintechs and technology companies (such as digital players and mobile providers) that use our technology to
enhance payment safety and security and to deliver their payment-related products and services quickly and efficiently to
consumers. Our inability to keep pace technologically could negatively impact the willingness of these customers to work with
us, and could encourage them to use their own technology and compete against us.
• Regulatory or government requirements could require us to host and deliver certain products and services on-soil in certain
markets, which would require us to alter our technology and delivery model, potentially resulting in additional expenses.
• Various central banks are experimenting with digital currencies called Central Bank Digital Currencies (CBDC). CBDCs may be
launched with their own networks to transfer money between participants. Policy and design considerations that governments
adopt could impact the extent of our role in facilitating CBDC-based payment transactions, potentially impacting the transactions
that we may process over our network.
We cannot predict the effect of technological changes on our business, and our future success will depend, in part, on our ability to
anticipate, develop or adapt to technological changes and evolving industry standards. Failure to keep pace with these technological
developments or otherwise bring to market products that reflect these technologies could lead to a decline in the use of our
products, which could have a material adverse impact on our overall business and results of operations.
Operating a real-time account-based payment network presents risks that could materially affect our business.
U.K. regulators have designated Vocalink, our real-time account-based payment network platform, to be a “specified service
provider” and regulators in other countries may in the future expand their regulatory oversight of real-time account-based payment
systems in similar ways. In addition, any prolonged service outage on this network could result in quickly escalating impacts,
including potential intervention by the Bank of England and significant reputational risk to Vocalink and us. For a discussion of the
regulatory risks related to our real-time account-based payment platform, see our risk factor in “Risk Factors - Payments Industry
Regulation” in this Part I, Item 1A. Furthermore, the complexity of this payment technology requires careful management to address
security vulnerabilities that are different from those faced on our core network. Operational difficulties, such as the temporary
unavailability of our services or products, or security breaches on our real-time account-based payment network could cause a loss
of business for these products and services, result in potential liability for us and adversely affect our reputation.
Working with new customers and end users as we expand our integrated products and services can present operational and
onboarding challenges, be costly and result in reputational damage if the new products or services do not perform as intended.
The payments markets in which we compete are characterized by rapid technological change, new product introductions, evolving
industry standards and changing customer and consumer needs. In order to remain competitive and meet the needs of the
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payments markets, we are continually involved in diversifying our integrated products and services. These efforts carry the risks
associated with any diversification initiative, including cost overruns, delays in delivery and performance problems. These projects
also carry risks associated with working with different types of customers, for example organizations such as corporations that are
not financial institutions and non-governmental organizations (“NGOs”), and end users other than those we have traditionally
worked with. These differences may present new operational challenges in the development and implementation of our new
products or services. These new customers are typically less regulated, and as a result, enhanced infrastructure and monitoring is
required.
Our failure to deliver these integrated products and services could make our other integrated products and services less desirable to
customers, or put us at a competitive disadvantage. In addition, if there is a delay in the implementation of our products or services
or if our products or services do not perform as anticipated, or we are unable to adequately anticipate risks related to new types of
customers, we could face additional regulatory scrutiny, fines, sanctions or other penalties, which could materially and adversely
affect our overall business and results of operations, as well as negatively impact our brand and reputation.
Information Security and Service Disruptions
Information security incidents or account data compromise events could disrupt our business, damage our reputation, increase
our costs and cause losses.
Information security risks for payments and technology companies such as ours have significantly increased in recent years in part
because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial
transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. These
threats may derive from fraud or malice on the part of our employees or third parties, or may result from human error or accidental
technological failure. These threats include cyber-attacks such as computer viruses, malicious code, phishing attacks or information
security breaches and could lead to the misappropriation of consumer account and other information and identity theft. The advent
of the global COVID-19 pandemic has resulted in a significant rise in these types of threats due to a significant portion of our
workforce working from home in a mostly remote environment.
Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other information and
technology in our computer systems and networks, as well as the systems of our third-party providers. Our customers and other
parties in the payments value chain, as well as account holders, rely on our digital technologies, computer systems, software and
networks to conduct their operations. In addition, to access our integrated products and services, our customers and account
holders increasingly use personal smartphones, tablet PCs and other mobile devices that may be beyond our control. We, like other
financial technology organizations, routinely are subject to cyber-threats and our technologies, systems and networks, as well as the
systems of our third-party providers, have been subject to attempted cyber-attacks. Because of our position in the payments value
chain, we believe that we are likely to continue to be a target of such threats and attacks. Additionally, geopolitical events and
resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their
sympathizers.
To date, we have not experienced any material impact relating to cyber-attacks or other information security breaches. However,
future attacks or breaches could lead to security breaches of the networks, systems (including third-party provider systems) or
devices that our customers use to access our integrated products and services, which in turn could result in the unauthorized
disclosure, release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information (including
account data information) or data security compromises. Such attacks or breaches could also cause service interruptions,
malfunctions or other failures in the physical infrastructure or operations systems that support our businesses and customers (such
as the lack of availability of our value-added services), as well as the operations of our customers or other third parties. In addition,
they could lead to damage to our reputation with our customers and other parties and the market, additional costs to us (such as
repairing systems, adding new personnel or protection technologies or compliance costs), regulatory penalties, financial losses to
both us and our customers and partners and the loss of customers and business opportunities. If such attacks are not detected
immediately, their effect could be compounded.
Despite various mitigation efforts that we undertake, there can be no assurance that we will be immune to these risks and not suffer
material breaches and resulting losses in the future, or that our insurance coverage would be sufficient to cover all losses. Our risk
and exposure to these matters remain heightened because of, among other things, the evolving nature of these threats, our
prominent size and scale and our role in the global payments and technology industries, our plans to continue to implement our
digital and mobile channel strategies and develop additional remote connectivity solutions to serve our customers and account
holders when and how they want to be served, our global presence, our extensive use of third-party vendors and future joint
venture and merger and acquisition opportunities. As a result, information security and the continued development and
enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks
MASTERCARD 2020 FORM 10-K 27
PART I
ITEM 1A. RISK FACTORS
from attack, damage or unauthorized access remain a priority for us. As cyber-threats continue to evolve, we may be required to
expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate
any information security vulnerabilities. Any of the risks described above could materially adversely affect our overall business and
results of operations.
In addition to information security risks for our systems, we also routinely encounter account data compromise events involving
merchants and third-party payment processors that process, store or transmit payment transaction data, which affect millions of
Mastercard, Visa, Discover, American Express and other types of account holders. Further events of this type may subject us to
reputational damage and/or lawsuits involving payment products carrying our brands. Damage to our reputation or that of our
brands resulting from an account data breach of either our systems or the systems of our customers, merchants and other third
parties could decrease the use and acceptance of our integrated products and services. Such events could also slow or reverse the
trend toward electronic payments. In addition to reputational concerns, the cumulative impact of multiple account data
compromise events could increase the impact of the fraud resulting from such events by, among other things, making it more
difficult to identify consumers. Moreover, while most of the lawsuits resulting from account data breaches do not involve direct
claims against us and while we have releases from many issuers and acquirers, we could still face damage claims, which, if upheld,
could materially and adversely affect our results of operations. Such events could have a material adverse impact on our transaction
volumes, results of operations and prospects for future growth, or increase our costs by leading to additional regulatory burdens
being imposed on us.
Service disruptions that cause us to be unable to process transactions or service our customers could materially affect our overall
business and results of operations.
Our transaction switching systems and other offerings have experienced in limited instances and may continue to experience
interruptions as a result of technology malfunctions, fire, weather events, power outages, telecommunications disruptions,
terrorism, workplace violence, accidents or other catastrophic events. Our visibility in the global payments industry may also put us
at greater risk of attack by terrorists, activists, or hackers who intend to disrupt our facilities and/or systems. Additionally, we rely
on third-party service providers for the timely transmission of information across our global data network. Inadequate infrastructure
in lesser-developed markets could also result in service disruptions, which could impact our ability to do business in those markets.
If one of our service providers fails to provide the communications capacity or services we require, as a result of natural disaster,
operational disruptions, terrorism, hacking or any other reason, the failure could interrupt our services. Although we maintain a
enterprise resiliency program to analyze risk, assess potential impacts, and develop effective response strategies, we cannot ensure
that our business would be immune to these risks, because of the intrinsic importance of our switching systems to our business, any
interruption or degradation could adversely affect the perception of the reliability of products carrying our brands and materially
adversely affect our overall business and our results of operations.
Stakeholder Relationships
Losing a significant portion of business from one or more of our largest customers could lead to significant revenue decreases in
the longer term, which could have a material adverse impact on our business and our results of operations.
Most of our customer relationships are not exclusive and may be terminated by our customers. Our customers can reassess their
commitments to us at any time in the future and/or develop their own competitive services. Accordingly, our business agreements
with these customers may not reduce the risk inherent in our business that customers may terminate their relationships with us in
favor of relationships with our competitors, or for other reasons, or might not meet their contractual obligations to us.
In addition, a significant portion of our revenue is concentrated among our five largest customers. Loss of business from any of our
large customers could have a material adverse impact on our overall business and results of operations.
Exclusive/near exclusive relationships certain customers have with our competitors may have a material adverse impact on our
business.
Certain customers have exclusive, or nearly-exclusive, relationships with our competitors to issue payment products, and these
relationships may make it difficult or cost-prohibitive for us to do significant amounts of business with them to increase our
revenues. In addition, these customers may be more successful and may grow faster than the customers that primarily issue our
payment products, which could put us at a competitive disadvantage. Furthermore, we earn substantial revenue from customers
with nearly-exclusive relationships with our competitors. Such relationships could provide advantages to the customers to shift
business from us to the competitors with which they are principally aligned. A significant loss of our existing revenue or transaction
volumes from these customers could have a material adverse impact on our business.
28 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1A. RISK FACTORS
Consolidation in the banking industry could materially and adversely affect our overall business and results of operations.
The banking industry has undergone substantial, accelerated consolidation in the past. Consolidations have included customers with
a substantial Mastercard portfolio being acquired by institutions with a strong relationship with a competitor. If significant
consolidation among customers were to continue, it could result in the substantial loss of business for us, which could have a
material adverse impact on our business and prospects. In addition, one or more of our customers could seek to merge with, or
acquire, one of our competitors, and any such transaction could also have a material adverse impact on our overall business.
Consolidation could also produce a smaller number of large customers, which could increase their bargaining power and lead to
lower prices and/or more favorable terms for our customers. These developments could materially and adversely affect our results
of operations.
Our business significantly depends on the continued success and competitiveness of our issuing and acquiring customers and, in
many jurisdictions, their ability to effectively manage or help manage our brands.
While we work directly with many stakeholders in the payments system, including merchants, governments, fintechs and large
digital companies and other technology companies, we are, and will continue to be, significantly dependent on our relationships
with our issuers and acquirers and their respective relationships with account holders and merchants to support our programs and
services. Furthermore, we depend on our issuing partners and acquirers to continue to innovate to maintain competitiveness in the
market. We do not issue cards or other payment devices, extend credit to account holders or determine the interest rates or other
fees charged to account holders. Each issuer determines these and most other competitive payment program features. In addition,
we do not establish the discount rate that merchants are charged for acceptance, which is the responsibility of our acquiring
customers. As a result, our business significantly depends on the continued success and competitiveness of our issuing and acquiring
customers and the strength of our relationships with them. In turn, our customers’ success depends on a variety of factors over
which we have little or no influence, including economic conditions in global financial markets or their disintermediation by
competitors or emerging technologies, as well as regulation. If our customers become financially unstable, we may lose revenue or
we may be exposed to settlement risk. See our risk factor in “Risk Factors - Settlement and Third-Party Obligations” in this Part I,
Item 1A with respect to how we guarantee certain third-party obligations for further discussion.
With the exception of the United States and a select number of other jurisdictions, most in-country (as opposed to cross-border)
transactions conducted using Mastercard, Maestro and Cirrus cards are authorized, cleared and settled by our customers or other
processors. Because we do not provide domestic switching services in these countries and do not, as described above, have direct
relationships with account holders, we depend on our close working relationships with our customers to effectively manage our
brands, and the perception of our payments system, among consumers in these countries. We also rely on these customers to help
manage our brands and perception among regulators and merchants in these countries, alongside our own relationships with them.
From time to time, our customers may take actions that we do not believe to be in the best interests of our payments system
overall, which may materially and adversely impact our business.
Merchants’ continued focus on acceptance costs may lead to additional litigation and regulatory proceedings and increase our
incentive program costs, which could materially and adversely affect our profitability.
Merchants are important constituents in our payments system. We rely on both our relationships with them, as well as their
relationships with our issuer and acquirer customers, to continue to expand the acceptance of our integrated products and services.
We also work with merchants to help them enable new sales channels, create better purchase experiences, improve efficiencies,
increase revenues and fight fraud. In the retail industry, there is a set of larger merchants with increasingly global scope and
influence. We believe that these merchants are having a significant impact on all participants in the global payments industry,
including Mastercard. Some large merchants have supported the legal, regulatory and legislative challenges to interchange fees that
Mastercard has been defending, including the U.S. merchant litigations. Some merchants are increasingly asking regulators to
review and potentially regulate our own network fees, in addition to interchange. See our risk factor in “Risk Factors – Other
Regulation” in this Part I, Item 1A with respect to payments industry regulation, including interchange fees. The continued focus of
merchants on the costs of accepting various forms of payment, including in connection with the growth of digital payments, may
lead to additional litigation and regulatory proceedings.
Certain larger merchants are also able to negotiate incentives from us and pricing concessions from our issuer and acquirer
customers as a condition to accepting our products. We also make payments to certain merchants to incentivize them to create co-
branded payment programs with us. As merchants consolidate and become even larger, we may have to increase the amount of
incentives that we provide to certain merchants, which could materially and adversely affect our results of operations. Competitive
and regulatory pressures on pricing could make it difficult to offset the costs of these incentives. Additionally, if the rate of
merchant acceptance growth slows our business could suffer.
MASTERCARD 2020 FORM 10-K 29
PART I
ITEM 1A. RISK FACTORS
Our work with governments exposes us to unique risks that could have a material impact on our business and results of
operations.
As we increase our work with national, state and local governments, both indirectly through financial institutions and with them
directly as our customers, we may face various risks inherent in associating or contracting directly with governments. These risks
include, but are not limited to, the following:
• Governmental entities typically fund projects through appropriated monies. Changes in governmental priorities or other political
developments, including disruptions in governmental operations, could impact approved funding and result in changes in the
scope, or lead to the termination, of the arrangements or contracts we or financial institutions enter into with respect to our
payment products and services.
• Our work with governments subjects us to U.S. and international anti-corruption laws, including the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act. A violation and subsequent judgment or settlement under these laws could subject us to
substantial monetary penalties and damages and have a significant reputational impact.
• Working or contracting with governments, either directly or via our financial institution customers, can subject us to heightened
reputational risks, including extensive scrutiny and publicity, as well as a potential association with the policies of a government
as a result of a business arrangement with that government. Any negative publicity or negative association with a government
entity, regardless of its accuracy, may adversely affect our reputation.
Settlement and Third-Party Obligations
Our role as guarantor, as well as other contractual obligations, expose us to risk of loss or illiquidity.
We are a guarantor of certain third-party obligations, including those of certain of our customers. In this capacity, we are exposed to
credit and liquidity risk from these customers and certain service providers. We may incur significant losses in connection with
transaction settlements if a customer fails to fund its daily settlement obligations due to technical problems, liquidity shortfalls,
insolvency or other reasons. Concurrent settlement failures of more than one of our larger customers or of several of our smaller
customers either on a given day or over a condensed period of time may exceed our available resources and could materially and
adversely affect our results of operations.
We have significant contractual indemnification obligations with certain customers. Should an event occur that triggers these
obligations, such an event could materially and adversely affect our overall business and result of operations.
Global Economic and Political Environment
Global economic, political, financial and societal events or conditions could result in a material and adverse impact on our overall
business and results of operations.
Adverse economic trends in key countries in which we operate may adversely affect our financial performance. Such impact may
include, but is not limited to, the following:
• Customers mitigating their economic exposure by limiting the issuance of new Mastercard products and requesting greater
incentive or greater cost stability from us
• Consumers and businesses lowering spending, which could impact domestic and cross-border spend
• Government intervention (including the effect of laws, regulations and/or government investments on or in our financial
institution customers), as well as uncertainty due to changing political regimes in executive, legislative and/or judicial branches of
government, that may have potential negative effects on our business and our relationships with customers or otherwise alter
their strategic direction away from our products
•
Tightening of credit availability that could impact the ability of participating financial institutions to lend to us under the terms of
our credit facility
Additionally, we switch substantially all cross-border transactions using Mastercard, Maestro and Cirrus-branded cards and generate
a significant amount of revenue from cross-border volume fees and fees related to switched transactions. Revenue from switching
cross-border and currency conversion transactions for our customers fluctuates with the levels and destinations of cross-border
travel and our customers’ need for transactions to be converted into their base currency. Cross-border activity has, and may
continue to be, adversely affected by world geopolitical, economic, health, weather and other conditions. These include COVID-19,
as well as the threat of terrorism and separate outbreaks of flu, viruses and other diseases, as well as major environmental events
(including those related to climate change). The uncertainty that could result from such events could decrease cross-border activity.
Additionally, any regulation of interregional interchange fees could also negatively impact our cross-border activity. In each case,
decreased cross-border activity could decrease the revenue we receive.
30 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1A. RISK FACTORS
Our operations as a global payments network rely in part on global interoperable standards to help facilitate safe and simple
payments. To the extent geopolitical events result in jurisdictions no longer participating in the creation or adoption of these
standards, or the creation of competing standards, the products and services we offer could be negatively impacted.
Any of these developments could have a material adverse impact on our overall business and results of operations.
Adverse currency fluctuations and foreign exchange controls could negatively impact our results of operations.
During 2020, approximately 67% of our revenue was generated from activities outside the United States. This revenue (and the
related expense) could be transacted in a non-functional currency or valued based on a currency other than the functional currency
of the entity generating the revenues. Resulting exchange gains and losses are included in our net income. Our risk management
activities provide protection with respect to adverse changes in the value of only a limited number of currencies and are based on
estimates of exposures to these currencies.
In addition, some of the revenue we generate outside the United States is subject to unpredictable currency fluctuations including
devaluation of currencies where the values of other currencies change relative to the U.S. dollar. If the U.S. dollar strengthens
compared to currencies in which we generate revenue, this revenue may be translated at a materially lower amount than expected.
Furthermore, we may become subject to exchange control regulations that might restrict or prohibit the conversion of our other
revenue currencies into U.S. dollars, such as what we have experienced in Venezuela.
The occurrence of currency fluctuations or exchange controls could have a material adverse impact on our results of operations.
Brand and Reputational Impact
Negative brand perception may materially and adversely affect our overall business.
Our brands and their attributes are key assets of our business. The ability to attract consumers to our branded products and retain
them depends upon the external perception of us and our industry. Our business may be affected by actions taken by our
customers, merchants or other organizations that impact the perception of our brands or the payments industry in general. From
time to time, our customers may take actions that we do not believe to be in the best interests of our brands, such as creditor
practices that may be viewed as “predatory”. Moreover, adverse developments with respect to our industry or the industries of our
customers or other companies and organizations that use our products and services (including certain legally permissible but high
risk merchant categories, such as alcohol, tobacco, fire-arms and adult content) may also, by association, impair our reputation, or
result in greater public, regulatory or legislative scrutiny. We have also been pursuing the use of social media channels at an
increasingly rapid pace. Under some circumstances, our use of social media, or the use of social media by others as a channel for
criticism or other purposes, could also cause rapid, widespread reputational harm to our brands by disseminating rapidly and
globally actual or perceived damaging information about us, our products or merchants or other end users who utilize our products.
To the extent any of our published sustainability metrics are subsequently viewed as inaccurate or we are unable to execute on our
sustainability initiatives, we may be viewed negatively by consumers, investors and other stakeholders concerned about these
matters. Also, as we are headquartered in the United States, a negative perception of the United States could impact the perception
of our company, which could adversely affect our business. Any of the above issues could have a material and adverse effect to our
overall business.
Lack of visibility of our brand in our products and services, or in the products and services of our partners who use our technology,
may materially and adversely affect our business.
As more players enter the global payments system, the layers between our brand and consumers and merchants increase. In order
to compete with other powerful consumer brands that are also becoming part of the consumer payment experience, we often
partner with those brands on payment solutions. These brands include large digital companies and other technology companies
who are our customers and use our networks to build their own acceptance brands. In some cases, our brand may not be featured
in the payment solution or may be secondary to other brands. Additionally, as part of our relationships with some issuers, our
payment brand is only included on the back of the card. As a result, our brand may either be invisible to consumers or may not be
the primary brand with which consumers associate the payment experience. This brand invisibility, or any consumer confusion as to
our role in the consumer payment experience, could decrease the value of our brand, which could adversely affect our business.
MASTERCARD 2020 FORM 10-K 31
PART I
ITEM 1A. RISK FACTORS
Talent and Culture
We may not be able to attract, hire and retain a highly qualified and diverse workforce, or maintain our corporate culture, which
could impact our ability to grow effectively.
Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior
management. We may be unable to retain or to attract highly qualified employees. The market for key personnel is highly
competitive, particularly in technology and other skill areas significant to our business. Additionally, changes in immigration and
work permit laws and visa regulations and related enforcement have made it difficult for employees to work in, or transfer among,
jurisdictions in which we have operations and could impair our ability to attract and retain qualified employees. Moreover, as a
result of the global COVID-19 pandemic, a significant portion of our workforce is working in a mostly remote environment. This
remote environment may continue after the pandemic due to potential resulting trends, and could impact the quality of our
corporate culture. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain
a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations.
We rely on key personnel to lead with integrity and decency. To the extent our leaders behave in a manner that is not consistent
with our values, we could experience significant impact to our brand and reputation, as well as to our corporate culture.
Acquisitions
Acquisitions, strategic investments or entry into new businesses could be impacted by regulatory scrutiny, and if successful, could
disrupt our business and harm our results of operations or reputation.
As we continue to evaluate our strategic acquisitions of, or acquiring interests in joint ventures or other entities related to,
complementary businesses, products or technologies, we face increasing regulatory scrutiny with respect to antitrust and other
considerations. Such scrutiny could prevent us from successfully completing such acquisitions in the future.
To the extent we do make these acquisitions, we may not be able to successfully partner with or integrate them, despite original
intentions and focused efforts. In addition, such an integration may divert management’s time and resources from our core business
and disrupt our operations. Moreover, we may spend time and money on acquisitions or projects that do not meet our expectations
or increase our revenue. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves
available to us for other uses, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders.
Furthermore, we may not be able to successfully finance the business following the acquisition as a result of costs of operations,
including any litigation risk which may be inherited from the acquisition.
Any acquisition or entry into a new business could subject us to new regulations, both directly as a result of the new business as well
as in the other existing parts of our business, with which we would need to comply. This compliance could increase our costs, and
we could be subject to liability or reputational harm to the extent we cannot meet any such compliance requirements. Our
expansion into new businesses could also result in unanticipated issues which may be difficult to manage.
Class A Common Stock and Governance Structure
Provisions in our organizational documents and Delaware law could be considered anti-takeover provisions and have an impact
on change-in-control.
Provisions contained in our amended and restated certificate of incorporation and bylaws and Delaware law could be considered
anti-takeover provisions, including provisions that could delay or prevent entirely a merger or acquisition that our stockholders
consider favorable. These provisions may also discourage acquisition proposals or have the effect of delaying or preventing entirely
a change in control, which could harm our stock price. For example, subject to limited exceptions, our amended and restated
certificate of incorporation prohibits any person from beneficially owning more than 15% of any of the Class A common stock or any
other class or series of our stock with general voting power, or more than 15% of our total voting power. In addition:
• our stockholders are not entitled to the right to cumulate votes in the election of directors
• our stockholders are not entitled to act by written consent
•
•
a vote of 80% or more of all of the outstanding shares of our stock then entitled to vote is required for stockholders to amend
any provision of our bylaws
any representative of a competitor of Mastercard or of Mastercard Foundation is disqualified from service on our board of
directors
32 MASTERCARD 2020 FORM 10-K
PART I
ITEM 1A. RISK FACTORS
Mastercard Foundation’s substantial stock ownership, and restrictions on its sales, may impact corporate actions or acquisition
proposals favorable to, or favored by, the other public stockholders.
As of February 9, 2021, Mastercard Foundation owned 108,210,635 shares of Class A common stock, representing approximately
11.0% of our general voting power. Mastercard Foundation may not sell or otherwise transfer its shares of Class A common stock
prior to May 1, 2027, except to the extent necessary to satisfy its charitable disbursement requirements, for which purpose earlier
sales are permitted and have occurred. Mastercard Foundation is permitted to sell all of its remaining shares after May 1, 2027,
subject to certain conditions. The directors of Mastercard Foundation are required to be independent of us and our customers. The
ownership of Class A common stock by Mastercard Foundation, together with the restrictions on transfer, could discourage or make
more difficult acquisition proposals favored by the other holders of the Class A common stock. In addition, because Mastercard
Foundation is restricted from selling its shares for an extended period of time, it may not have the same interest in short or medium-
term movements in our stock price as, or incentive to approve a corporate action that may be favorable to, our other stockholders.
Item 1B. Unresolved staff comments
Not applicable.
Item 2. Properties
We own our corporate headquarters, located in Purchase, New York, and our principal technology and operations center, located in
O’Fallon, Missouri. As of December 31, 2020, Mastercard and its subsidiaries owned or leased commercial properties throughout
the U.S. and other countries around the world, consisting of corporate and regional offices, as well as our operations centers.
We believe that our facilities are suitable and adequate for the business that we currently conduct. However, we periodically review
our space requirements and may acquire or lease new space to meet the needs of our business, or consolidate and dispose of
facilities that are no longer required.
Item 3. Legal proceedings
Refer to Note 13 (Accrued Expenses and Accrued Litigation) and Note 21 (Legal and Regulatory Proceedings) to the consolidated
financial statements included in Part II, Item 8.
Item 4. Mine Safety Disclosures
Not applicable.
MASTERCARD 2020 FORM 10-K 33
PART I
EXECUTIVE OFFICERS
Information about our executive officers
(as of February 12, 2021)
Name
Current Position
Ajay Banga
Executive Chairman
since January 2021
Age
61
Previous Mastercard Experience
Previous Business Experience
Chief Executive Officer (2020)
President and Chief Executive Officer
(2010-2020)
President and COO (2009-2010)
Several executive positions at Citigroup,
including CEO, Asia Pacific region and
Chairman and CEO, International Global
Consumer Group
Previous senior leadership experience
at Nestlé India and PepsiCo in roles of
increasing responsibility
Ajay Bhalla
President, Cyber and
Intelligence Solutions
since November 2018
Ann Cairns
Vice Chairman
since June 2018
Gilberto Caldart
President, International
since June 2018
Michael Fraccaro
Chief People Officer
since July 2016
Michael Froman
Vice Chairman and
President, Strategic
Growth
since April 2018
55
President, Enterprise Security Solutions
(2014-2018)
Various leadership positions at HSBC and Xerox
Corporation
President, Digital Gateway Services
(2011-2013)
President, South Asia and Southeast Asia
(2008-2011)
Various senior leadership positions,
including President, Southeast Asia; Country
Manager, Singapore and Head of Marketing,
Southeast Asia; Vice President
64
President, International (2011-2018)
Managing director, Alvarez & Marsal
CEO, ABN AMRO
Senior corporate and investment banking roles at
Citigroup
61
President, Latin America and Caribbean
region (2013-2018)
Various leadership positions at Citigroup,
including Country Business Manager, Brazil
Division President, South Latin America/
Brazil (2008-2013)
55
Executive Vice President, Human Resources,
Global Products and Solutions (2014-2016)
Various executive-level human resources
positions at HSBC Group, Hong Kong (2000-2012)
Senior Vice President, Human Resources,
Global Products and Solutions (2012-2014)
Various senior human resources positions in
banking and financial services in Australia and
the Middle East
58 Mr. Froman joined the Company in 2018 in
his current role
U.S. Trade Representative in the Executive Office
of President Obama (2013-2017)
Assistant to the President and Deputy National
Security Advisor for International Economic
Policy (2009-2013)
Various senior leadership positions at Citigroup,
including CEO, CitiInsurance and COO of
Citigroup’s alternative investments business
34 MASTERCARD 2020 FORM 10-K
Name
Current Position
Linda Kirkpatrick
President, North America
since January 2021
Age
44
Previous Mastercard Experience
Previous Business Experience
PART I
EXECUTIVE OFFICERS
President, U.S. Issuers (2020)
Executive Vice President, Merchants and
Acceptance (2016-2020)
Senior Vice President, Core Merchants
(2013-2016)
Senior Vice President, Franchise
Development (2011-2013)
Edward McLaughlin
President, Operations
and Technology
since May 2017
Vice President, U.S. Region (2008-2011)
Vice President, Investor Relations
55
Chief Information Officer (2016-2017)
Chief Emerging Payments Officer
(2010-2015)
Various senior leadership roles, including
Chief Franchise Development Officer and
Senior Vice President, Bill Payment and
Healthcare
Group Vice President, Product and Strategy,
Metavante Corporation
Co-Founder and CEO, Paytrust, Inc.
Sachin Mehra
Chief Financial Officer
since April 2019
50
Chief Financial Operations Officer
(2018-2019)
Various senior positions at Hess Corporation,
including Vice President and Treasurer
Executive Vice President, Commercial
Products (2015-2018)
Various senior treasury and finance positions,
General Motors Corporation and GMAC
Executive Vice President and Business
Financial Officer, North America
(2013-2015)
Corporate Treasurer (2010-2013)
Michael Miebach
President and Chief
Executive Officer since
January 2021
53
President (2020)
Chief Product Officer (2016-2020)
President, Middle East and Africa
(2010-2015)
53
Chief Product Officer (2009-2014)
Various senior leadership roles, including
President, U.S. Region; Executive Vice
President, Customer Business Planning and
Analysis; and Senior Vice President and
Associate General Counsel
59
Chief Marketing Officer (2013-2015)
Tim Murphy
General Counsel
since April 2014
Raja Rajamannar
Chief Marketing and
Communications Officer
and President,
Healthcare
since January 2016
Managing Director, Middle East and North Africa
and Managing Director, Sub-Saharan Africa,
Barclays Bank PLC
Various executive positions at Citigroup in
Germany, Austria, U.K. and Turkey
Associate, Cleary, Gottlieb, Steen and Hamilton,
New York and London
Executive Vice President-Senior Business and
Chief Transformation Officer, Anthem (formerly,
WellPoint, Inc.) (2012- 2013)
Senior Vice President and Chief Innovation and
Marketing Officer, Humana Inc. (2009-2012)
Various management positions at Citigroup,
including Executive Vice President and Chief
Marketing Officer-Citi Global Cards
MASTERCARD 2020 FORM 10-K 35
PART I
EXECUTIVE OFFICERS
Name
Current Position
Raj Seshadri
President, Data and
Services
since January 2020
Kevin Stanton
Chief Transformation
Officer
since January 2020
Craig Vosburg
Chief Product Officer
since January 2021
Previous Business Experience
Managing Director, Head of iShares U.S. Wealth
Advisory business, BlackRock (2014-2016)
Managing Director, Global Marketing Officer of
iShares, BlackRock, Inc. (2012-2014)
Various leadership positions at Citigroup, U.S.
Trust Company and McKinsey & Company, Inc.
Vice President, Counsel, Shawmut National
Corporation
Senior member-financial services practice, Bain
& Company and A.T. Kearney
Vice president, CoreStates Financial Corporation
Age
55
Previous Mastercard Experience
President, U.S. Issuers (2016-2019)
59
Chief Services Officer (2018-2019)
President, Mastercard Advisors (2010-2017)
Various senior leadership roles, including
President, Canada; Senior Vice President,
Strategy and Market Development; and Vice
President, Senior Counsel and North
America Region Counsel
53
President, North America (2016-2020)
Chief Product Officer (2014-2015)
Executive Vice President, U.S. Market
Development (2010-2014)
Various senior leadership roles, including
Head of Mastercard Advisors, U.S. and
Canada and Head of Mastercard Advisors,
Southeast Asia, Greater China and South
Asia/Middle East/Africa
36 MASTERCARD 2020 FORM 10-K
PART II
Item 5. Market for registrant’s common equity, related stockholder matters and
issuer purchases of equity securities
Item 6. Selected financial data
Item 7. Management’s discussion and analysis of financial condition and results of
operations
Item 7A. Quantitative and qualitative disclosures about market risk
Item 8. Financial statements and supplementary data
Item 9. Changes in and disagreements with accountants on accounting and
financial disclosure
Item 9A. Controls and procedures
Item 9B. Other information
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUES PURCHASES OF
Item 5. Market
stockholder matters and issuer purchases of equity securities
for registrant’s common equity, related
Our Class A common stock trades on the New York Stock Exchange under the symbol “MA”. At February 9, 2021, we had 73
stockholders of record for our Class A common stock. We believe that the number of beneficial owners is substantially greater than
the number of record holders because a large portion of our Class A common stock is held in “street name” by brokers.
There is currently no established public trading market for our Class B common stock. There were approximately 257 holders of
record of our non-voting Class B common stock as of February 9, 2021, constituting approximately 0.8% of our total outstanding
equity.
Stock Performance Graph
The graph and table below compare the cumulative total stockholder return of Mastercard’s Class A common stock, the S&P 500 and
the S&P 500 Financials for the five-year period ended December 31, 2020. The graph assumes a $100 investment in our Class A
common stock and both of the indices and the reinvestment of dividends. Mastercard’s Class B common stock is not publicly traded
or listed on any exchange or dealer quotation system.
Comparison of cumulative five-year total return
Total returns to stockholders for each of the years presented were as follows:
Base
period
2015
Indexed Returns
For the Years Ended December 31,
2016
2017
2018
2019
2020
$ 100.00 $ 106.91 $ 157.88 $ 197.86 $ 314.91 $ 378.44
100.00
100.00
111.96
122.80
136.40
150.04
130.42
130.49
171.49
172.41
203.04
169.49
Company/Index
Mastercard
S&P 500
S&P 500 Financials
38 MASTERCARD 2020 FORM 10-K
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUES PURCHASES OF
Dividend Declaration and Policy
On December 8, 2020, our Board of Directors declared a quarterly cash dividend of $0.44 per share paid on February 9, 2021 to
holders of record on January 8, 2021 of our Class A common stock and Class B common stock. On February 8, 2021, our Board of
Directors declared a quarterly cash dividend of $0.44 per share payable on May 7, 2021 to holders of record on April 9, 2021 of our
Class A common stock and Class B common stock.
Subject to legally available funds, we intend to continue to pay a quarterly cash dividend on our outstanding Class A common stock
and Class B common stock. However, the declaration and payment of future dividends is at the sole discretion of our Board of
Directors after taking into account various factors, including our financial condition, operating results, available cash and current and
anticipated cash needs.
Issuer Purchases of Equity Securities
During the fourth quarter of 2020, we repurchased a total of approximately 3.1 million shares for $1.03 billion at an average price of
$330.34 per share of Class A common stock. See Note 16 (Stockholders' Equity) to the consolidated financial statements included in
Part II, Item 8 for further discussion with respect to our share repurchase programs. The following table presents our repurchase
activity on a cash basis during the fourth quarter of 2020:
Period
October 1 – 31
November 1 – 30
December 1 – 31
Total
Total Number
of Shares
Purchased
Average Price
Paid per Share
(including
commission cost)
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs 1
1,552,273 $
779,892
785,846
3,118,011
335.39
314.13
336.44
330.34
1,552,273 $
4,340,730,451
779,892
785,846
3,118,011
4,095,745,017
9,831,351,292
1
Dollar value of shares that may yet be purchased under the share repurchase programs are as of the end of each period presented.
MASTERCARD 2020 FORM 10-K 39
PART II
ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected financial data
The statement of operations data and the cash dividends declared per share for the years ended December 31, 2020, 2019 and
2018, and the balance sheet data as of December 31, 2020 and 2019, are presented in the audited consolidated financial statements
of Mastercard Incorporated included in Part II, Item 8. The statement of operations data and the cash dividends declared per share
for the years ended December 31, 2017 and 2016, and the balance sheet data as of December 31, 2018, 2017 and 2016, are not
included in this Report, and are provided in Part II, Item 8 of our Annual Reports on Form 10-K for the years ended December 31,
2018, 2017 and 2016.
40 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 7. Management’s discussion and analysis of financial
condition and results of operations
The following discussion should be read in conjunction with the consolidated financial statements and notes of Mastercard
Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International”)
(together, “Mastercard” or the “Company”), included elsewhere in this Report. Percentage changes provided throughout
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” were calculated on amounts rounded to
the nearest thousand. For discussion related to the results of operations for the year ended December 31, 2019 compared to the
year ended December 31, 2018, please see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.
Business Overview
Mastercard is a technology company in the global payments industry that connects consumers, financial institutions, merchants,
governments, digital partners, businesses and other organizations worldwide, enabling them to use electronic forms of payment
instead of cash and checks. We make payments easier and more efficient by providing a wide range of payment solutions and
services using our family of well-known brands, including Mastercard®, Maestro® and Cirrus®. We operate a multi-rail network that
offers customers one partner to turn to for their domestic and cross-border payment needs. Through our unique and proprietary
global payments network, which we refer to as our core network, we switch (authorize, clear and settle) payment transactions and
deliver related products and services. We have additional payment capabilities that include automated clearing house (“ACH”)
transactions (both batch and real-time account-based payments). We also provide integrated value-added offerings such as cyber
and intelligence products, information and analytics services, consulting, loyalty and reward programs, processing and open banking.
Our payment solutions offer customers choice and flexibility and are designed to ensure safety and security for the global payments
system.
A typical transaction on our core network involves four participants in addition to us: account holder (a person or entity who holds a
card or uses another device enabled for payment), issuer (the account holder’s financial institution), merchant and acquirer (the
merchant’s financial institution). We do not issue cards, extend credit, determine or receive revenue from interest rates or other
fees charged to account holders by issuers, or establish the rates charged by acquirers in connection with merchants’ acceptance of
our products. In most cases, account holder relationships belong to, and are managed by, our customers.
COVID-19
The coronavirus (“COVID-19”) pandemic has spread rapidly across the globe and has had significant negative effects on the global
economy. This outbreak has affected business activity, adversely impacting consumers, our customers, suppliers and business
partners, as well as our workforce. We continue to monitor the effects of the pandemic and actions taken by governments as they
relate to travel restrictions, social distancing measures and restrictions on business operations, as well as the continued impact of
these actions on consumers and businesses. While some of these measures have eased in certain jurisdictions, others have
remained in place. The extent to which current measures are removed or new measures are put in place will depend upon how the
pandemic evolves, as well as the progress of the global roll-out of vaccines.
The COVID-19 outbreak affected our 2020 performance, during which we noted unfavorable trends compared to historical periods.
The following table provides a summary of trends in our key metrics for 2020 as compared to the respective periods in 2019:
Gross dollar volume (local currency basis)
Cross-border volume (local currency basis)
Switched transactions
March 31
June 30
September 30
December 31
Quarter ended
Year ended
December 31
8 %
(1) %
13 %
Increase/(Decrease)
(10) %
(45) %
(10) %
1 %
(36) %
5 %
1 %
(29) %
4 %
— %
(29) %
3 %
The impact of this outbreak started in the first quarter of 2020 as we experienced declines in our key metrics compared to historical
periods, primarily due to travel restrictions and stay-at-home orders implemented by governments in many regions and countries
across the globe. Our key metrics continued to be impacted throughout 2020 as follows:
• Gross dollar volumes were flat in 2020 as compared to 2019, recovering gradually in the second half of the year from a decline
during the second quarter in part due to the global relaxation of both restrictions on business operations and social distancing
measures.
MASTERCARD 2020 FORM 10-K 41
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
• Cross-border volumes were negatively impacted by the pandemic during 2020 due to a significant decrease in global travel as a
result of compliance with travel restrictions and quarantine requirements. While cross-border volumes are still lower compared
to prior year periods, these volumes have improved throughout the second half of 2020.
•
Switched transactions were negatively impacted by the pandemic primarily in the second quarter. Subsequently, switched
transactions improved during the third quarter in part due to the global relaxation of both restrictions on business operations
and social distancing measures. During the fourth quarter, switched transactions growth slowed slightly as compared to the
third quarter.
The full extent to which the pandemic, and measures taken in response, affect our business, results of operations and financial
condition will depend on future developments, including the duration of the pandemic and its impact on the global economy, which
are uncertain, and cannot be predicted at this time.
Financial Results Overview
The following table provides a summary of our key GAAP operating results, as reported:
Net revenue
Operating expenses
Operating income
Operating margin
Income tax expense
Effective income tax rate
Net income
Diluted earnings per share
Diluted weighted-average shares outstanding
Year ended December 31,
2020
2019
2018
2020
Increase/
(Decrease)
2019
Increase/
(Decrease)
($ in millions, except per share data)
$ 15,301
7,220
$
$ 16,883
7,219
$
$ 14,950
7,668
$
$
8,081
$
9,664
$
7,282
(9)%
—%
(16)%
52.8 %
57.2 %
48.7 %
(4.4) ppt
$
1,349
$
1,613
$
1,345
(16)%
13%
(6)%
33%
8.5 ppt
20%
17.4 %
16.6 %
18.7 %
0.8 ppt
(2.1) ppt
$
$
6,411
6.37
1,006
$
$
8,118
7.94
1,022
$
$
5,859
5.60
1,047
(21)%
(20)%
(2)%
39%
42%
(2)%
The following table provides a summary of our key non-GAAP operating results1, adjusted to exclude the impact of gains and losses
on our equity investments, special items (which represent litigation judgments and settlements and certain one-time items) and the
related tax impacts on our non-GAAP adjustments. In addition, we have presented growth rates, adjusted for the impact of
currency:
Year ended December 31,
2020
2019
2018
2020
Increase/(Decrease)
2019
Increase/(Decrease)
As
adjusted
Currency-
neutral
As
adjusted
Currency-
neutral
($ in millions, except per share data)
Net revenue
$ 15,301
$ 16,883
$ 14,950
Adjusted operating expenses
$
7,147
$
7,219
$
6,540
(9)%
(1)%
(8)%
(1)%
13%
10%
16%
12%
Adjusted operating margin
Adjusted effective income tax rate
53.3 %
17.2 %
57.2 %
17.0 %
56.2 % (4.0) ppt
(3.7) ppt
1.0 ppt
1.3 ppt
18.5 % 0.2 ppt
0.3 ppt
(1.5) ppt
(1.3) ppt
Adjusted net income
Adjusted diluted earnings per share
$
$
6,463
6.43
$
$
7,937
7.77
$
$
6,792
6.49
(19)%
(17)%
(17)%
(16)%
17%
20%
20%
23%
Note: Tables may not sum due to rounding.
1
See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
42 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Key highlights for 2020 as compared to 2019 were as follows:
Net revenue
GAAP
Non-GAAP
(currency-neutral)
down 9% down 8% - Cross-border volume decline of 29% on a local currency basis
Net revenue decreased 8% on a currency-neutral basis due to COVID-19 impacts, and
includes a 1 percentage point benefit from acquisitions. Gross dollar volume was flat
on a local currency basis. The primary drivers of net revenue were:
- Rebates and incentives growth of 3%, or 4% on a currency-neutral basis
These decreases to net revenue were partially offset by:
- Switched transactions growth of 3%
- Other revenues growth of 14%, or 15% on a currency-neutral basis, which
includes 3 percentage points of growth due to acquisitions
Adjusted operating expense decreased 1% on a currency-neutral basis, which included
a 4 percentage point increase due to acquisitions. Excluding acquisitions, expenses
declined 5 percentage points primarily due to reduced spending on advertising and
marketing, travel and professional fees, partially offset by higher personnel and data
processing costs to support continued investment in our strategic initiatives.
Adjusted effective income tax rate of 17.2% was higher than prior year primarily due to
a discrete tax benefit related to a favorable court ruling in 2019.
Operating
expenses
GAAP
flat
Adjusted
operating expenses
Non-GAAP
(currency-neutral)
down 1%
Effective income
tax rate
GAAP
17.4%
Adjusted effective
income tax rate
Non-GAAP
(currency-neutral)
17.2%
Other 2020 financial highlights were as follows:
• We generated net cash flows from operations of $7.2 billion.
• We completed the acquisitions of businesses for total consideration of $1.1 billion.
• We repurchased 14.3 million shares of our common stock for $4.5 billion and paid dividends of $1.6 billion.
• We completed debt offerings for an aggregate principal amount of $4.0 billion.
Non-GAAP Financial Information
Non-GAAP financial information is defined as a numerical measure of a company’s performance that excludes or includes amounts
so as to be different than the most comparable measure calculated and presented in accordance with accounting principles
generally accepted in the United States (“GAAP”). Our non-GAAP financial measures exclude the impact of special items, where
applicable, which represent litigation judgments and settlements and certain one-time items, as well as the related tax impacts
(“Special Items”). Starting in 2019, our non-GAAP financial measures also exclude the impact of gains and losses on our equity
investments which primarily includes mark-to-market fair value adjustments, impairments and gains and losses upon disposition and
the related tax impacts. The 2018 amounts were not restated, as the impact of the change was immaterial in relation to our non-
GAAP results. Our non-GAAP financial measures for the comparable periods exclude the impact of the following:
Gains and Losses on Equity Investments
• During 2020 and 2019, we recorded net gains of $30 million ($15 million after tax, or $0.01 per diluted share) and $167 million
($124 million after tax, or $0.12 per diluted share), respectively. The net gains were primarily related to unrealized fair market
value adjustments on marketable and non-marketable equity securities.
MASTERCARD 2020 FORM 10-K 43
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Items
Litigation provisions
• During 2020, we recorded pre-tax charges of $73 million ($67 million after tax, or $0.07 per diluted share) related to litigation
provisions which included pre-tax charges of:
◦
◦
$45 million related to an ongoing confidential legal matter associated with our prepaid cards in the U.K., and
$28 million related to estimated attorneys’ fees and litigation settlements with U.K. and Pan-European merchants.
• During 2018, we recorded pre-tax charges of $1,128 million ($1,008 million after tax, or $0.96 per diluted share) related to
litigation provisions which included pre-tax charges of:
$654 million related to a fine issued by the European Commission,
$237 million related to both the U.S. merchant class litigation and the filed and anticipated opt-out U.S. merchant cases, and
$237 million related to litigation settlements with U.K. and Pan-European merchants.
◦
◦
◦
Tax act
• During 2019, we recorded a $57 million net tax benefit ($0.06 per diluted share), which included a $30 million benefit related to
a reduction to the 2017 one-time deemed repatriation tax on accumulated foreign earnings (the “Transition Tax”) resulting from
final tax regulations issued in 2019 and a $27 million benefit related to additional foreign tax credits which can be carried back
under transition rules.
• During 2018, we recorded a $75 million net tax benefit ($0.07 per diluted share), which included a $90 million benefit related to
the carryback of foreign tax credits due to transition rules, offset by a net $15 million expense primarily related to an increase to
our Transition Tax.
See Note 7 (Investments), Note 20 (Income Taxes) and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial
statements included in Part II, Item 8 for further discussion. We excluded these items because management evaluates the
underlying operations and performance of the Company separately from these recurring and nonrecurring items.
We believe that the non-GAAP financial measures presented facilitate an understanding of our operating performance and provide a
meaningful comparison of our results between periods. We use non-GAAP financial measures to, among other things, evaluate our
ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of
performance-based compensation.
In addition, we present growth rates adjusted for the impact of currency, which is a non-GAAP financial measure. Currency-neutral
growth rates are calculated by remeasuring the prior period’s results using the current period’s exchange rates for both the
translational and transactional impacts on operating results. The impact of currency translation represents the effect of translating
operating results where the functional currency is different than our U.S. dollar reporting currency. The impact of the transactional
currency represents the effect of converting revenue and expenses occurring in a currency other than the functional currency. We
believe the presentation of currency-neutral growth rates provides relevant information to facilitate an understanding of our
operating results.
Net revenue, operating expenses, operating margin, other income (expense), effective income tax rate, net income and diluted
earnings per share adjusted for the impact of gains and losses on our equity investments, Special Items and/or the impact of
currency, are non-GAAP financial measures and should not be relied upon as substitutes for measures calculated in accordance with
GAAP.
44 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables reconcile our reported financial measures calculated in accordance with GAAP to the respective non-GAAP
adjusted financial measures:
Reported - GAAP
(Gains) losses on equity investments
Litigation provisions
Non-GAAP
Reported - GAAP
(Gains) losses on equity investments
Tax act
Non-GAAP
Reported - GAAP
Ligitation provisions
Tax act
Non-GAAP
Note: Tables may not sum due to rounding.
** Not applicable
Year ended December 31, 2020
Operating
expenses
Operating
margin
Other
income
(expense)
Effective
income
tax rate
Net
income
Diluted
earnings
per share
($ in millions, except per share data)
$ 7,220
52.8 % $
(321)
17.4 % $ 6,411 $
6.37
**
(73)
**
0.5 %
(30)
**
(0.1) %
(0.1) %
(15)
67
$ 7,147
53.3 % $
(351)
17.2 % $ 6,463 $
(0.01)
0.07
6.43
Year ended December 31, 2019
Operating
expenses
Operating
margin
Other
income
(expense)
Effective
income
tax rate
Net
income
Diluted
earnings
per share
($ in millions, except per share data)
$ 7,219
57.2 % $
67
16.6 % $ 8,118 $
7.94
**
**
**
(167)
(0.2) %
(124)
**
**
0.6 %
(57)
(0.12)
(0.06)
$ 7,219
57.2 % $
(100)
17.0 % $ 7,937 $
7.77
Year ended December 31, 2018
Operating
expenses
Operating
margin
Other
income
(expense)
Effective
income
tax rate
Net
income
Diluted
earnings
per share
($ in millions, except per share data)
$ 7,668
48.7 % $
(78)
18.7 % $ 5,859
(1,128)
7.5 %
**
**
**
**
(1.1) %
1,008
0.9 %
(75)
(0.07)
$ 6,540
56.2 % $
(78)
18.5 % $ 6,792 $
6.49
MASTERCARD 2020 FORM 10-K 45
5.60
0.96
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following tables represent the reconciliation of our growth rates reported under GAAP to our non-GAAP growth rates:
Year Ended December 31, 2020 as compared to the Year Ended December 31, 2019
Increase/(Decrease)
Net
revenue
Operating
expenses
Operating
margin
Effective
income tax
rate
Net
income
Diluted
earnings
per share
Reported - GAAP
(9) %
— %
(4.4) ppt
0.8 ppt
(21) %
(20) %
(Gains) losses on equity investments
Litigation provisions
Tax act
Non-GAAP
Currency impact 2
Non-GAAP - currency-neutral
Reported - GAAP
(Gains) losses on equity investments 1
Tax act
Litigation provisions
Non-GAAP
Currency impact 2
Non-GAAP - currency-neutral
**
**
**
(9) %
1 %
(8) %
**
**
— ppt
(1) %
0.5 ppt
(0.1) ppt
**
**
(0.6) ppt
(1) %
(4.0) ppt
— %
0.3 ppt
(1) %
(3.7) ppt
0.2 ppt
0.2 ppt
0.3 ppt
1 %
1 %
1 %
(19) %
1 %
(17) %
1 %
1 %
1 %
(17) %
1 %
(16) %
Year Ended December 31, 2019 as compared to the Year Ended December 31, 2018
Increase/(Decrease)
Net
revenue
Operating
expenses
Operating
margin
Effective
income tax
rate
Net
income
Diluted
earnings
per share
13 %
(6) %
8.5 ppt
(2.1) ppt
**
**
**
13 %
3 %
16 %
**
**
16 %
10 %
2 %
12 %
**
**
(0.2) ppt
(0.3) ppt
39 %
(2) %
1 %
42 %
(2) %
1 %
(7.5) ppt
1.1 ppt
(20) %
(21) %
1.0 ppt
(1.5) ppt
0.3 ppt
0.2 ppt
1.3 ppt
(1.3) ppt
17 %
3 %
20 %
20 %
3 %
23 %
Note: Tables may not sum due to rounding.
** Not applicable
1
In 2019 we updated our non-GAAP methodology to prospectively exclude the impact of gains and losses on our equity investments. The 2018
period was not restated as the impact of the change was immaterial in relation to our non-GAAP results.
Represents the translational and transactional impact of currency.
2
Key Metrics
In addition to the financial measures described above in “Financial Results Overview”, we review the following metrics to evaluate
and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions. We
believe that the key metrics presented facilitate an understanding of our operating and financial performance and provide a
meaningful comparison of our results between periods.
Gross Dollar Volume (“GDV”)1 measures dollar volume of activity on cards carrying our brands during the period, on a local currency
basis and U.S. dollar-converted basis. Dollar volume represents purchase volume plus cash volume and includes the impact of
balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with
Mastercard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements
and includes the impact of balance transfers and convenience checks obtained with Mastercard-branded cards for the relevant
period. Information denominated in U.S. dollars relating to GDV is calculated by applying an established U.S. dollar/local currency
exchange rate for each local currency in which Mastercard volumes are reported. These exchange rates are calculated on a quarterly
basis using the average exchange rate for each quarter. Mastercard reports period-over-period rates of change in purchase volume
and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of currencies
against the U.S. dollar in calculating such rates of change.
Cross-border Volume2 measures cross-border dollar volume initiated and switched through our network during the period, on a
local currency basis and U.S. dollar-converted basis, for all Mastercard-branded programs.
46 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Switched Transactions2 measures the number of transactions switched by Mastercard. We define transactions switched as the
number of transactions initiated and switched through our network during the period.
Operating Margin measures how much profit we make on each dollar of sales after our operating costs but before other income
(expense) and income tax expense. Operating margin is calculated by dividing our operating income by net revenue.
1 Data used in the calculation of GDV is provided by Mastercard customers and is subject to verification by Mastercard and partial cross-checking
against information provided by Mastercard’s transaction switching systems. All data is subject to revision and amendment by Mastercard or
Mastercard’s customers.
2 Normalized to eliminate the effects of differing switching and carryover days between periods. Carryover days are those where transactions and
volumes from days where the company does not clear and settle are processed.
Foreign Currency
Currency Impact
Our primary revenue functional currencies are the U.S. dollar, euro, Brazilian real and the British pound. Our overall operating
results are impacted by currency translation, which represents the effect of translating operating results where the functional
currency is different than our U.S. dollar reporting currency.
Our operating results are also impacted by transactional currency. The impact of the transactional currency represents the effect of
converting revenue and expense transactions occurring in a currency other than the functional currency. Changes in currency
exchange rates directly impact the calculation of gross dollar volume (“GDV”) and gross euro volume (“GEV”), which are used in the
calculation of our domestic assessments, cross-border volume fees and certain volume-related rebates and incentives. In most non-
European regions, GDV is calculated based on local currency spending volume converted to U.S. dollars using average exchange rates
for the period. In Europe, GEV is calculated based on local currency spending volume converted to euros using average exchange
rates for the period. As a result, certain of our domestic assessments, cross-border volume fees and volume-related rebates and
incentives are impacted by the strengthening or weakening of the U.S. dollar versus non-European local currencies and the
strengthening or weakening of the euro versus other European local currencies. For example, our billing in Australia is in the U.S.
dollar, however, consumer spend in Australia is in the Australian dollar. The currency transactional impact of converting Australian
dollars to our U.S. dollar billing currency will have an impact on the revenue generated. The strengthening or weakening of the U.S.
dollar is evident when GDV growth on a U.S. dollar-converted basis is compared to GDV growth on a local currency basis. In 2020,
GDV on a U.S. dollar-converted basis decreased 2.0%, while GDV on a local currency basis increased 0.1% versus 2019. In 2019, GDV
on a U.S. dollar-converted basis increased 9.8%, while GDV on a local currency basis increased 13.1% versus 2018. Further, the
impact from transactional currency occurs in transaction processing revenue, other revenue and operating expenses when the local
currency of these items is different than the functional currency of the entity.
The translational and transactional impact of currency (“Currency impact”) has been identified in our drivers of change tables and
has been excluded from our currency-neutral growth rates, which are non-GAAP financial measures. See “Financial Results -
Revenue and Operating Expenses” for our drivers of change impact tables and “Non-GAAP Financial Information” for further
information on our non-GAAP adjustments.
2021 Hedge Accounting Designation
Through December 31, 2020, our approach to manage our transactional currency exposure consisted of hedging a portion of
anticipated revenues impacted by transactional currencies by entering into foreign exchange derivative contracts, and recording the
related changes in fair value in general and administrative expenses on the consolidated statement of operations. Beginning in
January 2021, we started to formally designate certain newly-executed foreign exchange derivative contracts, which meet the
established accounting criteria, as cash flow hedges. Starting in the first quarter of 2021, gains and losses resulting from changes in
fair value of these designated contracts will be deferred in accumulated other comprehensive income (loss) and subsequently
recognized in the respective component of net revenue when the underlying forecasted transactions impact earnings. The related
impact of our foreign exchange cash flow hedging activities will be excluded from our currency-neutral growth rates as part of our
Currency impact.
Foreign Exchange Activity
We incur foreign currency gains and losses from remeasuring monetary assets and liabilities, including settlement receivables and
payables with our customers, that are denominated in a currency other than the functional currency of the entity. To manage this
foreign exchange risk, we may enter into foreign exchange derivative contracts to economically hedge the foreign currency exposure
of a portion of our nonfunctional monetary assets and liabilities. The gains or losses resulting from changes in fair value of these
contracts are intended to reduce the potential effect of the underlying hedged exposure and are recorded net within general and
MASTERCARD 2020 FORM 10-K 47
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
administrative expenses on the consolidated statement of operations. The impact of foreign exchange activity, including the related
hedging activities, has not been eliminated in our currency-neutral results.
Our foreign exchange risk management activities are discussed further in Note 23 (Derivative and Hedging Instruments) to the
consolidated financial statements included in Part II, Item 8.
Risk of Currency Devaluation
We are exposed to currency devaluation in certain countries. In addition, we are subject to exchange control regulations that
restrict the conversion of financial assets into U.S. dollars. While these revenues and assets are not material to us on a consolidated
basis, we can be negatively impacted should there be a continued and sustained devaluation of local currencies relative to the U.S.
dollar and/or a continued and sustained deterioration of economic conditions in these countries.
Financial Results
Revenue
Primary drivers of net revenue, versus the prior year, were as follows:
Gross revenue decreased 5%, or 4% on a currency-neutral basis, driven by decreased cross-border volumes reflecting impacts of the
COVID-19 outbreak, partially offset by increases in our value-added products and services and the number of switched transactions.
Gross dollar volume of $6.3 trillion was flat.
Rebates and incentives increased 3%, or 4% on a currency-neutral basis, due to new and renewed deals partially offset by a
favorable mix of volume-based incentives.
Net revenue decreased 9%, or 8% on a currency-neutral basis, including 1 percentage point of growth from our acquisitions.
See Note 3 (Revenue) to the consolidated financial statements included in Part II, Item 8 for a further discussion of how we recognize
revenue.
The components of net revenue were as follows:
For the Years Ended December 31,
Increase (Decrease)
2020
2019
2018
2020
2019
($ in millions)
Domestic assessments
Cross-border volume fees
Transaction processing
Other revenues
Gross revenue
Rebates and incentives (contra-revenue)
$
6,656 $
6,781 $
3,512
8,731
4,717
23,616
(8,315)
5,606
8,469
4,124
24,980
(8,097)
6,138
4,954
7,391
3,348
21,831
(6,881)
Net revenue
$
15,301 $
16,883 $
14,950
(2)%
(37)%
3%
14%
(5)%
3%
(9)%
10%
13%
15%
23%
14%
18%
13%
48 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table summarizes the drivers of change in net revenue:
For the Years Ended December 31,
Volume
Acquisitions
Currency
Impact 1
Other 2
Total
Domestic assessments
Cross-border volume fees
Transaction processing
Other revenues
Rebates and incentives
Net revenue
2020
2019
2020
2019
2020
2019
2020
2019
2020
—%
(30)%
3%
2019
13%
14%
14%
—% —%
(3)%
—% —% —%
—% —% —%
**
(6)% 5
**
2%
3%
9% 5 —% —%
(5)%
13%
1%
1%
(1)%
(2)%
(1)%
(3)%
(3)%
(2)%
(1)%
(3)%
(3)%
1 % 3
1 % 3
(2) % 10 %
(7) %
2 % (37) % 13 %
3 %
— %
12 % 4 22 % 4
10 % 6 11 % 6
3 % 15 %
14 % 23 %
3 % 18 %
(4) %
2 %
(9) % 13 %
Note: Table may not sum due to rounding
** Not applicable
1
2
3
4
5
6
Represents the translational and transactional impact of currency.
Includes impact from pricing, other non-volume based fees and geographic mix.
Includes impact of the allocation of revenue to service deliverables, which are primarily recorded in other revenue when services are performed.
Includes impacts from cyber and intelligence fees, data analytics and consulting fees and other payment-related products and services.
Includes the impact from mix on volume-based incentives.
Includes the impact of new, renewed and expired agreements.
The following tables provide a summary of the trend in volumes and transactions.
Mastercard-branded GDV 1
Asia Pacific/Middle East/Africa
Canada
Europe
Latin America
United States
Cross-border volume 1
1
Excludes volume generated by Maestro and Cirrus cards.
Switched transactions
For the Years Ended December 31,
2020
2019
Increase/(Decrease)
USD
Local
USD
Local
(2) %
(3) %
(4) %
(2) %
(17) %
2 %
— %
(2) %
(3) %
1 %
(2) %
2 %
(29) %
10 %
8 %
4 %
12 %
9 %
10 %
13 %
12 %
7 %
18 %
15 %
10 %
16 %
For the Years Ended
December 31,
Increase/(Decrease)
2020
2019
3 %
19 %
No individual country, other than the United States, generated more than 10% of net revenue in any such period. A significant
portion of our net revenue is concentrated among our five largest customers. In 2020, the net revenue from these customers was
approximately $3.4 billion, or 22%, of total net revenue. The loss of any of these customers or their significant card programs could
adversely impact our revenue.
Operating Expenses
Operating expenses were flat in 2020 versus the prior year. Adjusted operating expenses decreased 1% on both an as adjusted and a
currency-neutral basis versus the prior year. Current year results include growth of approximately 4 percentage points from
acquisitions. Excluding acquisitions, expenses declined 5% primarily due to reduced spending on advertising and marketing, travel
and professional fees, partially offset by higher personnel and data processing costs to support continued investment in our strategic
initiatives.
MASTERCARD 2020 FORM 10-K 49
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The components of operating expenses were as follows:
General and administrative
Advertising and marketing
Depreciation and amortization
Provision for litigation
Total operating expenses
Special Items1
Adjusted operating expenses (excluding Special Items1)
For the Years Ended December 31,
Increase (Decrease)
2020
2019
2018
2020
2019
($ in millions)
$ 5,910 $ 5,763 $ 5,174
657
580
73
934
522
—
7,220
7,219
907
459
1,128
7,668
(73)
—
(1,128)
$ 7,147 $ 7,219 $ 6,540
3 %
(30) %
11 %
**
— %
**
(1) %
11 %
3 %
14 %
**
(6) %
**
10 %
Note: Table may not sum due to rounding.
** Not meaningful
1
See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
The following table summarizes the drivers of changes in operating expenses:
For the Years Ended December 31,
Operational
Special
Items 1
Acquisitions
Currency
Impact 2
Total
General and administrative
Advertising and marketing
Depreciation and amortization
Provision for litigation
Total operating expenses
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
(1)%
(30)%
5%
**
11 %
5 %
9 %
**
**
**
**
**
**
**
**
**
(5)%
10 %
1 % (16) %
4 %
2 %
— %
— %
6 %
**
4 %
7 %
**
2 %
— %
(1) %
— %
**
(2) %
3 % 11 %
(2) % (30) %
3 %
(2) % 11 % 14 %
**
**
**
— %
(2) %
— %
(6) %
Note: Table may not sum due to rounding.
** Not meaningful
1
2
See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
Represents the translational and transactional impact of currency.
General and Administrative
General and administrative expenses increased 3% on both an as reported and a currency-neutral basis in 2020 versus the prior year.
Current year results include growth of approximately 4 percentage points from acquisitions. Excluding acquisitions, expenses
declined 1% primarily due to reduced spending on travel and professional fees, partially offset by an increase in personnel and data
processing costs to support continued investment in our strategic initiatives.
50 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The components of general and administrative expenses were as follows:
Personnel
Professional fees
Data processing and telecommunications
Foreign exchange activity 1
Other
Total general and administrative expenses
For the Years Ended December 31,
Increase (Decrease)
2020
2019
2018
2020
2019
($ in millions)
$ 3,787 $ 3,537 $ 3,214
7%
384
756
9
974
5,910
447
666
32
1,081
5,763
377
600
(14)%
14%
(36)
**
1,019
(10)%
5,174
3%
10%
19%
11%
**
6%
11%
Note: Table may not sum due to rounding.
** Not meaningful
1
Foreign exchange activity includes gains and losses on foreign exchange derivative contracts and the impact of remeasurement of assets and
liabilities denominated in foreign currencies. See Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements
included in Part II, Item 8 for further discussion.
Advertising and Marketing
Advertising and marketing expenses decreased 30%, or 29% on a currency-neutral basis in 2020 versus the prior year, primarily due
to lower advertising and sponsorship spend in response to COVID-19.
Depreciation and Amortization
Depreciation and amortization expenses increased 11% on both an as reported and a currency-neutral basis in 2020 versus the prior
year. Current year results include growth of approximately 6 percentage points from acquisitions. The remaining increase was
primarily due to higher depreciation from capital investments.
Provision for Litigation
In 2020, we recorded $73 million related to various litigation settlements and legal costs. There were no litigation charges in the
prior year. See Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for
further discussion.
Other Income (Expense)
Other income (expense) was unfavorable in 2020 versus the prior year primarily due to increased interest expense related to our
recent debt issuances, as well as lower net gains in the current year versus the prior year related to unrealized fair market value
adjustments on marketable and non-marketable equity securities and a decrease in our investment income.
The components of other income (expense) were as follows:
Investment Income
Gains (losses) on equity investments, net
Interest expense
Other income (expense), net
Total other income (expense)
Note: Table may not sum due to rounding.
** Not meaningful
Income Taxes
For the Years Ended December 31,
Increase (Decrease)
2020
2019
2018
2020
2019
($ in millions)
$
24 $
97 $
122
30
(380)
5
(321)
167
(224)
27
67
—
(186)
(14)
(78)
(75) %
(82) %
70 %
(81) %
**
(21) %
**
20 %
**
**
The effective income tax rates for the years ended December 31, 2020 and 2019 were 17.4% and 16.6%, respectively. The effective
income tax rate for 2020 was higher than the prior year, primarily due to discrete tax benefits in 2019, partially offset by a more
MASTERCARD 2020 FORM 10-K 51
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
favorable geographic mix of earnings in 2020. The 2019 discrete tax benefits related to a favorable court ruling, a reduction to the
Company’s transition tax liability and additional foreign tax credits which can be carried back under U.S tax reform transition rules
issued by the Department of the Treasury and the Internal Revenue Service.
The adjusted effective income tax rates for the years ended December 31, 2020 and 2019 were 17.2% and 17.0%, respectively. The
adjusted effective income tax rate was higher than the prior year, primarily due to a discrete tax benefit related to a favorable court
ruling in 2019.
See Note 20 (Income Taxes) to the consolidated financial statements included in Part II, Item 8 for further discussion.
Liquidity and Capital Resources
We rely on existing liquidity, cash generated from operations and access to capital to fund our global operations, credit and
settlement exposure, capital expenditures, investments in our business and current and potential obligations. The following table
summarizes the cash, cash equivalents, investments and credit available to us at December 31:
Cash, cash equivalents and investments 1
Unused line of credit
2020
2019
(in billions)
$
10.6 $
6.0
7.7
6.0
1
Investments include available-for-sale securities and held-to-maturity securities. This amount excludes restricted cash and restricted cash
equivalents of $2.3 billion and $2.0 billion at December 31, 2020 and 2019, respectively.
We believe that our existing cash, cash equivalents and investment securities balances, our cash flow generating capabilities, and our
access to capital resources are sufficient to satisfy our future operating cash needs, capital asset purchases, outstanding
commitments and other liquidity requirements associated with our existing operations and potential obligations.
Our liquidity and access to capital could be negatively impacted by global credit market conditions. We guarantee the settlement of
many of the transactions between our customers. Historically, payments under these guarantees have not been significant;
however, historical trends may not be an indication of potential future losses. The risk of loss on these guarantees is specific to
individual customers, but may also be driven by regional or global economic conditions, including, but not limited to the health of
the financial institutions in a country or region. See Note 22 (Settlement and Other Risk Management) to the consolidated financial
statements in Part II, Item 8 for a description of these guarantees.
Our liquidity and access to capital could also be negatively impacted by the outcome of any of the legal or regulatory proceedings to
which we are a party. For additional discussion of these and other risks facing our business, see Part I, Item 1A - Risk Factors - Legal
and Regulatory Risks and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II,
Item 8.
Cash Flow
The table below shows a summary of the cash flows from operating, investing and financing activities:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
For the Years Ended December 31,
2020
2019
2018
(in millions)
$ 7,224 $ 8,183 $ 6,223
(1,879)
(1,640)
(506)
(2,152)
(5,867)
(4,966)
Net cash provided by operating activities decreased $1.0 billion in 2020 versus the prior year, primarily due to lower net income
adjusted for non-cash items, partially offset by a decrease in litigation payments.
Net cash used in investing activities increased $239 million in 2020 versus the prior year, primarily due to lower net proceeds from
our investments in available-for-sale and held-to-maturity securities, partially offset by higher prior year acquisition payments.
Net cash used in financing activities decreased $3.7 billion in 2020 versus the prior year, primarily due to lower repurchases of our
Class A common stock, higher net debt proceeds in the current period and the repayment of debt that matured in the prior year.
52 MASTERCARD 2020 FORM 10-K
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Debt and Credit Availability
In March 2020, we issued $1 billion principal amount of notes due March 2027, $1.5 billion principal amount of notes due March
2030 and $1.5 billion principal amount notes due March 2050. Our total debt outstanding was $12.7 billion at December 31, 2020,
with the earliest maturity of $650 million of principal occurring in November 2021.
As of December 31, 2020, we have a commercial paper program (the “Commercial Paper Program”), under which we are authorized
to issue up to $6 billion in outstanding notes, with maturities up to 397 days from the date of issuance. In conjunction with the
Commercial Paper Program, we have a committed unsecured $6 billion revolving credit facility (the “Credit Facility”) which, in 2020,
was extended for an additional year and now expires in November 2025.
Borrowings under the Commercial Paper Program and the Credit Facility are to provide liquidity for general corporate purposes,
including providing liquidity in the event of one or more settlement failures by our customers. In addition, we may borrow and
repay amounts under these facilities for business continuity purposes. We had no borrowings outstanding under the Commercial
Paper Program or the Credit Facility at December 31, 2020.
See Note 15 (Debt) to the consolidated financial statements included in Part II, Item 8 for further discussion on our debt, the
Commercial Paper Program and the Credit Facility.
Dividends and Share Repurchases
We have historically paid quarterly dividends on our outstanding Class A common stock and Class B common stock. Subject to
legally available funds, we intend to continue to pay a quarterly cash dividend. The declaration and payment of future dividends is at
the sole discretion of our Board of Directors after taking into account various factors, including our financial condition, operating
results, available cash and current and anticipated cash needs.
The following table summarizes the annual, per share dividends paid in the years reflected:
Cash dividend, per share
Cash dividends paid
For the Years Ended December 31,
2020
2019
2018
(in millions, except per share data)
$
$
1.60 $
1.32 $
1.00
1,605 $
1,345 $
1,044
On December 8, 2020, our Board of Directors declared a quarterly cash dividend of $0.44 per share paid on February 9, 2021 to
holders of record on January 8, 2021 of our Class A common stock and Class B common stock. The aggregate amount of this
dividend was $439 million.
On February 8, 2021, our Board of Directors declared a quarterly cash dividend of $0.44 per share payable on May 7, 2021 to holders
of record on April 9, 2021 of our Class A common stock and Class B common stock. The aggregate amount of this dividend is
estimated to be $437 million.
Repurchased shares of our common stock are considered treasury stock. In December 2020, 2019 and 2018, our Board of Directors
approved share repurchase programs authorizing us to repurchase up to $6.0 billion, $8.0 billion and $6.5 billion, respectively, of our
Class A common stock. The program approved in 2020 will become effective after completion of the share repurchase program
authorized in 2019. The timing and actual number of additional shares repurchased will depend on a variety of factors, including
cash requirements to meet the operating needs of the business, legal requirements, as well as the share price and economic and
market conditions. The following table summarizes our share repurchase activity of our Class A common stock through
December 31, 2020, under the plans approved in 2019 and 2018:
Remaining authorization at December 31, 2019
Dollar-value of shares repurchased in 2020
Remaining authorization at December 31, 2020
Shares repurchased in 2020
Average price paid per share in 2020
(in millions, except per share data)
$
$
$
$
8,304
4,473
9,831
14.3
312.68
See Note 16 (Stockholders' Equity) to the consolidated financial statements included in Part II, Item 8 for further discussion.
MASTERCARD 2020 FORM 10-K 53
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Estimates
The application of GAAP requires us to make estimates and assumptions about certain items and future events that directly affect
our reported financial condition. Our significant accounting policies, including recent accounting pronouncements, are described in
Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part II, Item 8.
Revenue Recognition - Rebates and Incentives
We enter into business agreements with certain customers that provide for rebates or support when customers meet certain volume
thresholds as well as other support incentives, which are tied to customer performance. We consider various factors in estimating
customer performance, including forecasted transactions, card issuance and card conversion volumes, expected payments and
historical experience with that customer. Rebates and incentives are recorded as a reduction to gross revenue based on these
estimates primarily when volume- and transaction- based revenues are recognized over the contractual term. Differences between
actual results and our estimates are adjusted in the period the customer reports actual performance. If our customers’ actual
performance is not consistent with our estimates of their performance, net revenue may be materially different.
Loss Contingencies
We are currently involved in various claims and legal proceedings. We regularly review the status of each significant matter and
assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the
amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is required in both the
determination of probability and whether an exposure is reasonably estimable. Our judgments are subjective based on the status of
the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel. Because of
uncertainties related to these matters, accruals are based only on the best information available at the time. As additional
information becomes available, we reassess the potential liability related to pending claims and litigation and may revise our
estimates. Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which we operate,
our judgments may be materially different than the actual outcomes.
Income Taxes
In calculating our effective income tax rate, estimates are required regarding the timing and amount of taxable and deductible items
which will adjust the pretax income earned in various tax jurisdictions. Through our interpretation of local tax regulations,
adjustments to pretax income for income earned in various tax jurisdictions are reflected within various tax filings. Although we
believe that our estimates and judgments discussed herein are reasonable, actual results may be materially different than the
estimated amounts.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
Significant judgment is required in determining the valuation allowance. In assessing the need for a valuation allowance, we
consider all sources of taxable income including, projected future taxable income, reversing taxable temporary differences and
ongoing tax planning strategies. If it is determined that we are able to realize deferred tax assets in excess of the net carrying value
or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance in the period in which such a
determination is made, with a corresponding increase or decrease to earnings.
We record tax liabilities for uncertain tax positions taken, or expected to be taken, which may not be sustained or may only be
partially sustained, upon examination by the relevant taxing authorities. We consider all relevant facts and current authorities in the
tax law in assessing whether any benefit resulting from an uncertain tax position is more likely than not to be sustained and, if so,
how current law impacts the amount reflected within these financial statements. If upon examination, we realize a tax benefit
which is not fully sustained or is more favorably sustained, this would decrease or increase earnings in the period. In certain
situations, we will have offsetting tax credits or taxes in other jurisdictions.
Deferred taxes are established on the estimated foreign exchange gains or losses for foreign earnings that are not considered
permanently reinvested, which will be recognized through cumulative translation adjustments as incurred. Ultimately, the working
capital requirements of foreign affiliates will determine the amount of cash to be remitted from respective jurisdictions.
Business Combinations
We account for our business combinations using the acquisition method of accounting. The acquisition purchase price, including
contingent consideration, is allocated to the underlying identified, tangible and intangible assets, liabilities assumed and any non-
controlling interest in the acquiree, based on their respective estimated fair values on the acquisition date. Any excess of purchase
price over the fair value of net assets acquired, including identifiable intangible assets, is recorded as goodwill. The amounts and
useful lives assigned to acquisition-related tangible and intangible assets impact the amount and timing of future amortization
54 MASTERCARD 2020 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
expense. We use various valuation techniques to determine fair value, primarily discounted cash flows analysis, relief-from-royalty
and multi-period excess earnings for estimating the value of intangible assets. These valuation techniques included comparable
company multiples, discount rates, growth projections and other assumptions of future business conditions. Determining the fair
value of assets acquired, liabilities assumed, any non-controlling interest in the acquiree and the expected useful lives, requires
management’s judgment. The significance of management’s estimates and assumptions is relative to the size of the acquisition. Our
estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.
Item 7A. Quantitative and qualitative disclosures about market
risk
Market risk is the potential for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in
factors such as interest rates and foreign currency exchange rates. Our exposure to market risk from changes in interest rates and
foreign exchange rates is limited. Management monitors risk exposures on an ongoing basis and establishes and oversees the
implementation of policies governing our funding, investments and use of derivative financial instruments to manage these risks.
Foreign currency and interest rate exposures are managed through our risk management activities, which are discussed further in
Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.
Foreign Exchange Risk
We enter into foreign exchange derivative contracts to manage currency exposure associated with anticipated receipts and
disbursements occurring in a currency other than the functional currency of the entity. We may also enter into foreign currency
derivative contracts to offset possible changes in value of assets and liabilities due to foreign exchange fluctuations. The objective of
these activities is to reduce our exposure to transaction gains and losses resulting from fluctuations of foreign currencies against our
functional and reporting currencies, principally the U.S. dollar and euro. The effect of a hypothetical 10% adverse change in the
value of the functional currencies could result in a fair value loss of approximately $58 million and $144 million on our foreign
exchange derivative contracts outstanding at December 31, 2020 and 2019, respectively, before considering the offsetting effect of
the underlying hedged activity.
We are also subject to foreign exchange risk as part of our daily settlement activities. To manage this risk, we enter into short
duration foreign exchange contracts based upon anticipated receipts and disbursements for the respective currency position. This
risk is typically limited to a few days between when a payment transaction takes place and the subsequent settlement with our
customers. The effect of a hypothetical 10% adverse change in the value of the functional currencies could result in a fair value loss
of approximately $23 million on our short duration foreign exchange derivative contracts outstanding at December 31, 2020. The
Company did not have any outstanding short duration foreign exchange derivative contracts related to this activity at December 31,
2019.
Interest Rate Risk
Our available-for-sale debt investments include fixed and variable rate securities that are sensitive to interest rate fluctuations. Our
policy is to invest in high quality securities, while providing adequate liquidity and maintaining diversification to avoid significant
exposure. A hypothetical 100 basis point adverse change in interest rates would not have a material impact to the fair value of our
investments at December 31, 2020 and 2019.
MASTERCARD 2020 FORM 10-K 55
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial statements and supplementary data
Mastercard Incorporated
Index to consolidated financial statements
As of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018
Management’s report on internal control over financial reporting
Report of independent registered public accounting firm
Consolidated Statement of Operations
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to consolidated financial statements
Page
57
58
60
61
62
63
65
66
56 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s report on internal control over financial reporting
The management of Mastercard Incorporated (“Mastercard”) is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. As required by Section 404 of the Sarbanes-Oxley
Act of 2002, management has assessed the effectiveness of Mastercard’s internal control over financial reporting as of December 31,
2020. In making its assessment, management has utilized the criteria set forth in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has concluded that, based
on its assessment, Mastercard’s internal control over financial reporting was effective as of December 31, 2020. The effectiveness of
Mastercard’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears on the next page.
MASTERCARD 2020 FORM 10-K 57
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Mastercard Incorporated
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Mastercard Incorporated and its subsidiaries (the “Company”) as
of December 31, 2020 and 2019 and the related consolidated statements of operations, comprehensive income, changes in equity
and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred
to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on internal control over financial reporting. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
58 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Rebates and Incentives
As described in Notes 1 and 3 to the consolidated financial statements, the Company provides certain customers with rebates or
incentives which totaled $8.3 billion for the year ended December 31, 2020. The Company has business agreements with certain
customers that provide for rebates or other support when customers meet certain volume hurdles as well as other support
incentives, which are tied to performance. Rebates and incentives are recorded as a reduction of gross revenue primarily when
volume- and transaction-based revenues are recognized over the contractual term. Rebates and incentives are calculated based
upon estimated customer performance and the terms of the related business agreements. As disclosed by management, various
factors are considered in estimating customer performance, including forecasted transactions, card issuance and card conversion
volumes, expected payments and historical experience with that customer.
The principal considerations for our determination that performing procedures relating to rebates and incentives is a critical audit
matter are (i) the significant judgment by management when developing estimates related to rebates and incentives based on
customer performance; and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating
management’s estimates related to customer performance, including the reasonableness of the various applicable factors
considered by management in the estimate.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to rebates and
incentives, including controls over evaluating estimated customer performance. These procedures also included, among others,
evaluating the reasonableness of estimated customer performance for a sample of customer agreements, including (i) evaluating
rebate and incentive contracts to identify whether all incentives are identified and recorded accurately; (ii) testing management’s
process for developing estimated customer performance, including evaluating the reasonableness of the various applicable factors
considered by management; and (iii) evaluating estimated customer performance as compared to actual results in the period the
customer reports actual performance.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 12, 2021
We have served as the Company’s auditor since 1989.
MASTERCARD 2020 FORM 10-K 59
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statement of Operations
Net Revenue
Operating Expenses
General and administrative
Advertising and marketing
Depreciation and amortization
Provision for litigation
Total operating expenses
Operating income
Other Income (Expense)
Investment income
Gains (losses) on equity investments, net
Interest expense
Other income (expense), net
Total other income (expense)
Income before income taxes
Income tax expense
Net Income
Basic Earnings per Share
Basic weighted-average shares outstanding
Diluted Earnings per Share
Diluted weighted-average shares outstanding
For the Years Ended December 31,
2020
2019
2018
(in millions, except per share data)
$
15,301 $
16,883 $
14,950
5,910
657
580
73
7,220
8,081
24
30
(380)
5
(321)
7,760
1,349
6,411 $
6.40 $
1,002
6.37 $
1,006
5,763
934
522
—
7,219
9,664
97
167
(224)
27
67
9,731
1,613
8,118 $
7.98 $
1,017
7.94 $
1,022
5,174
907
459
1,128
7,668
7,282
122
—
(186)
(14)
(78)
7,204
1,345
5,859
5.63
1,041
5.60
1,047
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
60 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statement of Comprehensive Income
Net Income
Other comprehensive income (loss):
Foreign currency translation adjustments
Income tax effect
Foreign currency translation adjustments, net of income tax effect
Translation adjustments on net investment hedge
Income tax effect
Translation adjustments on net investment hedge, net of income tax effect
Cash flow hedges
Income tax effect
Reclassification adjustment for cash flow hedges
Income tax effect
Cash flow hedges, net of income tax effect
Defined benefit pension and other postretirement plans
Income tax effect
Reclassification adjustment for defined benefit pension and other postretirement plans
Income tax effect
Defined benefit pension and other postretirement plans, net of income tax effect
Investment securities available-for-sale
Income tax effect
Investment securities available-for-sale, net of income tax effect
Other comprehensive income (loss), net of income tax effect
Comprehensive Income
For the Years Ended December 31,
2020
2019
2018
(in millions)
$ 6,411 $ 8,118 $ 5,859
345
(59)
286
(177)
40
(137)
(189)
42
4
(1)
(144)
(12)
2
(1)
—
(11)
(1)
—
(1)
10
13
23
36
(8)
28
14
(3)
—
—
11
(21)
3
(1)
—
(19)
3
(1)
2
(319)
40
(279)
96
(21)
75
—
—
—
—
—
(16)
3
(2)
—
(15)
(3)
1
(2)
(7)
(221)
$ 6,404 $ 8,163 $ 5,638
45
The accompanying notes are an integral part of these consolidated financial statements.
MASTERCARD 2020 FORM 10-K 61
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Balance Sheet
Assets
Current assets:
Cash and cash equivalents
Restricted cash for litigation settlement
Investments
Accounts receivable
Settlement due from customers
Restricted security deposits held for customers
Prepaid expenses and other current assets
Total current assets
Property, equipment and right-of-use assets, net
Deferred income taxes
Goodwill
Other intangible assets, net
Other assets
Total Assets
Liabilities, Redeemable Non-controlling Interests and Equity
Current liabilities:
Accounts payable
Settlement due to customers
Restricted security deposits held for customers
Accrued litigation
Accrued expenses
Current portion of long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Other liabilities
Total Liabilities
Commitments and Contingencies
Redeemable Non-controlling Interests
Stockholders’ Equity
Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,396 and 1,391 shares
issued and 987 and 996 shares outstanding, respectively
Class B common stock, $0.0001 par value; authorized 1,200 shares, 8 and 11 shares issued
and outstanding, respectively
Additional paid-in-capital
Class A treasury stock, at cost, 409 and 395 shares, respectively
Retained earnings
Accumulated other comprehensive income (loss)
Mastercard Incorporated Stockholders' Equity
Non-controlling interests
Total Equity
December 31,
2020
2019
(in millions, except per share data)
$
$
$
10,113 $
586
483
2,646
1,706
1,696
1,883
19,113
1,902
491
4,960
1,753
5,365
33,584 $
527 $
1,475
1,696
842
5,430
649
1,228
11,847
12,023
86
3,111
27,067
29
—
—
4,982
(36,658)
38,747
(680)
6,391
97
6,488
6,988
584
688
2,514
2,995
1,370
1,763
16,902
1,828
543
4,021
1,417
4,525
29,236
489
2,714
1,370
914
5,489
—
928
11,904
8,527
85
2,729
23,245
74
—
—
4,787
(32,205)
33,984
(673)
5,893
24
5,917
Total Liabilities, Redeemable Non-controlling Interests and Equity
$
33,584 $
29,236
The accompanying notes are an integral part of these consolidated financial statements.
62 MASTERCARD 2020 FORM 10-K
Consolidated Statement of Changes in Equity
Stockholders’ Equity
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Common Stock
Class A
Class B
Additional
Paid-In
Capital
Class A
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Mastercard
Incorporated
Stockholders'
Equity
Non-
Controlling
Interests
Total
Equity
(in millions, except per share data)
$ — $ — $ 4,365 $ (20,764) $ 22,364 $
(497) $
5,468 $
29 $ 5,497
Balance at December
31, 2017
Adoption of revenue
standard
Adoption of intra-
entity asset transfers
standard
Net income
Activity related to
non-controlling
interests
Redeemable non-
controlling interest
adjustments
Other comprehensive
income (loss)
Dividends
Purchases of treasury
stock
Share-based
payments
Balance at December
31, 2018
Net income
Activity related to
non-controlling
interests
Redeemable non-
controlling interest
adjustments
Other comprehensive
income (loss)
Dividends
Purchases of treasury
stock
Share-based
payments
Balance at December
31, 2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
366
—
—
—
—
—
—
(4,991)
(183)
5,859
—
(3)
—
(1,120)
—
—
—
8,118
—
—
—
—
(6,463)
—
(9)
—
(1,408)
—
—
—
—
215
5
—
—
4,580
(25,750)
27,283
(718)
—
—
—
—
—
(221)
—
—
—
—
—
—
45
—
—
—
366
(183)
5,859
—
(3)
(221)
(1,120)
(4,991)
220
5,395
8,118
—
(9)
45
(1,408)
(6,463)
215
—
—
—
366
(183)
5,859
(6)
(6)
—
—
—
—
—
23
—
1
—
—
—
—
—
(3)
(221)
(1,120)
(4,991)
220
5,418
8,118
1
(9)
45
(1,408)
(6,463)
215
—
—
207
8
—
—
4,787
(32,205)
33,984
(673)
5,893
24
5,917
MASTERCARD 2020 FORM 10-K 63
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statement of Changes in Equity (Continued)
Stockholders’ Equity
Common Stock
Class A
Class B
Additional
Paid-In
Capital
Class A
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Mastercard
Incorporated
Stockholders'
Equity
Non-
Controlling
Interests
Total
Equity
(in millions, except per share data)
Balance at December
31, 2019
Net income
Activity related to
non-controlling
interests
Redeemable non-
controlling interest
adjustments
Other comprehensive
income (loss)
Dividends
Purchases of treasury
stock
Share-based
payments
Balance at December
31, 2020
—
—
4,787
(32,205)
33,984
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,411
—
—
—
—
(4,459)
—
(7)
—
(1,641)
—
—
—
—
195
6
(673)
—
5,893
6,411
—
—
(7)
—
—
—
—
(7)
(7)
(1,641)
(4,459)
201
24
—
73
—
—
—
—
—
5,917
6,411
73
(7)
(7)
(1,641)
(4,459)
201
$ — $ — $ 4,982 $ (36,658) $ 38,747 $
(680) $
6,391 $
97 $ 6,488
The accompanying notes are an integral part of these consolidated financial statements.
64 MASTERCARD 2020 FORM 10-K
Consolidated Statement of Cash Flows
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For the Years Ended December 31,
2019
(in millions)
2018
2020
Operating Activities
Net income
$
6,411 $
8,118 $
5,859
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of customer and merchant incentives
1,072
1,141
1,235
Depreciation and amortization
(Gains) losses on equity investments, net
Share-based compensation
Deferred income taxes
Other
Changes in operating assets and liabilities:
Accounts receivable
Income taxes receivable
Settlement due from customers
Prepaid expenses
Accrued litigation and legal settlements
Restricted security deposits held for customers
Accounts payable
Settlement due to customers
Accrued expenses
Long-term taxes payable
Net change in other assets and liabilities
Net cash provided by operating activities
Investing Activities
Purchases of investment securities available-for-sale
Purchases of investments held-to-maturity
Proceeds from sales of investment securities available-for-sale
Proceeds from maturities of investment securities available-for-sale
Proceeds from maturities of investments held-to-maturity
Purchases of property and equipment
Capitalized software
Purchases of equity investments
Acquisition of businesses, net of cash acquired
Settlement of interest rate derivative contracts
Other investing activities
Net cash used in investing activities
Financing Activities
Purchases of treasury stock
Dividends paid
Proceeds from debt, net
Payment of debt
Acquisition of redeemable non-controlling interests
Contingent consideration paid
Tax withholdings related to share-based payments
Cash proceeds from exercise of stock options
Other financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period
580
(30)
254
73
14
(86)
(2)
1,288
(1,552)
(73)
326
26
(1,242)
(114)
(37)
316
522
(167)
250
(7)
24
(246)
(202)
(444)
(1,661)
(662)
290
(42)
477
657
2
133
7,224
8,183
(220)
(198)
361
140
121
(339)
(369)
(214)
(989)
(175)
3
(643)
(215)
1,098
376
383
(422)
(306)
(467)
(1,440)
—
(4)
459
—
196
(244)
31
(317)
(120)
(1,078)
(1,769)
869
(6)
101
849
439
(20)
(261)
6,223
(1,300)
(509)
604
379
929
(330)
(174)
(91)
—
—
(14)
(1,879)
(1,640)
(506)
(4,473)
(1,605)
3,959
—
(49)
—
(150)
97
69
(6,497)
(1,345)
2,724
(500)
—
(199)
(161)
126
(15)
(4,933)
(1,044)
991
—
—
—
(80)
104
(4)
(2,152)
(5,867)
(4,966)
257
3,450
8,969
(44)
632
8,337
(6)
745
7,592
Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period
$ 12,419 $
8,969 $
8,337
The accompanying notes are an integral part of these consolidated financial statements.
MASTERCARD 2020 FORM 10-K 65
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes to consolidated financial statements
Note 1. Summary of Significant Accounting Policies
Organization
its consolidated subsidiaries,
Mastercard Incorporated and
including Mastercard International Incorporated (“Mastercard
International” and together with Mastercard Incorporated, “Mastercard” or the “Company”), is a technology company in the global
payments industry that connects consumers, financial institutions, merchants, governments, digital partners, businesses and other
organizations worldwide, enabling them to use electronic forms of payment instead of cash and checks. The Company makes
payments easier and more efficient by providing a wide range of payment solutions and services through its family of well-known
brands, including Mastercard®, Maestro® and Cirrus®. The Company operates a multi-rail network that offers customers one partner
to turn to for their domestic and cross-border payment needs. Through its unique and proprietary global payments network, which
is referred to as the core network, the Company switches (authorizes, clears and settles) payment transactions and delivers related
products and services. Mastercard has additional payment capabilities that include automated clearing house (“ACH”) transactions
(both batch and real-time account-based payments). The Company also provides integrated value-added offerings such as cyber and
intelligence products, information and analytics services, consulting, loyalty and reward programs, processing and open banking.
The Company’s payment solutions offer customers choice and flexibility and are designed to ensure safety and security for the global
payments system.
A typical transaction on the Company’s core network involves four participants in addition to the Company: account holder (a
person or entity who holds a card or uses another device enabled for payment), issuer (the account holder’s financial institution),
merchant and acquirer (the merchant’s financial institution). The Company does not issue cards, extend credit, determine or receive
revenue from interest rates or other fees charged to account holders by issuers, or establish the rates charged by acquirers in
connection with merchants’ acceptance of the Company’s products. In most cases, account holder relationships belong to, and are
managed by, the Company’s financial institution customers.
Significant Accounting Policies
Consolidation and basis of presentation - The consolidated financial statements include the accounts of Mastercard and its majority-
owned and controlled entities, including any variable interest entities (“VIEs”) for which the Company is the primary beneficiary.
Investments in VIEs for which the Company is not considered the primary beneficiary are not consolidated and are accounted for as
equity method or measurement alternative method investments and recorded in other assets on the consolidated balance sheet. At
December 31, 2020 and 2019, there were no significant VIEs which required consolidation and the investments were not considered
material to the consolidated financial statements. The Company consolidates acquisitions as of the date in which the Company has
obtained a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. The
Company follows accounting principles generally accepted in the United States of America (“GAAP”).
Non-controlling interests represent the equity interest not owned by the Company and are recorded for consolidated entities in
which the Company owns less than 100% of the interests. Changes in a parent’s ownership interest while the parent retains its
controlling interest are accounted for as equity transactions, and upon loss of control, retained ownership interests are remeasured
at fair value, with any gain or loss recognized in earnings. For 2020, 2019 and 2018, net losses from non-controlling interests were
not material and, as a result, amounts are included on the consolidated statement of operations within other income (expense).
Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting periods. Future events and their
effects cannot be predicted with certainty, including the potential impacts and duration of the COVID-19 pandemic, as well as other
factors; accordingly, accounting estimates require the exercise of judgment. These financial statements were prepared using
information reasonably available as of December 31, 2020 and through the date of this Report. The accounting estimates used in
the preparation of the Company’s consolidated financial statements may change as new events occur, as more experience is
acquired, as additional information is obtained and as the Company’s operating environment changes. Actual results may differ
from these estimates.
Revenue recognition - Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. Revenue is
primarily generated from assessing customers based on the dollar volume of activity, or gross dollar volume, on the products that
carry the Company’s brands, from fees to issuers, acquirers and other stakeholders for providing switching services, as well as from
value-added products and services that are typically integrated and sold with the Company’s payment offerings.
66 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Volume-based revenue (domestic assessments and cross-border volume fees) is recorded as revenue in the period it is earned,
which is primarily based on the related volume generated on the cards. Certain volume-based revenue is based upon information
reported by customers. Transaction-based revenue (transaction processing) is primarily based on the number and type of
transactions and is recognized as revenue in the same period in which the related transactions occur. Other payment-related
products and services are recognized as revenue in the period in which the related services are performed or transactions occur. For
services provided to customers where delivery involves the use of a third-party, the Company recognizes revenue on a gross basis if
it acts as the principal, controlling the service to the customer and on a net basis if it acts as the agent, arranging for the service to be
provided.
Mastercard has business agreements with certain customers that provide for rebates or other support when the customers meet
certain volume hurdles as well as other support incentives, which are tied to performance. Rebates and incentives are recorded as a
reduction of gross revenue primarily when volume- and transaction-based revenues are recognized over the contractual term.
Rebates and incentives are calculated based upon estimated customer performance and the terms of the related business
agreements. In addition, Mastercard may make payments to a customer directly related to entering into an agreement, which are
generally capitalized and amortized over the life of the agreement on a straight-line basis.
Contract assets include unbilled consideration typically resulting from executed data analytic and consulting services performed for
customers in connection with Mastercard’s payment network service arrangements. Collection for these services typically occurs
over the contractual term. Contract assets are included in prepaid expenses and other current assets and other assets on the
consolidated balance sheet.
The Company defers the recognition of revenue when consideration has been received prior to the satisfaction of performance
obligations. As these performance obligations are satisfied, revenue is subsequently recognized. Deferred revenue is primarily
derived from data analytic and consulting services. Deferred revenue is included in other current liabilities and other liabilities on
the consolidated balance sheet.
Business combinations - The Company accounts for business combinations under the acquisition method of accounting. The
Company measures the tangible and intangible identifiable assets acquired, liabilities assumed, any non-controlling interest in the
acquiree and contingent consideration at fair value as of the acquisition date. Acquisition-related costs are expensed as incurred
and are included in general and administrative expenses on the consolidated statement of operations. Any excess purchase price
over the fair value of net assets acquired, including identifiable intangible assets, is recorded as goodwill. Measurement period
adjustments, if any, to the preliminary estimated fair value of the intangibles assets as of the acquisition date are recorded in
goodwill.
Goodwill and other intangible assets - Indefinite-lived intangible assets consist of goodwill, which represents the synergies expected
to arise after the acquisition date and the assembled workforce, and customer relationships. Finite-lived intangible assets consist of
capitalized software costs, customer relationships and other intangible assets. Intangible assets with finite useful lives are amortized
over their estimated useful lives, on a straight-line basis, which range from one to twenty years. Capitalized software includes
internal and external costs incurred directly related to the design, development and testing phases of each capitalized software
project.
Impairment of assets - Goodwill and indefinite-lived intangible assets are not amortized but tested annually for impairment at the
reporting unit level in the fourth quarter, or sooner when circumstances indicate an impairment may exist. The impairment
evaluation for goodwill utilizes a qualitative assessment to determine whether it is more likely than not that goodwill is impaired.
The qualitative factors may include, but are not limited to, macroeconomic conditions, industry and market conditions, operating
environment, financial performance and other relevant events. If it is determined that it is more likely than not that goodwill is
impaired, then the Company is required to perform a quantitative goodwill impairment test. If the fair value of a reporting unit
exceeds the carrying value, goodwill is not impaired. If the fair value of the reporting unit is less than its carrying value, then
goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment charge.
The impairment test for indefinite-lived intangible assets consists of a qualitative assessment to evaluate relevant events and
circumstances that could affect the significant inputs used to determine the fair value of indefinite-lived intangible assets. If the
qualitative assessment indicates that it is more likely than not that indefinite-lived intangible assets are impaired, then a quantitative
assessment is required.
Long-lived assets, other than goodwill and indefinite-lived intangible assets, are tested for impairment whenever events or
circumstances indicate that their carrying amount may not be recoverable. If the carrying value of the asset cannot be recovered
from estimated future cash flows, undiscounted and without interest, the fair value of the asset is calculated using the present value
of estimated net future cash flows. If the carrying amount of the asset exceeds its fair value, an impairment is recorded.
Impairment charges, if any, are recorded in general and administrative expenses on the consolidated statement of operations.
MASTERCARD 2020 FORM 10-K 67
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation - The Company is a party to certain legal and regulatory proceedings with respect to a variety of matters. The Company
evaluates the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which it is a party and accrues a loss
contingency when the loss is probable and reasonably estimable. Loss contingencies are recorded in provision for litigation on the
consolidated statement of operations. These judgments are subjective based on the status of the legal or regulatory proceedings,
the merits of its defenses and consultation with in-house and external legal counsel. Legal costs are expensed as incurred and
recorded in general and administrative expenses on the consolidated statement of operations.
Settlement and other risk management - Mastercard’s rules guarantee the settlement of many of the transactions between its
customers. Settlement exposure is the outstanding settlement risk to customers under Mastercard’s rules due to the difference in
timing between the payment transaction date and subsequent settlement. While the term and amount of the guarantee are
unlimited, the duration of settlement exposure is short term and typically limited to a few days.
The Company also enters into agreements in the ordinary course of business under which the Company agrees to indemnify third
parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or
transactions with the Company. As the extent of the Company’s obligations under these agreements depends entirely upon the
occurrence of future events, the Company’s potential future liability under these agreements is not determinable.
The Company accounts for each of its guarantees by recording the guarantee at its fair value at the inception or modification date
through earnings.
Income taxes - The Company follows an asset and liability based approach in accounting for income taxes as required under GAAP.
Deferred income tax assets and liabilities are recorded to reflect the tax consequences on future years of temporary differences
between the financial statement carrying amounts and income tax bases of assets and liabilities. Deferred income taxes are
displayed separately as noncurrent assets and liabilities on the consolidated balance sheet. Valuation allowances are provided
against assets which are not more likely than not to be realized. The Company recognizes all material tax positions, including
uncertain tax positions in which it is more likely than not that the position will be sustained based on its technical merits and if
challenged by the relevant taxing authorities. At each balance sheet date, unresolved uncertain tax positions are reassessed to
determine whether subsequent developments require a change in the amount of recognized tax benefit. The allowance for
uncertain tax positions is recorded in other current and noncurrent liabilities on the consolidated balance sheet. The Company
records interest expense related to income tax matters as interest expense on the consolidated statement of operations. The
Company includes penalties related to income tax matters in the income tax provision.
Cash and cash equivalents - Cash and cash equivalents include certain investments with daily liquidity and with an original maturity
of three months or less from the date of purchase. Cash equivalents are recorded at cost, which approximates fair value.
Restricted cash - The Company classifies cash and cash equivalents as restricted when it is unavailable for withdrawal or use in its
general operations. The Company has the following types of restricted cash and restricted cash equivalents which are included in
the reconciliation of beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows:
• Restricted cash for litigation settlement - The Company has restricted cash for litigation within a qualified settlement fund related
to the settlement agreement for the U.S. merchant class litigation. The funds continue to be restricted for payments until the
litigation matter is resolved.
• Restricted security deposits held for customers - The Company requires collateral from certain customers for settlement of their
transactions. The majority of collateral for settlement is in the form of standby letters of credit and bank guarantees which are
not recorded on the consolidated balance sheet. Additionally, the Company holds cash deposits and certificates of deposit from
certain customers as collateral for settlement of their transactions, which are recorded as assets on the consolidated balance
sheet. These assets are fully offset by corresponding liabilities included on the consolidated balance sheet. These security
deposits are typically held for the duration of the agreement with the customers.
• Other restricted cash balances - The Company has other restricted cash balances which include contractually restricted deposits,
as well as cash balances that are restricted based on the Company’s intention with regard to usage. These funds are classified on
the consolidated balance sheet within prepaid expenses and other current assets and other assets.
Fair value - The Company measures certain financial assets and liabilities at fair value on a recurring basis by estimating the price
that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants.
The Company classifies these recurring fair value measurements into a three-level hierarchy (“Valuation Hierarchy”).
The Valuation Hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement
date. A financial instrument’s categorization within the Valuation Hierarchy is based upon the lowest level of input that is significant
to the fair value measurement. The three levels of the Valuation Hierarchy are as follows:
•
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets
68 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
•
•
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets and liabilities in inactive markets and inputs that are observable for the asset or liability
Level 3 - inputs to the valuation methodology are unobservable and cannot be directly corroborated by observable market data
Certain assets are measured at fair value on a nonrecurring basis. The Company’s non-financial assets measured at fair value on a
nonrecurring basis include property, equipment and right-of-use assets, goodwill and other intangible assets. These assets are
subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.
The valuation methods for goodwill and other intangible assets acquired in business combinations involve assumptions concerning
comparable company multiples, discount rates, growth projections and other assumptions of future business conditions. The
Company uses various valuation techniques to determine fair value, primarily discounted cash flows analysis, relief-from-royalty, and
multi-period excess earnings for estimating the fair value of its intangible assets. As the assumptions employed to measure these
assets are based on management’s judgment using internal and external data, these fair value determinations are classified in Level
3 of the Valuation Hierarchy.
Contingent consideration - Certain business combinations involve the potential for future payment of consideration that is
contingent upon the achievement of performance milestones. These liabilities are classified within Level 3 of the Valuation
Hierarchy as the inputs used to measure fair value are unobservable and require management’s judgment. The fair value of the
contingent consideration at the acquisition date and subsequent periods is determined utilizing an income approach based on a
Monte Carlo technique and is recorded in other current liabilities and other liabilities on the consolidated balance sheet. Changes to
projected performance milestones of the acquired businesses could result in a higher or lower contingent consideration liability. The
changes in fair value as a result of updated assumptions are recorded in general and administrative expenses on the consolidated
statement of operations.
Investment securities - The Company classifies investments as available-for-sale or held-to-maturity at the date of acquisition.
•
Available-for-sale debt securities:
◦
Investments in debt securities that are available to meet the Company’s current operational needs are classified as current
assets and the securities that are not available for current operational needs are classified as non-current assets on the
consolidated balance sheet.
The debt securities are carried at fair value, with unrealized gains and losses, net of tax, recorded as a separate component
of accumulated other comprehensive income (loss) on the consolidated statement of comprehensive income. Net realized
gains and losses on debt securities are recognized in investment income on the consolidated statement of operations. The
specific identification method is used to determine realized gains and losses.
The Company evaluates its debt securities for impairment on an ongoing basis. When there has been a decline in fair value
of a debt security below the amortized cost basis, the Company recognizes an impairment if: (1) it has the intent to sell the
security; (2) it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis;
or (3) it does not expect to recover the entire amortized cost basis of the security. The credit loss component of the
impairment is recognized as an allowance and recorded in other income (expense), net on the consolidated statement of
operations while the non-credit related loss remains in accumulated other comprehensive income (loss) until realized from
a sale or subsequent impairment.
•
Held-to-maturity securities:
◦
Time deposits - The Company classifies time deposits with original maturities greater than three months as held-to-
maturity. Held-to-maturity securities that mature within one year are classified as current assets within investments on the
consolidated balance sheet while held-to-maturity securities with maturities of greater than one year are classified as non-
current assets. Time deposits are carried at amortized cost on the consolidated balance sheet and are intended to be held
until maturity.
MASTERCARD 2020 FORM 10-K 69
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equity investments - The Company holds equity securities of publicly traded and privately held companies.
• Marketable equity securities - Marketable equity securities are strategic investments in publicly traded companies and are
measured at fair value using quoted prices in their respective active markets with changes recorded through gain (losses) on
equity investments, net on the consolidated statement of operations. Securities that are not for use in current operations are
classified in other assets on the consolidated balance sheet.
•
Nonmarketable equity investments - The Company’s nonmarketable equity investments, which are reported in other assets on
the consolidated balance sheet, include investments in privately held companies without readily determinable market values.
The Company uses discounted cash flows and market assumptions to estimate the fair value of its nonmarketable equity
investments when certain events or circumstances indicate that impairment may exist. The Company’s nonmarketable equity
investments are accounted for under the equity method or measurement alternative method.
◦
Equity method - The Company accounts for investments in common stock or in-substance common stock under the equity
method of accounting when it has the ability to exercise significant influence over the investee, generally when it holds
between 20% and 50% ownership in the entity. The excess of the cost over the underlying net equity of investments
accounted for under the equity method is allocated to identifiable tangible and intangible assets and liabilities based on fair
values at the date of acquisition. The amortization of the excess of the cost over the underlying net equity of investments
and Mastercard’s share of net earnings or losses of entities accounted for under the equity method of accounting is
included in other income (expense), net on the consolidated statement of operations. In addition, investments in flow-
through entities such as limited partnerships and limited liability companies are also accounted for under the equity method
when the Company has the ability to exercise significant influence over the investee, generally when the investment
ownership percentage is equal to or greater than 5% of the outstanding ownership interest. The Company’s share of net
earnings or losses for these investments are included in gains (losses) on equity investments, net on the consolidated
statement of operations.
◦ Measurement alternative method - The Company accounts for investments in common stock or in-substance common stock
under the measurement alternative method of accounting when it does not exercise significant influence, generally when it
holds less than 20% ownership in the entity or when the interest in a limited partnership or limited liability company is less
than 5% and the Company has no significant influence over the operation of the investee. Investments in companies that
Mastercard does not control, but that are not in the form of common stock or in-substance common stock, are also
accounted for under the measurement alternative method of accounting. Measurement alternative investments are
measured at cost, less any impairment and adjusted for changes resulting from observable price changes in orderly
transactions for identical or similar investments of the same issuer. Fair value adjustments, as well as impairments, are
included in gain (losses) on equity investments, net on the consolidated statement of operations.
Derivative and hedging instruments - The Company’s derivative financial instruments are recorded as either assets or liabilities on
the balance sheet and measured at fair value. The Company’s foreign exchange and interest rate derivative contracts are included in
Level 2 of the Valuation Hierarchy as the fair value of the contracts are based on inputs, which are observable based on broker
quotes for the same or similar instruments. The Company does not enter into derivative contracts for trading or speculative
purposes. For derivative contracts that are not designated as hedging instruments, realized and unrealized gains and losses from the
change in fair value of the contracts are recognized in current earnings.
The Company’s derivatives that are designated as hedging instruments are required to meet established accounting criteria. In
addition, an effectiveness assessment is required to demonstrate that the derivative is expected to be highly effective at offsetting
changes in fair value or cash flows of the underlying exposure both at inception of the hedging relationship and on an ongoing basis.
The method of assessing hedge effectiveness and measuring hedge results is formally documented at hedge inception and assessed
at least quarterly throughout the designated hedge period. For cash flow hedges, the fair value adjustments are recorded, net of
tax, in other comprehensive income (loss) on the consolidated statement of comprehensive income. Any gains and losses deferred
in accumulated other comprehensive income (loss) are subsequently reclassified to the corresponding line item on the consolidated
statement of operations when the underlying hedged transactions impact earnings. For hedging instruments that are no longer
deemed highly effective, hedge accounting is discontinued prospectively, and any gains and losses remaining in accumulated other
comprehensive income (loss) are reclassified to earnings when the underlying forecasted transaction occurs. If it is probable that the
forecasted transaction will no longer occur, the associated gains or losses in accumulated other comprehensive income (loss) are
reclassified to the corresponding line item on the consolidated statement of operations in current earnings.
The Company has numerous investments in its foreign subsidiaries. The net assets of these subsidiaries are exposed to volatility in
foreign currency exchange rates. The Company may use foreign currency denominated debt and/or derivative instruments to hedge
a portion of its net investment in foreign operations against adverse movements in exchange rates. The effective portion of the
foreign currency gains and losses related to the hedging instruments are reported in accumulated other comprehensive income
(loss) on the consolidated balance sheet as a cumulative translation adjustment component of equity. Amounts excluded from
70 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
effectiveness testing of net investment hedges are recognized in earnings over the life of the hedging instrument. The Company
evaluates the effectiveness of the net investment hedge each quarter.
Settlement due from/due to customers - The Company operates systems for clearing and settling payment transactions among
customers. Net settlements are generally cleared daily among customers through settlement cash accounts by wire transfer or
other bank clearing means. However, some transactions may not settle until subsequent business days, resulting in amounts due
from and due to customers.
Property, equipment and right-of-use assets - Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the
assets. Depreciation of leasehold improvements and amortization of finance leases is included in depreciation and amortization
expense on the consolidated statement of operations. Operating lease amortization expense is included in general and
administrative expenses on the consolidated statement of operations.
The useful lives of the Company’s assets are as follows:
Asset Category
Buildings
Building equipment
Furniture and fixtures and equipment
Estimated Useful Life
30 years
10 - 15 years
3 - 5 years
Leasehold improvements
Shorter of life of improvement or lease term
Right-of-use assets
Shorter of life of the asset or lease term
The Company determines if a contract is, or contains, a lease at contract inception. The Company’s right-of-use (“ROU”) assets are
primarily related to operating leases for office space, automobiles and other equipment. Leases are included in property, equipment
and right-of-use assets, other current liabilities and other liabilities on the consolidated balance sheet.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make
lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the
present value of lease payments over the lease term. In addition, ROU assets include initial direct costs incurred by the lessee as
well as any lease payments made at or before the commencement date, and exclude lease incentives. As most of the Company's
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the
commencement date in determining the present value of lease payments. The incremental borrowing rate is determined by using
the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a
similar term and in a similar economic environment. Lease terms include options to extend or terminate the lease when it is
reasonably certain that the Company will exercise that option. Leases with a term of one year or less are excluded from ROU assets
and liabilities.
The Company excludes variable lease payments in measuring ROU assets and lease liabilities, other than those that depend on an
index, a rate or are in-substance fixed payments. Lease and nonlease components are generally accounted for separately. When
available, consideration is allocated to the separate lease and nonlease components in a lease contract on a relative standalone price
basis using observable standalone prices.
Pension and other postretirement plans - The Company recognizes the funded status of its single-employer defined benefit pension
plans and postretirement plans as assets or liabilities on its consolidated balance sheet and recognizes changes in the funded status
in the year in which the changes occur through accumulated other comprehensive income (loss). The funded status is measured as
the difference between the fair value of plan assets and the projected benefit obligation at December 31, the measurement date.
Overfunded plans, if any, are aggregated and recorded in other assets, while underfunded plans are aggregated and recorded as
accrued expenses and other liabilities on the consolidated balance sheet.
Net periodic pension and postretirement benefit cost/(income), excluding the service cost component, is recognized in other income
(expense) on the consolidated statement of operations. These costs include interest cost, expected return on plan assets,
amortization of prior service costs or credits and gains or losses previously recognized as a component of accumulated other
comprehensive income (loss). The service cost component is recognized in general and administrative expenses on the consolidated
statement of operations.
Defined contribution plans - The Company’s contributions to defined contribution plans are recorded as employees render service to
the Company. The charge is recorded in general and administrative expenses on the consolidated statement of operations.
MASTERCARD 2020 FORM 10-K 71
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advertising and marketing - Expenses incurred to promote Mastercard’s brand, products and services are recognized in advertising
and marketing on the consolidated statement of operations. The timing of recognition is dependent on the type of advertising or
marketing expense.
Foreign currency remeasurement and translation - Monetary assets and liabilities are remeasured to functional currencies using
current exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are recorded at historical exchange
rates. Revenue and expense accounts are remeasured at the weighted-average exchange rate for the period. Resulting exchange
gains and losses related to remeasurement are included in general and administrative expenses on the consolidated statement of
operations.
Where a non-U.S. currency is the functional currency, translation from that functional currency to U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using
a weighted-average exchange rate for the period. Resulting translation adjustments are reported as a component of accumulated
other comprehensive income (loss).
Treasury stock - The Company records the repurchase of shares of its common stock at cost on the trade date of the transaction.
These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized
and issued shares but excluded from outstanding shares.
Share-based payments - The Company measures share-based compensation expense at the grant date, based on the estimated fair
value of the award and uses the straight-line method of attribution, net of estimated forfeitures, for expensing awards over the
requisite employee service period. The Company estimates the fair value of its non-qualified stock option awards (“Options”) using a
Black-Scholes valuation model. The fair value of restricted stock units (“RSUs”) is determined and fixed on the grant date based on
the Company’s stock price, adjusted for the exclusion of dividend equivalents. The Monte Carlo simulation valuation model is used
to determine the grant date fair value of performance stock units (“PSUs”) granted. All share-based compensation expenses are
recorded in general and administrative expenses on the consolidated statement of operations.
Redeemable non-controlling interests - The Company’s business combinations may include provisions allowing non-controlling equity
owners the ability to require the Company to purchase additional interests in the subsidiary at their discretion. The interests are
initially recorded at fair value and in subsequent reporting periods are accreted or adjusted to the estimated redemption value. The
adjustments to the redemption value are recorded to retained earnings or additional paid-in capital on the consolidated balance
sheet. The redeemable non-controlling interests are considered temporary and reported outside of permanent equity on the
consolidated balance sheet at the greater of the carrying amount adjusted for the non-controlling interest’s share of net income
(loss) or its redemption value.
Earnings per share - The Company calculates basic earnings per share (“EPS”) by dividing net income by the weighted-average
number of common shares outstanding during the year. Diluted EPS is calculated by dividing net income by the weighted-average
number of common shares outstanding during the year, adjusted for the potentially dilutive effect of stock options and unvested
stock units using the treasury stock method. The Company may be required to calculate EPS using the two-class method as a result
of its redeemable non-controlling interests. If redemption value exceeds the fair value of the redeemable non-controlling interests,
the excess would be a reduction to net income for the EPS calculation.
Accounting pronouncements not yet adopted
Simplifying the accounting for income taxes - In December 2019, the FASB issued accounting guidance to simplify the accounting for
income taxes. This guidance includes the removal of certain exceptions to the general income tax accounting principles and provides
clarity and simplification to other areas of income tax accounting by amending the existing guidance. The guidance is effective for
periods beginning after December 15, 2020. The Company will adopt this guidance effective January 1, 2021 and does not expect
the impacts to be material.
Reference Rate Reform - In March 2020, the FASB issued accounting guidance to provide temporary optional expedients and
exceptions to the current contract modifications and hedge accounting guidance in light of the expected market transition from
LIBOR to alternative rates. The new guidance provides optional expedients and exceptions to transactions affected by reference rate
reform if certain criteria are met. The transactions primarily include (1) contract modifications, (2) hedging relationships, and (3) sale
or transfer of debt securities classified as held-to-maturity. The amendments were effective immediately upon issuance of the
update. Companies may elect to adopt the amendments prospectively to transactions existing as of or entered from the date of
adoption through December 31, 2022. The Company does not expect the impacts to be material.
72 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisitions
In 2020 and 2019, the Company acquired several businesses for total consideration of $1.1 billion and $1.5 billion, respectively,
representing both cash and contingent consideration. There were no acquisitions in 2018. These acquisitions align with the
Company’s strategy to grow, diversify and build the Company’s business. Refer to Note 1 (Summary of Significant Accounting
Policies) for the valuation techniques Mastercard utilizes to fair value the respective components of business combinations and
contingent consideration. The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after
the acquisition date and a majority of the goodwill is not expected to be deductible for local tax purposes.
In 2020, the Company finalized the purchase accounting for businesses acquired during 2019 and $185 million of the businesses
acquired in 2020. The Company is evaluating and finalizing the purchase accounting for the remainder of the businesses acquired
during 2020. The preliminary estimated and final fair values of the purchase price allocations in aggregate, as of the acquisition
dates, are noted below for the years ended December 31.
Assets:
Cash and cash equivalents
Other current assets
Other intangible assets
Goodwill
Other assets
Total assets
Liabilities:
Other current liabilities
Deferred income taxes
Other liabilities
Total liabilities
Net assets acquired
2020
2019
(in millions)
$
6 $
14
237
844
11
1,112
15
23
8
46
54
143
395
1,076
48
1,716
121
52
32
205
$
1,066 $
1,511
The following table summarizes the identified intangible assets acquired during the years ended December 31:
Developed technologies
Customer relationships
Other
Other intangible assets
2020
2019
2020
2019
Acquisition Date Fair Value
Weighted-Average Useful Life
$
$
(in millions)
122 $
114
1
237 $
199
178
18
395
6.3
12.0
1.0
9.0
(in years)
7.7
12.6
5.0
9.7
Pro forma information related to the acquisitions was not included because the impact on the Company's consolidated results of
operations was not considered to be material.
Among the businesses acquired in 2020, the largest acquisition relates to Finicity Corporation (“Finicity”), an open-banking provider,
headquartered in Salt Lake City, Utah. On November 18, 2020, Mastercard acquired 100% equity interest in Finicity for cash
consideration of $809 million. In addition, the Finicity sellers have the potential to earn contingent consideration of up to $160
million if certain revenue targets are met in 2021. As of the acquisition date, the fair value of the contingent consideration was $71
million. The businesses acquired in 2019 were not individually significant to Mastercard.
Pending Acquisition
In August 2019, Mastercard entered into a definitive agreement to acquire the majority of the Corporate Services business of Nets
Denmark A/S, for €2.85 billion (approximately $3.5 billion as of December 31, 2020) after adjusting for cash and certain other
MASTERCARD 2020 FORM 10-K 73
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
liabilities at closing. The pending acquisition primarily comprises the clearing and instant payment services, and e-billing solutions of
Nets Denmark A/S’s Corporate Services business. The Company has secured conditional approval from the European Commission
and, subject to other closing conditions, anticipates completing the acquisition in the first quarter of 2021, or shortly thereafter.
Note 3. Revenue
Mastercard’s core network involves four participants in addition to the Company: account holders (a person or entity who holds a
card or uses another device enabled for payment), issuers (the account holders’ financial institutions), merchants and acquirers (the
merchants’ financial institutions). Revenue from contracts with customers is recognized when services are performed in an amount
that reflects the consideration to which the Company expects to be entitled to in exchange for those services. Revenue recognized
from domestic assessments, cross-border volume fees and transaction processing are derived from Mastercard’s payment network
services. Revenue is primarily generated by charging fees to issuers, acquirers and other stakeholders for providing switching
services, as well as by assessing customers based primarily on the dollar volume of activity, or gross dollar volume, on the products
that carry the Company’s brands. Revenue is generally derived from information accumulated by Mastercard’s systems or reported
by customers. In addition, the Company generates other revenues from value-added products and services that are typically
integrated and sold with the Company’s payment offerings and are recognized as revenue in the period in which the related
transactions occur or services are performed.
The price structure for Mastercard’s products and services is dependent on the nature of volumes, types of transactions and type of
products and services offered to customers. Net revenue can be impacted by the following:
• domestic or cross-border transactions
•
•
geographic region or country in which the transaction occurs
volumes/transactions subject to tiered rates
• processed or not processed by the Company
•
•
amount of usage of the Company’s other products or services
amount of rebates and incentives provided to customers
The Company classifies its net revenue into the following five categories:
Domestic assessments are fees charged to issuers and acquirers based primarily on the dollar volume of activity on cards and other
devices that carry the Company’s brands where the merchant country and the country of issuance are the same. Revenue from
domestic assessments is recorded as revenue in the period it is earned, which is when the related volume is generated on the cards
or other devices that carry the Company’s brands.
Cross-border volume fees are charged to issuers and acquirers based primarily on the dollar volume of activity on cards and other
devices that carry the Company’s brands where the merchant country and the country of issuance are different. Revenue from
cross-border volume is recorded as revenue in the period it is earned, which is when the related volume is generated on the cards or
other devices that carry the Company’s brands.
Transaction processing revenue is recognized for both domestic and cross-border transactions in the period in which the related
transactions occur. Transaction processing includes the following:
•
Switched transaction revenue is generated from the following products and 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 approve such transactions on behalf
of the issuer in accordance with either the issuer’s instructions or applicable rules (also known as “stand-in”).
Clearing is the determination and exchange of financial transaction information between issuers and acquirers after a
transaction has been successfully conducted at the point of interaction. Transactions are cleared among customers through
Mastercard’s central and regional processing systems.
Settlement is facilitating the exchange of funds between parties.
• Connectivity fees are charged to issuers, acquirers and other financial institutions for network access, equipment and the
transmission of authorization and settlement messages. These fees are based on the size of the data being transmitted and the
number of connections to the Company’s network.
• Other processing fees include issuer and acquirer processing solutions; payment gateways for e-commerce merchants; mobile
gateways for mobile-initiated transactions; and safety and security.
74 MASTERCARD 2020 FORM 10-K
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other revenues consist of value-added products and services that are typically sold with the Company’s payment service offerings
and are recognized in the period in which the related services are performed or transactions occur. Other revenues include the
following:
• Data analytics and consulting fees.
• Cyber and intelligence fees are for products and services offered to prevent, detect and respond to fraud and to ensure the
safety of transactions made primarily on Mastercard products.
•
Loyalty and rewards solutions fees are charged to issuers for benefits provided directly to consumers with Mastercard-branded
cards, such as access to a global airline lounge network, global and local concierge services, individual insurance coverages,
emergency card replacement, emergency cash advance services and a 24-hour cardholder service center. Loyalty and reward
solution fees also include rewards campaigns and management services.
• Program management services provided to prepaid card issuers consist of foreign exchange margin, commissions, load fees and
ATM withdrawal fees paid by cardholders on the sale and encashment of prepaid cards.
• Batch and real-time account-based payment services relating to ACH transactions and other ACH related services.
• Other payment-related products and services and platforms, including account and transaction enhancement services, open
banking solutions, rules compliance and publications.
Rebates and incentives (contra-revenue) are provided to customers that meet certain volume targets and can be in the form of a
rebate or other support incentives, which are tied to performance. Rebates and incentives are recorded as a reduction of gross
revenue primarily when volume- and transaction-based revenues are recognized over the contractual term. In addition, Mastercard
may make incentive payments to a customer directly related to entering into an agreement, which are generally capitalized and
amortized over the life of the agreement on a straight-line basis.
The Company’s disaggregated net revenue by source and geographic region were as follows for the years ended December 31:
Revenue by source:
Domestic assessments
Cross-border volume fees
Transaction processing
Other revenues
Gross revenue
Rebates and incentives (contra-revenue)
Net revenue
Net revenue by geographic region:
North American Markets
International Markets
Other 1
Net revenue
1
Includes revenues managed by corporate functions.
2020
2019
2018
(in millions)
$
6,656 $
6,781 $
3,512
8,731
4,717
23,616
(8,315)
5,606
8,469
4,124
24,980
(8,097)
6,138
4,954
7,391
3,348
21,831
(6,881)
$
15,301 $
16,883 $
14,950
$
5,424 $
5,843 $
9,701
176
10,869
171
5,312
9,514
124
$
15,301 $
16,883 $
14,950
Receivables from contracts with customers of $2.5 billion and $2.3 billion as of December 31, 2020 and 2019, respectively, are
recorded within accounts receivable on the consolidated balance sheet. The Company’s customers are generally billed weekly,
however, the frequency is dependent upon the nature of the performance obligation and the underlying contractual terms. The
Company does not typically offer extended payment terms to customers.
Contract assets are included in prepaid expenses and other current assets and other assets on the consolidated balance sheet at
December 31, 2020 in the amounts of $59 million and $245 million, respectively. The comparable amounts included in prepaid
expenses and other current assets and other assets at December 31, 2019 were $48 million and $152 million, respectively.
Deferred revenue is included in other current liabilities and other liabilities on the consolidated balance sheet at December 31, 2020
in the amounts of $355 million and $143 million, respectively. The comparable amounts included in other current liabilities and
MASTERCARD 2020 FORM 10-K 75
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
other liabilities at December 31, 2019 were $238 million and $106 million, respectively. In 2020, 2019 and 2018 revenue recognized
from the satisfaction of such performance obligations was $1.1 billion, $994 million and $904 million, respectively.
The Company’s remaining performance periods for its contracts with customers for its payment network services are typically long-
term in nature (generally up to 10 years). As a payment network service provider, the Company provides its customers with
continuous access to its global payments network and stands ready to provide transaction processing and related services over the
contractual term. Consideration is variable as the Company generates volume- and transaction-based revenues from assessing its
customers’ current period activity. The Company has elected the optional exemption to not disclose the remaining performance
obligations related to its payment network services. The Company also earns revenues primarily from other value-added services
comprised of both batch and real-time account-based payment services, consulting fees, gateway services, processing, loyalty
programs and other payment-related products and services. At December 31, 2020, the estimated aggregate consideration
allocated to unsatisfied performance obligations for these other value-added services is $1.3 billion, which is expected to be
recognized through 2023. The estimated remaining performance obligations related to these revenues are subject to change and
are affected by several factors, including modifications and terminations and are not expected to be material to any future annual
period.
Note 4. Earnings Per Share
The components of basic and diluted EPS for common shares for each of the years ended December 31 were as follows:
Numerator
Net income
Denominator
Basic weighted-average shares outstanding
Dilutive stock options and stock units
Diluted weighted-average shares outstanding 1
Earnings per Share
Basic
Diluted
2020
2019
2018
(in millions, except per share data)
$
6,411 $
8,118 $
5,859
1,002
4
1,006
1,017
5
1,022
1,041
6
1,047
$
$
6.40 $
7.98 $
6.37 $
7.94 $
5.63
5.60
Note: Table may not sum due to rounding.
1
For the years presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.
Note 5. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported on
the consolidated balance sheet that total to the amounts shown on the consolidated statement of cash flows for the years ended
December 31:
2020
2019
(in millions)
$
10,113 $
6,988
586
1,696
24
584
1,370
27
8,969
Cash and cash equivalents
Restricted cash and restricted cash equivalents
Restricted cash for litigation settlement
Restricted security deposits held for customers
Prepaid expenses and other current assets
Cash, cash equivalents, restricted cash and restricted cash equivalents
$
12,419 $
76 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Supplemental Cash Flows
The following table includes supplemental cash flow disclosures for each of the years ended December 31:
Cash paid for income taxes, net of refunds
Cash paid for interest
Cash paid for legal settlements
Non-cash investing and financing activities
Dividends declared but not yet paid
Accrued property, equipment and right-of-use assets
Fair value of assets acquired, net of cash acquired
Fair value of liabilities assumed related to acquisitions
Note 7. Investments
2020
2019
2018
(in millions)
$
1,349 $
1,644 $
1,790
311
149
439
154
1,106
46
199
668
403
468
1,662
205
153
260
340
10
—
—
The Company’s investments on the consolidated balance sheet include both available-for-sale and held-to-maturity securities (see
Investments section below). The Company classifies its investments in equity securities of publicly traded and privately held
companies within other assets on the consolidated balance sheet (see Equity Investments section below).
Investments
Investments on the consolidated balance sheet consisted of the following at December 31:
Available-for-sale securities
Held-to-maturity securities
Total investments
Available-for-Sale Securities
2020
2019
(in millions)
321 $
162
483 $
591
97
688
$
$
The major classes of the Company’s available-for-sale investment securities and their respective amortized cost basis and fair values
were as follows:
December 31, 2020
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
December 31, 2019
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair Value
Fair Value
Amortized
Cost
(in millions)
$
10 $
— $
— $
10 $
15 $
— $
— $
15
64
246
—
—
1
—
—
—
—
64
247
—
108
381
85
—
1
1
—
—
—
108
382
86
Municipal securities
Government and agency
securities
Corporate securities
Asset-backed securities
Total
$
320 $
1 $
— $
321 $
589 $
2 $
— $
591
The Company’s available-for-sale investment securities held at December 31, 2020 and 2019, primarily carried a credit rating of A- or
better with unrealized gains and losses recorded as a separate component of other comprehensive income (loss) on the consolidated
statement of comprehensive income. The municipal securities are comprised of state tax-exempt bonds and are diversified across
states and sectors. Government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds
and foreign government bonds. Corporate securities are comprised of commercial paper and corporate bonds. The asset-backed
securities are investments in bonds which are collateralized primarily by automobile loan receivables.
MASTERCARD 2020 FORM 10-K 77
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The maturity distribution based on the contractual terms of the Company’s investment securities at December 31, 2020 was as
follows:
Due within 1 year
Due after 1 year through 5 years
Total
Available-For-Sale
Amortized
Cost
Fair Value
$
$
(in millions)
115 $
205
320 $
115
206
321
Investment income on the consolidated statement of operations primarily consists of interest income generated from cash, cash
equivalents, time deposits, and realized gains and losses on the Company’s debt securities. The realized gains and losses from the
sale of available-for-sale securities for 2020, 2019 and 2018 were not significant.
Held-to-Maturity Securities
The Company classifies time deposits with maturities greater than three months but less than one year as held-to-maturity. Time
deposits are carried at amortized cost on the consolidated balance sheet and are intended to be held until maturity. The cost of
these securities approximates fair value.
Equity Investments
Included in other assets on the consolidated balance sheet are equity investments with readily determinable fair values
(“Marketable securities”) and equity investments without readily determinable fair values (“Nonmarketable securities”). Marketable
securities are publicly traded companies and are measured using unadjusted quoted prices in their respective active markets.
Nonmarketable securities that do not qualify for equity method accounting are measured at cost, less any impairment and adjusted
for changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same
issuer (“measurement alternative”).
The following table is a summary of the activity related to the Company’s equity investments:
Marketable securities
Nonmarketable securities
Total equity investments
Balance at
December 31,
2019
Purchases
(Sales), net
Changes in
Fair Value1
(in millions)
Other2
Balance at
December 31,
2020
$
$
479 $
435
1 $
204
914 $
205 $
(5) $
35
30 $
1 $
22
476
696
23 $
1,172
1
2
Recorded in gains (losses) on equity investments, net on the consolidated statement of operations
Includes translational impact of currency
At December 31, 2020, the total carrying value of Nonmarketable securities included $157 million of measurement alternative
investments and $539 million of equity method investments. At December 31, 2019, the total carrying value of Nonmarketable
securities included $317 million of measurement alternative investments and $118 million of equity method investments.
Cumulative impairments and downward fair value adjustments on measurement alternative investments were $14 million and
cumulative upward fair value adjustments were $86 million as of December 31, 2020.
Note 8. Fair Value Measurements
The Company classifies its fair value measurements of financial instruments into a three-level hierarchy within the Valuation
Hierarchy. Financial instruments are categorized for fair value measurement purposes as recurring or non-recurring in nature. There
were no transfers made among the three levels in the Valuation Hierarchy for 2020 and 2019.
78 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments - Recurring Measurements
The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy
were as follows:
December 31, 2020
December 31, 2019
Quoted
Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Quoted
Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Total
(in millions)
Assets
Investment securities available
for sale 1:
Municipal securities
$ — $
10 $
— $ 10 $ — $
15 $
— $
15
Government and agency
securities
Corporate securities
Asset-backed securities
Derivative instruments 2:
Foreign exchange contracts
Interest rate contracts
Marketable securities 3:
Equity securities
Deferred compensation plan 4:
26
—
—
—
—
476
Deferred compensation assets
78
38
247
—
19
—
—
—
—
—
—
—
—
64
247
—
19
—
66
—
—
—
—
—
476
479
—
78
67
42
382
86
12
14
—
—
—
—
—
—
—
108
382
86
12
14
—
479
—
67
Liabilities
Derivative instruments 2:
Foreign exchange derivative
liabilities
Deferred compensation plan 5:
$ — $
(28) $
— $
(28) $ — $
(32) $
— $
(32)
Deferred compensation liabilities
(81)
—
—
(81)
(67)
—
—
(67)
1
2
3
4
5
The Company’s U.S. government securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted
quoted prices for identical assets in active markets. The fair value of the Company’s available-for-sale municipal securities, government and
agency securities, corporate securities and asset-backed securities are based on observable inputs such as quoted prices, benchmark yields and
issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.
The Company’s foreign exchange and interest rate derivative asset and liability contracts have been classified within Level 2 of the Valuation
Hierarchy as the fair value is based on observable inputs such as broker quotes relating to foreign currency exchange rates for similar derivative
instruments. See Note 23 (Derivative and Hedging Instruments) for further details.
The Company’s Marketable securities are publicly held and classified within Level 1 of the Valuation Hierarchy as the fair values are based on
unadjusted quoted prices in their respective active markets.
The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is
restricted for payments to participants of the plan. The Company has elected to use the fair value option for these mutual funds, which are
measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the
consolidated balance sheet.
The deferred compensation liabilities are measured at fair value based on the quoted prices of identical instruments to the investment vehicles
selected by the participants. These are included in other liabilities on the consolidated balance sheet.
MASTERCARD 2020 FORM 10-K 79
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments - Non-Recurring Measurements
Nonmarketable Securities
The Company’s Nonmarketable securities are recorded at fair value on a non-recurring basis in periods after initial recognition under
the equity method or measurement alternative method. Nonmarketable securities are classified within Level 3 of the Valuation
Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity and unobservable inputs used to measure fair
value that require management’s judgment. The Company uses discounted cash flows and market assumptions to estimate the fair
value of its Nonmarketable securities when certain events or circumstances indicate that impairment may exist. See Note 7
(Investments) for further details.
Debt
The Company estimates the fair value of its long-term debt based on market quotes. These debt instruments are not traded in
active markets and are classified as Level 2 of the Valuation Hierarchy. At December 31, 2020, the carrying value and fair value of
total long-term debt (including the current portion) was $12.7 billion and $14.8 billion, respectively. At December 31, 2019, the
carrying value and fair value of long-term debt (including the current portion) was $8.5 billion and $9.2 billion, respectively. See
Note 15 (Debt) for further details.
Other Financial Instruments
Certain financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair
value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash, time
deposits, accounts receivable, settlement due from customers, restricted security deposits held for customers, accounts payable,
settlement due to customers and other accrued liabilities.
Note 9. Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consisted of the following at December 31:
Customer and merchant incentives
Prepaid income taxes
Other
Total prepaid expenses and other current assets
Other assets consisted of the following at December 31:
Customer and merchant incentives
Equity investments
Income taxes receivable
Other
Total other assets
2020
2019
(in millions)
1,086 $
78
719
1,883 $
872
105
786
1,763
$
$
2020
2019
(in millions)
$
3,220 $
2,838
1,172
553
420
914
460
313
$
5,365 $
4,525
Customer and merchant incentives represent payments made to customers and merchants under business agreements. Costs
directly related to entering into such an agreement are generally deferred and amortized over the life of the agreement.
See Note 7 (Investments) for further information on the Company’s equity investments.
80 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Property, Equipment and Right-of-Use Assets
Property, equipment and right-of-use assets consisted of the following at December 31:
Building, building equipment and land
Equipment
Furniture and fixtures
Leasehold improvements
Operating lease right-of-use assets
Property, equipment and right-of-use assets
Less: Accumulated depreciation and amortization
Property, equipment and right-of-use assets, net
2020
2019
$
(in millions)
522 $
1,321
99
380
970
3,292
(1,390)
$
1,902 $
505
1,218
92
303
810
2,928
(1,100)
1,828
Depreciation and amortization expense for the above property, equipment and right-of-use assets was $400 million, $336 million
and $209 million for 2020, 2019 and 2018, respectively.
Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows at
December 31:
2020
2019
(in millions)
Balance sheet location
Property, equipment and right-of-use assets, net
$
748 $
Other current liabilities
Other liabilities
125
726
711
106
656
Operating lease amortization expense for 2020 and 2019 was $123 million and $99 million, respectively. As of December 31, 2020
and 2019, the weighted-average remaining lease term of operating leases was 9.1 years and 9.5 years and the weighted-average
discount rate for operating leases was 2.7% and 2.9%, respectively.
The following table summarizes the maturity of the Company’s operating lease liabilities at December 31, 2020 based on lease term:
2021
2022
2023
2024
2025
Thereafter
Total operating lease payments
Less: Interest
Present value of operating lease liabilities
Operating Leases
(in millions)
$
$
137
130
108
95
72
383
925
(74)
851
Prior to adoption of the lease accounting standard in 2019, consolidated rental expense for the Company’s leased office space was
$94 million for 2018. Consolidated lease expense for automobiles, computer equipment and office equipment was $20 million for
2018, respectively.
MASTERCARD 2020 FORM 10-K 81
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Goodwill
The changes in the carrying amount of goodwill for the years ended December 31 were as follows:
Beginning balance
Additions
Foreign currency translation
Ending balance
2020
2019
(in millions)
4,021 $
844
95
4,960 $
2,904
1,076
41
4,021
$
$
The Company performed its annual qualitative assessment of goodwill during the fourth quarter of 2020 and determined a
quantitative assessment was not necessary. The Company concluded that goodwill was not impaired and had no accumulated
impairment losses at December 31, 2020.
Note 12. Other Intangible Assets
The following table sets forth net intangible assets, other than goodwill, at December 31:
2020
2019
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(in millions)
Finite-lived intangible assets
Capitalized software
$
2,276 $
(1,126) $
1,150 $
1,884 $
(988) $
743
44
(322)
(41)
421
3
621
44
(264)
(44)
3,063
(1,489)
1,574
2,549
(1,296)
1,253
896
357
—
Customer relationships
Other
Total
Indefinite-lived intangible assets
Customer relationships
179
—
179
164
—
164
Total
$
3,242 $
(1,489) $
1,753 $
2,713 $
(1,296) $
1,417
The increase in the gross carrying amount of amortized intangible assets in 2020 was primarily related to software additions and
businesses acquired in 2020. See Note 2 (Acquisitions) for further details. Certain intangible assets are denominated in foreign
currencies. As such, the change in intangible assets includes a component attributable to foreign currency translation. Based on the
qualitative assessment performed in 2020, it was determined that the Company’s indefinite-lived intangible assets were not
impaired.
Amortization on the assets above amounted to $303 million, $285 million and $250 million in 2020, 2019 and 2018, respectively.
The following table sets forth the estimated future amortization expense on finite-lived intangible assets on the consolidated
balance sheet at December 31, 2020 for the years ending December 31:
2021
2022
2023
2024
2025 and thereafter
82 MASTERCARD 2020 FORM 10-K
(in millions)
$
332
260
211
194
577
$
1,574
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Accrued Expenses and Accrued Litigation
Accrued expenses consisted of the following at December 31:
Customer and merchant incentives
Personnel costs
Income and other taxes
Other
Total accrued expenses
2020
2019
(in millions)
$
3,998 $
3,892
727
208
497
713
332
552
$
5,430 $
5,489
Customer and merchant incentives represent amounts to be paid to customers under business agreements. As of December 31,
2020 and 2019, the Company’s provision for litigation was $842 million and $914 million, respectively. These amounts are not
included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet.
See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.
Note 14. Pension, Postretirement and Savings Plans
The Company and certain of its subsidiaries maintain various pension and other postretirement plans that cover substantially all
employees worldwide.
Defined Contribution Plans
The Company sponsors defined contribution retirement plans. The primary plan is the Mastercard Savings Plan, a 401(k) plan for
substantially all of the Company’s U.S. employees, which is subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended. In addition, the Company has several defined contribution plans outside of the U.S. The Company’s total
expense for its defined contribution plans was $150 million, $127 million and $98 million in 2020, 2019 and 2018, respectively.
Defined Benefit and Other Postretirement Plans
The Company sponsors pension and postretirement plans for certain non-U.S. employees (the “non-U.S. Plans”) that cover various
benefits specific to their country of employment. Additionally, Vocalink has a defined benefit pension plan (the “Vocalink Plan”)
which was permanently closed to new entrants and future accruals as of July 21, 2013, however, plan participants’ obligations are
adjusted for future salary changes. The Company has agreed to make contributions of £15 million (approximately $20 million as of
December 31, 2020) annually until September 2022. The term “Pension Plans” includes the non-U.S. Plans and the Vocalink Plan.
The Company maintains a postretirement plan providing health coverage and life insurance benefits for substantially all of its U.S.
employees hired before July 1, 2007 (the “Postretirement Plan”).
MASTERCARD 2020 FORM 10-K 83
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company uses a December 31 measurement date for the Pension Plans and its Postretirement Plan (collectively the “Plans”).
The Company recognizes the funded status of its Plans, measured as the difference between the fair value of the plan assets and the
projected benefit obligation, in the consolidated balance sheet. The following table sets forth the Plans’ funded status, key
assumptions and amounts recognized in the Company’s consolidated balance sheet at December 31:
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Transfers in
Foreign currency translation
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual (loss) gain on plan assets
Employer contributions
Benefits paid
Transfers in
Foreign currency translation
Fair value of plan assets at end of year
Funded status at end of year
Amounts recognized on the consolidated balance sheet consist of:
Noncurrent assets
Other liabilities, short-term
Other liabilities, long-term
Accumulated other comprehensive income consists of:
Net actuarial (gain) loss
Prior service credit
Balance at end of year
Weighted-average assumptions used to determine end of year benefit
obligations
Discount rate
Non-U.S. Plans
Vocalink Plan
Postretirement Plan
Rate of compensation increase
Non-U.S. Plans
Vocalink Plan
Postretirement Plan
* Not applicable
84 MASTERCARD 2020 FORM 10-K
Pension Plans
Postretirement Plan
2020
2019
2020
2019
($ in millions)
$ 531
$ 438
$
64
$
57
13
9
43
(18)
3
23
604
518
56
34
(18)
5
22
617
11
13
73
(15)
2
9
531
410
79
32
(15)
2
10
518
1
2
7
(4)
—
—
70
—
—
4
(4)
—
—
—
1
2
9
(5)
—
—
64
—
—
5
(5)
—
—
—
$
13
$
(13)
$
(70)
$
(64)
$
28
—
(15)
$ —
$ —
$ —
—
(13)
(4)
(66)
(3)
(61)
$
13
$
(13)
$
(70)
$
(64)
$
$
12
1
13
$
$
7
1
8
$
$
9
(4)
5
$
$
2
(5)
(3)
0.70 %
1.55 %
*
1.50 %
2.75 %
*
0.70 %
2.00 %
*
*
*
*
*
2.50 %
3.25 %
1.50 %
2.50 %
*
*
*
*
*
3.00 %
3.00 %
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2020, the Company’s aggregated Pension Plan assets exceed the benefit obligations. For plans where the benefit
obligations exceeded plan assets, the projected benefit obligation was $112 million, the accumulated benefit obligation was $111
million and plan assets were $97 million. At December 31, 2019, all of the Pension Plans had benefit obligations in excess of plan
assets. Information on the Pension Plans were as follows as of December 31:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2020
2019
(in millions)
$
604 $
601
617
531
524
518
For the years ended December 31, 2020 and 2019, the Company’s projected benefit obligation related to its Pension Plans increased
$73 million and $93 million, respectively, primarily attributable to actuarial losses related to lower discount rate assumptions.
Components of net periodic benefit cost recorded in earnings were as follows for the Plans for each of the years ended
December 31:
Pension Plans
Postretirement Plan
2020
2019
2018
2020
2019
2018
(in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service credit
Net periodic benefit cost
$ 13 $ 11 $
9 $
1 $
1 $
9
(18)
13
(18)
12
2
2
(20)
—
—
—
—
1
—
—
—
—
—
—
—
(1)
(1)
(2)
$
4 $
7 $
1 $
2 $
2 $
1
1
2
The service cost component is recognized in general and administrative expenses on the consolidated statement of operations. Net
periodic benefit cost, excluding the service cost component, is recognized in other income (expense) on the consolidated statement
of operations.
Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years ended December 31
were as follows:
Current year actuarial loss (gain)
Current year prior service credit
Amortization of prior service credit
Total other comprehensive loss (income)
Total net periodic benefit cost and other comprehensive loss (income)
Pension Plans
Postretirement Plan
2020
2019
2018
2020
2019
2018
(in millions)
$
5 $ 12 $ 17 $
7 $
9 $
(2)
—
—
1
—
—
—
—
—
—
1
1
2
$
$
5 $ 12 $ 18 $
8 $ 10 $ —
9 $ 19 $ 19 $ 10 $ 12 $
1
MASTERCARD 2020 FORM 10-K 85
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumptions
Weighted-average assumptions used to determine net periodic benefit cost were as follows for the years ended December 31:
Discount rate
Non-U.S. Plans
Vocalink Plan
Postretirement Plan
Expected return on plan assets
Non-U.S. Plans
Vocalink Plan
Rate of compensation increase
Non-U.S. Plans
Vocalink Plan
Postretirement Plan
* Not applicable
Pension Plans
Postretirement Plan
2020
2019
2018
2020
2019
2018
0.70 % 1.80 % 1.80 %
1.55 % 2.00 % 2.80 %
*
*
*
*
*
*
*
*
* 3.25 % 4.25 % 3.50 %
1.60 % 2.10 % 3.00 %
3.20 % 3.75 % 4.75 %
1.50 % 1.50 % 2.60 %
2.75 % 2.50 % 3.85 %
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* 3.00 % 3.00 % 3.00 %
The Company’s discount rate assumptions are based on yield curves derived from high quality corporate bonds, which are matched
to the expected cash flows of each respective plan. The expected return on plan assets assumptions are derived using the current
and expected asset allocations of the Pension Plans’ assets and considering historical as well as expected returns on various classes
of plan assets. The rates of compensation increases are determined by the Company, based upon its long-term plans for such
increases.
The following additional assumptions were used at December 31 in accounting for the Postretirement Plan:
Healthcare cost trend rate assumed for next year
Ultimate trend rate
Year that the rate reaches the ultimate trend rate
Assets
2020
2019
7.00 % 6.00 %
5.00 % 5.00 %
8
2
Plan assets are managed taking into account the timing and amount of future benefit payments. The Vocalink Plan assets are
managed with the following target asset allocations: fixed income 35%, U.K. government securities 23%, equity 22%, cash and cash
equivalents 12% and real estate 8%. For the non-U.S. Plans, the assets are concentrated primarily in insurance contracts.
The Valuation Hierarchy of the Pension Plans’ assets is determined using a consistent application of the categorization
measurements for the Company’s financial instruments. See Note 1 (Summary of Significant Accounting Policies) for additional
information.
86 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth by level, within the Valuation Hierarchy, the Pension Plans’ assets at fair value:
December 31, 2020
December 31, 2019
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair
Value
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair
Value
(in millions)
Cash and cash equivalents 1
Mutual funds 2
Insurance contracts 3
$
59 $
— $
— $ 59 $
16 $
— $
— $ 16
270
—
117
96
—
—
387
96
153
—
193
75
—
—
346
75
Total
$ 329 $
213 $
— $ 542 $ 169 $
268 $
— $ 437
Investments at Net Asset Value (“NAV”) 4
Total Plan Assets
75
$ 617
81
$ 518
1
2
3
4
Cash and cash equivalents are valued at quoted market prices, which represent the net asset value of the shares held by the Plans.
Certain mutual funds are valued at quoted market prices, which represent the value of the shares held by the Plans, and are therefore included in
Level 1. Certain other mutual funds are valued at unit values provided by investment managers, which are based on the fair value of the
underlying investments utilizing public information, independent external valuation from third-party services or third-party advisors, and are
therefore included in Level 2.
Insurance contracts are valued at unit values provided by investment managers, which are based on the fair value of the underlying investments
utilizing public information, independent external valuation from third-party services or third-party advisors.
Investments at NAV include mutual funds (comprised primarily of credit investments) and other investments (comprised primarily of real estate
investments) and are valued using the net asset value provided by the administrator as a practical expedient, and therefore these investments
are not included in the valuation hierarchy. These investments have quarterly redemption frequencies with redemption notice periods ranging
from 60 to 90 days.
The following table summarizes expected benefit payments (as of December 31, 2020) through 2030 for the Pension Plans and the
Postretirement Plan, including those payments expected to be paid from the Company’s general assets. Actual benefit payments
may differ from expected benefit payments.
2021
2022
2023
2024
2025
2026 - 2030
Pension Plans
Postretirement Plan
$
(in millions)
19 $
12
14
15
15
77
4
4
4
4
4
20
MASTERCARD 2020 FORM 10-K 87
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15. Debt
Long-term debt consisted of the following at December 31:
2020
2019
(in millions)
Effective
Interest Rate
2020 USD Notes
3.300 % Senior Notes due March 2027
$
1,000 $
3.350 % Senior Notes due March 2030
3.850 % Senior Notes due March 2050
2019 USD Notes
2.950 % Senior Notes due June 2029
3.650 % Senior Notes due June 2049
2.000 % Senior Notes due March 2025
2018 USD Notes
3.500 % Senior Notes due February 2028
3.950 % Senior Notes due February 2048
2016 USD Notes
2.000 % Senior Notes due November 2021
2.950 % Senior Notes due November 2026
3.800 % Senior Notes due November 2046
2015 EUR Notes 1
1.100 % Senior Notes due December 2022
2.100 % Senior Notes due December 2027
2.500 % Senior Notes due December 2030
2014 USD Notes
3.375 % Senior Notes due April 2024
Less: Unamortized discount and debt issuance costs
Total debt outstanding
Less: Current portion2
Long-term debt
1,500
1,500
1,000
1,000
750
500
500
650
750
600
859
982
184
1,000
12,775
(103)
12,672
(649)
$
12,023 $
—
—
—
1,000
1,000
750
500
500
650
750
600
785
896
169
1,000
8,600
(73)
8,527
—
8,527
3.420 %
3.430 %
3.896 %
3.030 %
3.689 %
2.147 %
3.598 %
3.990 %
2.236 %
3.044 %
3.893 %
1.265 %
2.189 %
2.562 %
3.484 %
1
2
Relates to euro-denominated debt issuance of €1.650 billion in December 2015
Relates to current portion of the 2016 USD Notes, due in November 2021, classified as current portion of long-term debt on the consolidated
balance sheet
In March 2020, the Company issued $1 billion principal amount of notes due March 2027, $1.5 billion principal amount of notes due
March 2030 and $1.5 billion principal amount notes due March 2050 (collectively the “2020 USD Notes”). The net proceeds from the
issuance of the 2020 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were
$3.959 billion.
In May 2019, the Company issued $1 billion principal amount of notes due June 2029 and $1 billion principal amount of notes due
June 2049 and in December 2019, the Company issued $750 million principal amount of notes due March 2025 (collectively the
“2019 USD Notes”). The net proceeds from the issuance of the 2019 USD Notes, after deducting the original issue discount,
underwriting discount and offering expenses, were $2.724 billion.
The net proceeds, after deducting the original issue discount, underwriting discount and offering expenses, from the issuance of the
2018 USD Notes were $991 million.
88 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The outstanding debt, described above, is not subject to any financial covenants and it may be redeemed in whole, or in part, at the
Company’s option at any time for a specified make-whole amount. These notes are senior unsecured obligations and would rank
equally with any future unsecured and unsubordinated indebtedness. The proceeds of the notes are to be used for general
corporate purposes.
Scheduled annual maturities of the principal portion of long-term debt outstanding at December 31, 2020 are summarized below.
2021
2022
2023
2024
2025
Thereafter
Total
(in millions)
$
650
859
—
1,000
750
9,516
$
12,775
On November 14, 2019, the Company increased its commercial paper program (the “Commercial Paper Program”) from $4.5 billion
to $6 billion under which the Company is authorized to issue unsecured commercial paper notes with maturities of up to 397 days
from the date of issuance. The Commercial Paper Program is available in U.S. dollars.
In conjunction with the Commercial Paper Program, the Company entered into a committed five-year unsecured $6 billion revolving
credit facility (the “Credit Facility”) on November 14, 2019. The Credit Facility, which previously expired on November 14, 2024, was
extended on November 14, 2020 for an additional year and now expires on November 13, 2025. The extension did not result in
material changes to the terms and conditions of the Credit Facility. Borrowings under the Credit Facility are available in U.S. dollars
and/or euros. The facility fee under the Credit Facility is determined according to the Company’s credit rating and is payable on the
average daily commitment, regardless of usage, per annum. In addition to the facility fee, interest rates on borrowings under the
Credit Facility would be based on prevailing market interest rates plus applicable margins that fluctuate based on the Company’s
credit rating. The Credit Facility contains customary representations, warranties, affirmative and negative covenants, events of
default and indemnification provisions. The Company was in compliance in all material respects with the covenants of the Credit
Facility at December 31, 2020 and 2019.
Borrowings under the Commercial Paper Program and the Credit Facility are used to provide liquidity for general corporate
purposes, including providing liquidity in the event of one or more settlement failures by the Company’s customers. The Company
may borrow and repay amounts under the Commercial Paper Program and Credit Facility from time to time. The Company had no
borrowings under the Credit Facility and the Commercial Paper Program at December 31, 2020 and 2019.
Note 16. Stockholders' Equity
Classes of Capital Stock
Mastercard’s amended and restated certificate of incorporation authorizes the following classes of capital stock:
Class
A
Par Value
Per Share
$0.0001
Authorized
Shares
(in millions)
3,000 One vote per share
Dividend rights
B
$0.0001
1,200 Non-voting
Dividend rights
Dividend and Voting Rights
Preferred
$0.0001
300 No shares issued or outstanding at December 31, 2020 and 2019. Dividend and voting
rights are to be determined by the Board of Directors of the Company upon issuance.
MASTERCARD 2020 FORM 10-K 89
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends
The Company declared a quarterly cash dividend on its Class A and Class B Common Stock during each of the four quarters of 2020,
2019 and 2018.
The Company declared total per share dividends on its Class A and Class B Common Stock during the years ended December 31 as
summarized below:
Dividends declared per share
Total dividends declared
Ownership and Governance Structure
2020
2019
2018
(in millions, except per share data)
$
$
1.64 $
1,641 $
1.39 $
1,408 $
1.08
1,120
Equity ownership and voting power of the Company’s shares were allocated as follows as of December 31:
Public Investors (Class A stockholders)
Principal or Affiliate Customers (Class B stockholders)
Mastercard Foundation (Class A stockholders)
Class B Common Stock Conversions
2020
2019
Equity
Ownership
88.2 %
0.8 %
11.0 %
General
Voting Power
88.9 %
— %
11.1 %
Equity
Ownership
87.8 %
1.1 %
11.1 %
General
Voting Power
88.8 %
— %
11.2 %
Shares of Class B common stock are convertible on a one-for-one basis into shares of Class A common stock. Entities eligible to hold
Mastercard’s Class B common stock are defined in the Company’s amended and restated certificate of incorporation (generally the
Company’s principal or affiliate customers), and they are restricted from retaining ownership of shares of Class A common stock.
Class B stockholders are required to subsequently sell or otherwise transfer any shares of Class A common stock received pursuant
to such a conversion.
Mastercard Foundation
In connection and simultaneously with its 2006 initial public offering (the “IPO”), the Company issued and donated 135 million newly
authorized shares of Class A common stock to Mastercard Foundation. Mastercard Foundation is a private charitable foundation
incorporated in Canada that is controlled by directors who are independent of the Company and its principal customers. Under the
terms of the donation, Mastercard Foundation became able to resell the donated shares in May 2010 to the extent necessary to
meet charitable disbursement requirements pursuant to Canadian tax law. Under such current law, Mastercard Foundation must
annually disburse at least 3.5% of its assets not used in its charitable activities and administration in the previous eight quarters
(“Disbursement Quota”). However, Mastercard Foundation obtained permission from the Canada Revenue Agency to, until
December 31, 2021, meet its cumulative Disbursement Quota obligations over a period of time that, on average, demonstrates
compliance with the requirement for such established time period. Mastercard Foundation will be permitted to sell all of its
remaining shares beginning May 1, 2027, subject to certain conditions.
Stock Repurchase Programs
The Company’s Board of Directors have approved share repurchase programs authorizing the Company to repurchase shares of its
Class A Common Stock. These programs become effective after the completion of the previously authorized share repurchase
program.
90 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s share repurchase authorizations of its Class A common stock through December 31,
2020, as well as historical purchases:
Board authorization dates
Date program became effective
December
2020
December
2019
December
2018
December
2017
December
2016
Not yet
effective
January
2020
January
2019
March
2018
April 2017
Total
(in millions, except average price data)
Board authorization
$ 6,000 $ 8,000 $ 6,500 $ 4,000 $ 4,000 $ 28,500
Dollar-value of shares repurchased in 2018
Remaining authorization at December 31, 2018
Dollar-value of shares repurchased in 2019
Remaining authorization at December 31, 2019
Dollar-value of shares repurchased in 2020
$
$
$
$
$
— $
— $
— $
— $
— $ 3,699 $ 1,234 $ 4,933
— $ 6,500 $
301 $
— $ 6,801
— $ 6,196 $
301 $
— $ 6,497
— $ 8,000 $
304 $
— $ 4,169 $
304 $
— $
— $
— $
— $ 8,304
— $ 4,473
— $ 9,831
Remaining authorization at December 31, 2020
$ 6,000 $ 3,831 $
— $
Shares repurchased in 2018
Average price paid per share in 2018
Shares repurchased in 2019
Average price paid per share in 2019
Shares repurchased in 2020
Average price paid per share in 2020
Cumulative shares repurchased through December 31,
2020
Cumulative average price paid per share
—
—
—
19.0
7.2
26.2
— $
— $
— $ 194.77 $ 171.11 $ 188.26
—
—
24.8
1.6
—
26.4
— $
— $ 249.58 $ 188.38 $
— $ 245.89
—
13.3
1.0
—
—
14.3
— $ 313.26 $ 304.89 $
— $
— $ 312.68
—
13.3
25.8
20.6
28.2
87.9
— $ 313.26 $ 251.72 $ 194.27 $ 141.99 $ 212.41
$
$
$
$
The following table presents the changes in the Company’s outstanding Class A and Class B common stock for the years ended
December 31:
Balance at December 31, 2017
Purchases of treasury stock
Share-based payments
Conversion of Class B to Class A common stock
Balance at December 31, 2018
Purchases of treasury stock
Share-based payments
Conversion of Class B to Class A common stock
Balance at December 31, 2019
Purchases of treasury stock
Share-based payments
Conversion of Class B to Class A common stock
Balance at December 31, 2020
Outstanding Shares
Class A
Class B
(in millions)
1,039.7
14.1
(26.2)
2.8
2.3
1,018.6
(26.4)
3.2
0.6
996.0
(14.3)
2.3
2.9
986.9
—
—
(2.3)
11.8
—
—
(0.6)
11.2
—
—
(2.9)
8.3
MASTERCARD 2020 FORM 10-K 91
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Accumulated Other Comprehensive Income (Loss)
The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, for the years ended
December 31, 2020 and 2019 were as follows:
December 31,
2019
Increase /
(Decrease)
Reclassifications
December 31,
2020
Foreign currency translation adjustments1
Translation adjustments on net investment hedge2
Cash flow hedges
Interest rate contracts3
Defined benefit pension and other postretirement plans4
Investment securities available-for-sale
$
(638) $
(in millions)
286 $
(38)
(137)
11
(9)
1
(147)
(10)
(1)
— $
—
3
(1)
—
Accumulated Other Comprehensive Income (Loss)
$
(673) $
(9) $
2 $
(352)
(175)
(133)
(20)
—
(680)
December 31,
2018
Increase /
(Decrease)
Reclassifications
December 31,
2019
Foreign currency translation adjustments1
Translation adjustments on net investment hedge2
Cash flow hedges
Interest rate contracts3
Defined benefit pension and other postretirement plans4
Investment securities available-for-sale
$
(661) $
(66)
—
10
(1)
(in millions)
23 $
28
11
(17)
2
— $
—
—
(2)
—
(638)
(38)
11
(9)
1
Accumulated Other Comprehensive Income (Loss)
$
(718) $
47 $
(2) $
(673)
1. During 2020, the decrease in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily
by the appreciation of the Euro and British pound partially offset by the depreciation of the Brazilian real. During 2019, the decrease in the
accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the appreciation of the British
pound partially offset by the depreciation of the euro.
2.
3.
The Company uses foreign currency denominated debt to hedge a portion of its net investment in foreign operations against adverse movements
in exchange rates. Changes in the value of the debt are recorded in accumulated other comprehensive income (loss). During 2020, the increase
in the accumulated other comprehensive loss related to the net investment hedge was driven by the appreciation of the euro. During 2019, the
decrease in the accumulated other comprehensive loss related to the net investment hedge was driven by the depreciation of the euro. See
Note 23 (Derivative and Hedging Instruments) for additional information.
In 2019, the Company entered into treasury rate locks which are accounted for as cash flow hedges. In the first quarter of 2020, in connection
with the issuance of the 2020 USD Notes, these contracts were settled for a loss of $175 million, or $136 million net of tax, recorded in
accumulated other comprehensive income (loss). The cumulative loss will be reclassified as an adjustment to interest expense over the
respective terms of the 2020 USD Notes. See Note 23 (Derivative and Hedging Instruments) for additional information.
4. During 2020, the increase in the accumulated other comprehensive loss related to the Company’s Plans was driven primarily by an actuarial loss
within the Postretirement Plan. During 2019, the decrease in the accumulated other comprehensive gain related to the Company’s Plans was
primarily driven by actuarial losses within the Vocalink and non-U.S. Plans. See Note 14 (Pension, Postretirement and Savings Plans) for
additional information.
Note 18. Share-Based Payments
In May 2006, the Company implemented the Mastercard Incorporated 2006 Long Term Incentive Plan, which was amended and
restated as of June 5, 2012 (the “LTIP”). The LTIP is a stockholder-approved plan that permits the grant of various types of equity
awards to employees. The Company has granted Options, RSUs and PSUs under the LTIP. The Company uses the straight-line
method of attribution for expensing all equity awards. Compensation expense is recorded net of estimated forfeitures, with
estimates adjusted as appropriate.
92 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There are approximately 116 million shares of Class A common stock authorized for equity awards under the LTIP. Although the LTIP
permits the issuance of shares of Class B common stock, no such shares have been authorized for issuance. Shares issued as a result
of Option exercises and the conversions of RSUs and PSUs were funded primarily with the issuance of new shares of Class A common
stock.
Stock Options
Options expire ten years from the date of grant and vest ratably over four years. For Options granted, a participant’s unvested
awards are forfeited upon termination. In the event a participant terminates employment due to disability or retirement more than
seven months after receiving the award, however, the participant retains all of their awards without providing additional service to
the Company. Retirement eligibility is dependent upon age and years of service. Compensation expense is recognized over the
vesting period as stated in the LTIP.
The fair value of each Option is estimated on the date of grant using a Black-Scholes option pricing model. The following table
presents the weighted-average assumptions used in the valuation and the resulting weighted-average fair value per option granted
for the years ended December 31:
Risk-free rate of return
Expected term (in years)
Expected volatility
Expected dividend yield
2020
2019
2018
1.0 %
6.00
19.3 %
0.6 %
2.6 %
6.00
19.6 %
0.6 %
2.7 %
6.00
19.7 %
0.6 %
Weighted-average fair value per Option granted
$ 80.92
$ 53.09
$ 40.90
The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. The expected term and the
expected volatility were based on historical Mastercard information. The expected dividend yields were based on the Company’s
expected annual dividend rate on the date of grant.
The following table summarizes the Company’s option activity for the year ended December 31, 2020:
Outstanding at January 1, 2020
Granted
Exercised
Forfeited/expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Options vested and expected to vest at December 31, 2020
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(in years)
(in millions)
Options
(in millions)
6.6 $
0.4 $
(1.3) $
— $
5.7 $
3.8 $
5.7 $
117
263
75
229
137
106
137
6.0 $
1,259
5.1 $
962
6.0 $
1,257
As of December 31, 2020, there was $37 million of total unrecognized compensation cost related to non-vested Options. The cost is
expected to be recognized over a weighted-average period of 2.1 years.
Restricted Stock Units
For RSUs granted on or after March 1, 2020, the awards generally vest ratably over four years. For RSUs granted before March 1,
2020, the awards generally vest after three years. A participant’s unvested awards are forfeited upon termination of employment.
In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion
of the unvested awards for services performed through the date of termination. In the event a participant terminates employment
due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without
providing additional service to the Company. Compensation expense is recognized over the shorter of the vesting periods stated in
the LTIP or the date the individual becomes eligible to retire but not less than seven months.
MASTERCARD 2020 FORM 10-K 93
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s RSU activity for the year ended December 31, 2020:
Outstanding at January 1, 2020
Granted
Converted
Forfeited
Outstanding at December 31, 2020
RSUs expected to vest at December 31, 2020
Weighted-
Average
Grant-Date
Fair Value
Aggregate
Intrinsic
Value
(in millions)
Units
(in millions)
2.9 $
0.9 $
(1.2) $
(0.1) $
166
288
116
218
2.5 $
231 $
898
2.4 $
230 $
861
The fair value of each RSU is the closing stock price on the New York Stock Exchange of the Company’s Class A common stock on the
date of grant, adjusted for the exclusion of dividend equivalents. Upon vesting, a portion of the RSU award may be withheld to
satisfy the minimum statutory withholding taxes. The remaining RSUs will be settled in shares of the Company’s Class A common
stock after the vesting period. As of December 31, 2020, there was $233 million of total unrecognized compensation cost related to
non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 2.4 years.
Performance Stock Units
PSUs vest after three years, however, awards granted on or after March 1, 2019 are subject to a mandatory one-year post-vest hold.
A participant’s unvested awards are forfeited upon termination of employment. In the event of termination due to job elimination
(as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed
through the date of termination. In the event a participant terminates employment due to disability or retirement more than seven
months after receiving the award, the participant retains all of their awards without providing additional service to the Company.
The following table summarizes the Company’s PSU activity for the year ended December 31, 2020:
Outstanding at January 1, 2020
Granted
Converted
Outstanding at December 31, 2020
PSUs expected to vest at December 31, 2020
Weighted-
Average
Grant-Date
Fair Value
Aggregate
Intrinsic
Value
(in millions)
Units
(in millions)
0.5 $
0.2 $
(0.3) $
167
291
126
0.4 $
259 $
148
0.4 $
259 $
148
Since 2013, PSUs containing performance and market conditions have been issued. Performance measures used to determine the
actual number of shares that vest after three years include net revenue growth, EPS growth and relative total shareholder return
(“TSR”). Relative TSR is considered a market condition, while net revenue and EPS growth are considered performance conditions.
The Monte Carlo simulation valuation model is used to determine the grant-date fair value.
Compensation expense for PSUs is recognized over the requisite service period, or the date the individual becomes eligible to retire
but not less than seven months, if it is probable that the performance target will be achieved and subsequently adjusted if the
probability assessment changes. During the year ended December 31, 2020, performance targets related to PSU awards granted in
2018, and scheduled to vest in 2021 (“2018 PSU Awards”), were adjusted to exclude certain pandemic-related financial impacts
deemed outside of the Company’s control. The adjustment required the Company to apply modification accounting to the 2018 PSU
Awards. The modification had an immaterial impact on compensation expense expected to be recognized over the remaining
service period. As of December 31, 2020, there was $38 million of total unrecognized compensation cost related to non-vested
PSUs. The cost is expected to be recognized over a weighted-average period of 1.4 years.
94 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional Information
The following table includes additional share-based payment information for each of the years ended December 31:
Share-based compensation expense: Options, RSUs and PSUs
$
254 $
250 $
196
2020
2019
2018
(in millions, except weighted-
average fair value)
Income tax benefit recognized for equity awards
Income tax benefit realized related to Options exercised
Options:
Total intrinsic value of Options exercised
RSUs:
Weighted-average grant-date fair value of awards granted
Total intrinsic value of RSUs converted into shares of Class A common stock
PSUs:
Weighted-average grant-date fair value of awards granted
Total intrinsic value of PSUs converted into shares of Class A common stock
53
68
53
69
41
53
317
317
242
288
330
291
92
226
394
231
85
171
194
226
40
Note 19. Commitments
At December 31, 2020, the Company had the following future minimum payments due under noncancelable agreements, primarily
related to sponsorships to promote the Mastercard brand and licensing arrangements and a commitment to purchase the remaining
shares of a majority-owned joint venture. The Company has accrued $22 million of these future payments as of December 31, 2020.
2021
2022
2023
2024
2025
Thereafter
Total
Note 20. Income Taxes
Components of Income and Income tax expense
The domestic and foreign components of income before income taxes for the years ended December 31 are as follows:
(in millions)
$
573
255
117
78
1
—
$
1,024
United States
Foreign
Income before income taxes
2020
2019
2018
(in millions)
$
3,304 $
4,213 $
3,510
4,456
5,518
3,694
$
7,760 $
9,731 $
7,204
MASTERCARD 2020 FORM 10-K 95
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total income tax provision for the years ended December 31 is comprised of the following components:
Current
Federal
State and local
Foreign
Deferred
Federal
State and local
Foreign
Income tax expense
Effective Income Tax Rate
2020
2019
2018
(in millions)
$
439 $
642 $
56
781
1,276
106
9
(42)
73
81
897
1,620
40
—
(47)
(7)
649
69
871
1,589
(228)
(11)
(5)
(244)
$
1,349 $
1,613 $
1,345
A reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate for the years ended December 31, is as
follows:
2020
2019
2018
Amount
Percent
Amount
Percent
Amount
Percent
(in millions, except percentages)
Income before income taxes
$
7,760
$
9,731
$
7,204
Federal statutory tax
1,630
21.0 %
2,044
21.0 %
1,513
21.0 %
State tax effect, net of federal benefit
57
0.7 %
65
0.7 %
Foreign tax effect
European Commission fine
Foreign tax credits1
Windfall benefit
Other, net
Income tax expense
(193)
(2.5) %
(208)
(2.1) %
—
—
(119)
(26)
— %
— %
(1.5) %
(0.3) %
—
(32)
(129)
(127)
— %
(0.3) %
(1.3) %
(1.4) %
46
(92)
194
(110)
(72)
(134)
0.6 %
(1.3) %
2.7 %
(1.5) %
(1.0) %
(1.8) %
$
1,349
17.4 % $
1,613
16.6 % $
1,345
18.7 %
1
Included within the impact of the foreign tax credits is $27 million for 2019 and $90 million for 2018 of tax benefits relating to the carryback of
certain foreign tax credits.
The effective income tax rates for the years ended December 31, 2020, 2019 and 2018 were 17.4%, 16.6% and 18.7%, respectively.
The effective income tax rate for 2020 was higher than the effective income tax rate for 2019, primarily due to discrete tax benefits
in 2019, partially offset by a more favorable geographic mix of earnings in 2020. The 2019 discrete tax benefits related to a
favorable court ruling, a reduction to the Company’s transition tax liability and additional foreign tax credits which can be carried
back under U.S. tax reform transition rules issued by the Department of the Treasury and the Internal Revenue Service.
The effective income tax rate for 2019 was lower than the effective income tax rate for 2018 primarily due to the nondeductible
nature of the fine issued by the European Commission in 2018 and a discrete tax benefit related to a favorable court ruling in 2019.
These 2019 benefits were partially offset by discrete tax benefits in 2018 primarily related to foreign tax credits generated in 2018 as
a result of U.S. tax reform, which can be carried back and utilized in 2017 under transition rules issued by the Department of the
Treasury and the Internal Revenue Service.
96 MASTERCARD 2020 FORM 10-K
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Singapore Income Tax Rate
In connection with the expansion of the Company’s operations in the Asia Pacific, Middle East and Africa region, the Company’s
subsidiary in Singapore, Mastercard Asia Pacific Pte. Ltd. (“MAPPL”) received an incentive grant from the Singapore Ministry of
Finance in 2010. The incentive had provided MAPPL with, among other benefits, a reduced income tax rate for the 10-year period
commencing January 1, 2010 on taxable income in excess of a base amount. The Company continued to explore business
opportunities in this region, resulting in an expansion of the incentives being granted by the Ministry of Finance, including a further
reduction to the income tax rate on taxable income in excess of a revised fixed base amount commencing July 1, 2011 and
continuing through December 31, 2025. Without the incentive grant, MAPPL would have been subject to the statutory income tax
rate on its earnings. For 2020, 2019 and 2018, the impact of the incentive grant received from the Ministry of Finance resulted in a
reduction of MAPPL’s income tax liability of $260 million, or $0.26 per diluted share, $300 million, or $0.29 per diluted share, and
$212 million, or $0.20 per diluted share, respectively.
Indefinite Reinvestment
As of December 31, 2020 the Company had deferred tax liabilities of $61 million primarily related to the tax effect of the estimated
foreign exchange impact on unremitted earnings. The Company expects that foreign withholding taxes associated with future
repatriation of these earnings will not be material. Earnings of approximately $0.6 billion remain permanently reinvested and the
Company estimates that immaterial U.S. federal and state and local income tax expense would result, primarily from foreign
exchange, if these earnings were to be repatriated.
Deferred Taxes
Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities. The components of deferred tax assets and liabilities at December 31 are as
follows:
Deferred Tax Assets
Accrued liabilities
Compensation and benefits
State taxes and other credits
Net operating and capital losses
Unrealized gain/loss - 2015 EUR Notes
U.S. foreign tax credits
Intangible assets
Other items
Less: Valuation allowance
Total Deferred Tax Assets
Deferred Tax Liabilities
Prepaid expenses and other accruals
Goodwill and intangible assets
Property, plant and equipment
Previously taxed earnings and profits
Other items
Total Deferred Tax Liabilities
Net Deferred Tax Assets
2020
2019
(in millions)
$
324 $
218
47
147
58
276
182
142
354
214
41
119
20
145
157
74
(353)
1,041
(205)
919
78
216
183
61
98
636
83
187
128
—
63
461
$
405 $
458
The valuation allowance balance at December 31, 2020 and 2019 primarily relates to the Company’s ability to recognize future tax
benefits associated with the carry forward of U.S. foreign tax credits generated in the current and prior periods and certain foreign
net operating losses. The recognition of the foreign tax credits is dependent upon the realization of future foreign source income in
the appropriate foreign tax credit basket in accordance with U.S. federal income tax law. The recognition of the foreign losses is
MASTERCARD 2020 FORM 10-K 97
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
dependent upon the future taxable income in such jurisdictions and the ability under tax law in these jurisdictions to utilize net
operating losses following a change in control.
A reconciliation of the beginning and ending balance for the Company’s unrecognized tax benefits for the years ended December 31,
is as follows:
Beginning balance
Additions:
Current year tax positions
Prior year tax positions
Reductions:
Prior year tax positions
Settlements with tax authorities
Expired statute of limitations
Ending balance
2020
2019
2018
(in millions)
$
203 $
164 $
183
19
192
(10)
(12)
(4)
22
37
(11)
(2)
(7)
23
5
(17)
(18)
(12)
$
388 $
203 $
164
As of December 31, 2020, the amount of unrecognized tax benefit was $388 million. This amount, if recognized, would reduce the
effective income tax rate. The Company’s unrecognized tax benefits increased primarily due to a prior year tax issue resulting from a
refund claim filed in 2020.
The Company is subject to tax in the U.S., Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as
state and local jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and
circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation. Within the next
twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations are reasonably
possible and that a change in estimate, reducing unrecognized tax benefits, may occur. While such a change may be significant, it is
not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation
expire. The Company has effectively settled its U.S. federal income tax obligations through 2011. With limited exception, the
Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2010.
At December 31, 2020 and 2019, the Company had a net income tax-related interest payable of $24 million and $13 million,
respectively, in its consolidated balance sheet. Tax-related interest income/(expense) in 2020, 2019 and 2018 was not material. In
addition, as of December 31, 2020 and 2019, the amounts the Company has recognized for penalties payable in its consolidated
balance sheet were not material.
Note 21. Legal and Regulatory Proceedings
Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business.
Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages.
Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore,
Mastercard has not established reserves for any of these proceedings. When the Company determines that a loss is both probable
and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material. When a material
loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount
of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Unless otherwise stated below with
respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the
following reasons: (1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are
unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or
motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings of multiple defendants or
potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal
issues presented. Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the
outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its
results of operations, financial condition or overall business. However, an adverse judgment or other outcome or settlement with
respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to
change its business practices. In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage
claims and possibly result in significant damage awards. Any of these events could have a material adverse effect on Mastercard’s
results of operations, financial condition and overall business.
98 MASTERCARD 2020 FORM 10-K
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interchange Litigation and Regulatory Proceedings
Mastercard’s interchange fees and other practices are subject to regulatory, legal review and/or challenges in a number of
jurisdictions, including the proceedings described below. When taken as a whole, the resulting decisions, regulations and legislation
with respect to interchange fees and acceptance practices may have a material adverse effect on the Company’s prospects for future
growth and its overall results of operations, financial position and cash flows.
United States. In June 2005, the first of a series of complaints were filed on behalf of merchants (the majority of the complaints
were styled as class actions, although a few complaints were filed on behalf of individual merchant plaintiffs) against Mastercard
International, Visa U.S.A., Inc., Visa International Service Association and a number of financial institutions. Taken together, the
claims in the complaints were generally brought under both Sections 1 and 2 of the Sherman Act, which prohibit monopolization and
attempts or conspiracies to monopolize a particular industry, and some of these complaints contain unfair competition law claims
under state law. The complaints allege, among other things, that Mastercard, Visa, and certain financial institutions conspired to set
the price of interchange fees, enacted point of sale acceptance rules (including the no surcharge rule) in violation of antitrust laws
and engaged in unlawful tying and bundling of certain products and services, resulting in merchants paying excessive costs for the
acceptance of Mastercard and Visa credit and debit cards. The cases were consolidated for pre-trial proceedings in the U.S. District
Court for the Eastern District of New York in MDL No. 1720. The plaintiffs filed a consolidated class action complaint that seeks
treble damages.
In July 2006, the group of purported merchant class plaintiffs filed a supplemental complaint alleging that Mastercard’s initial public
offering of its Class A Common Stock in May 2006 (the “IPO”) and certain purported agreements entered into between Mastercard
and financial institutions in connection with the IPO: (1) violate U.S. antitrust laws and (2) constituted a fraudulent conveyance
because the financial institutions allegedly attempted to release, without adequate consideration, Mastercard’s right to assess them
for Mastercard’s litigation liabilities. The class plaintiffs sought treble damages and injunctive relief including, but not limited to, an
order reversing and unwinding the IPO.
In February 2011, Mastercard and Mastercard International entered into each of: (1) an omnibus judgment sharing and settlement
sharing agreement with Visa Inc., Visa U.S.A. Inc. and Visa International Service Association and a number of financial institutions;
and (2) a Mastercard settlement and judgment sharing agreement with a number of financial institutions. The agreements provide
for the apportionment of certain costs and liabilities which Mastercard, the Visa parties and the financial institutions may incur,
jointly and/or severally, in the event of an adverse judgment or settlement of one or all of the cases in the merchant litigations.
Among a number of scenarios addressed by the agreements, in the event of a global settlement involving the Visa parties, the
financial institutions and Mastercard, Mastercard would pay 12% of the monetary portion of the settlement. In the event of a
settlement involving only Mastercard and the financial institutions with respect to their issuance of Mastercard cards, Mastercard
would pay 36% of the monetary portion of such settlement.
In October 2012, the parties entered into a definitive settlement agreement with respect to the merchant class litigation (including
with respect to the claims related to the IPO) and the defendants separately entered into a settlement agreement with the individual
merchant plaintiffs. The settlements included cash payments that were apportioned among the defendants pursuant to the
omnibus judgment sharing and settlement sharing agreement described above. Mastercard also agreed to provide class members
with a short-term reduction in default credit interchange rates and to modify certain of its business practices, including its “no
surcharge” rule. The court granted final approval of the settlement in December 2013, and objectors to the settlement appealed
that decision to the U.S. Court of Appeals for the Second Circuit. In June 2016, the court of appeals vacated the class action
certification, reversed the settlement approval and sent the case back to the district court for further proceedings. The court of
appeals’ ruling was based primarily on whether the merchants were adequately represented by counsel in the settlement. As a
result of the appellate court ruling, the district court divided the merchants’ claims into two separate classes - monetary damages
claims (the “Damages Class”) and claims seeking changes to business practices (the “Rules Relief Class”). The court appointed
separate counsel for each class.
In September 2018, the parties to the Damages Class litigation entered into a class settlement agreement to resolve the Damages
Class claims. Mastercard increased its reserve by $237 million during 2018 to reflect both its expected financial obligation under the
Damages Class settlement agreement and the filed and anticipated opt-out merchant cases. The time period during which Damages
Class members were permitted to opt out of the class settlement agreement ended in July 2019 with merchants representing slightly
more than 25% of the Damages Class interchange volume choosing to opt out of the settlement. The district court granted final
approval of the settlement in December 2019. The district court’s settlement approval order has been appealed. Mastercard has
commenced settlement negotiations with a number of the opt-out merchants and has reached settlements and/or agreements in
principle to settle a number of these claims. The Damages Class settlement agreement does not relate to the Rules Relief Class
claims. Separate settlement negotiations with the Rules Relief Class are ongoing. In December 2020, the Rules Relief Class filed a
motion for class certification. Briefing on summary judgment motions in the Rules Relief Class and opt-out merchant cases was
completed in December 2020.
MASTERCARD 2020 FORM 10-K 99
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2020 and 2019, Mastercard had accrued a liability of $783 million and $914 million, respectively, as a reserve for
both the Damages Class litigation and the opt-out merchant cases. As of December 31, 2020 and 2019, Mastercard had $586 million
and $584 million, respectively, in a qualified cash settlement fund related to the Damages Class litigation and classified as restricted
cash on its consolidated balance sheet. The reserve as of December 31, 2020 for both the Damages Class litigation and the opt-out
merchants represents Mastercard’s best estimate of its probable liabilities in these matters. The portion of the accrued liability
relating to both the opt-out merchants and the Damages Class litigation settlement does not represent an estimate of a loss, if any, if
the matters were litigated to a final outcome. Mastercard cannot estimate the potential liability if that were to occur.
Canada. In December 2010, a proposed class action complaint was commenced against Mastercard in Quebec on behalf of Canadian
merchants. The suit essentially repeated the allegations and arguments of a previously filed application by the Canadian
Competition Bureau to the Canadian Competition Tribunal (dismissed in Mastercard’s favor) concerning certain Mastercard rules
related to point-of-sale acceptance, including the “honor all cards” and “no surcharge” rules. The Quebec suit sought compensatory
and punitive damages in unspecified amounts, as well as injunctive relief. In the first half of 2011, additional purported class action
lawsuits were commenced in British Columbia and Ontario against Mastercard, Visa and a number of large Canadian financial
institutions. The British Columbia suit sought compensatory damages in unspecified amounts, and the Ontario suit sought
compensatory damages of $5 billion on the basis of alleged conspiracy and various alleged breaches of the Canadian Competition
Act. Additional purported class action complaints were commenced in Saskatchewan and Alberta with claims that largely mirror
those in the other suits. In June 2017, Mastercard entered into a class settlement agreement to resolve all of the Canadian class
action litigation. The settlement, which requires Mastercard to make a cash payment and modify its “no surcharge” rule, has
received court approval in each Canadian province. Objectors to the settlement have sought to appeal the approval orders. All
appellate courts have rejected the objectors’ appeals. In one of the appeals, the objectors have until April 2021 to request an appeal
to the Supreme Court of Canada. For the remainder of the appeals, the Supreme Court has previously denied such requests.
Europe. In July 2015, the European Commission (“EC”) issued a Statement of Objections related to Mastercard’s interregional
interchange fees and central acquiring rule within the European Economic Area (the “EEA”). The Statement of Objections, which
followed an investigation opened in 2013, included preliminary conclusions concerning the alleged anticompetitive effects of these
practices. In December 2018, Mastercard announced the anticipated resolution of the EC’s investigation. With respect to
interregional interchange fees, Mastercard made a settlement proposal whereby it would make changes to its interregional
interchange fees. The EC issued a decision accepting the settlement in April 2019, with changes to interregional interchange fees
going into effect in the fourth quarter of 2019. In addition, with respect to Mastercard’s historic central acquiring rule, the EC issued
a negative decision in January 2019. The EC’s negative decision covers a period of time of less than two years before the rule’s
modification. The rule was modified in late 2015 to comply with the requirements of the EEA Interchange Fee Regulation. The
decision does not require any modification of Mastercard’s current business practices but included a fine of €571 million, which was
paid in April 2019. Mastercard incurred a charge of $654 million in 2018 in relation to this matter.
Since May 2012, a number of United Kingdom (“U.K.”) merchants filed claims or threatened litigation against Mastercard seeking
damages for merchants allegedly paying excessive costs for the acceptance of Mastercard credit and debit cards arising out of
alleged anti-competitive conduct with respect to, among other things, Mastercard’s cross-border interchange fees and its U.K. and
Ireland domestic interchange fees (the “U.K. Merchant claimants”). In addition, Mastercard, has faced similar filed or threatened
litigation by merchants with respect to interchange rates in other countries in Europe (the “Pan-European Merchant claimants”). In
aggregate, the alleged damages claims from the U.K. and Pan-European Merchant claimants were in the amount of approximately £3
billion (approximately $4.5 billion as of December 31, 2020). Mastercard has resolved over £2 billion (approximately $3 billion as of
December 31, 2020) of these damages claims through settlement or judgment.
In January 2017, Mastercard received a liability judgment in its favor on all significant matters in a separate action brought by ten of
the U.K. Merchant claimants. Three of the U.K. Merchant claimants appealed the judgment, and these appeals were combined with
Mastercard’s appeal of a 2016 judgment in favor of one U.K. merchant. In July 2018, the U.K. appellate court heard the appeals of
the four merchants and ruled against both Mastercard and Visa on two of the three legal issues being considered. The parties
appealed the rulings to the U.K. Supreme Court. In June 2020, the U.K. Supreme Court ruled against Mastercard and Visa with
respect to one of the liability issues being considered by the Court related to U.K domestic interchange fees. Additionally, the U.K
Supreme Court set out the legal standard that should be applied by lower trial courts with respect to determining whether
interchange was exemptible under applicable law, and provided guidance to lower courts with regard to the legal standard that
should be applied in assessing merchants’ damages claims. The U.K. Supreme Court sent one of the four merchant cases back to the
trial court for a determination of liability and damages issues and sent the remaining three merchant cases back to the trial court for
a determination of damages issues only. A hearing in one of these merchant cases on liability and damages issues is expected to be
scheduled for the fourth quarter of 2021, while a trial on damages for the other three merchant claims is not expected to occur until
2023.
Since June 2015, Mastercard has recorded litigation provisions for settlements, judgments and legal fees relating to these claims,
including charges of $237 million in 2018. Mastercard continues to litigate with the remaining U.K. and Pan-European Merchant
claimants and it has submitted statements of defense disputing liability and damages claims. The majority of these merchant claims
100 MASTERCARD 2020 FORM 10-K
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
generally had been stayed pending the decision of the U.K. Supreme Court, and a number of those matters are now progressing with
motion practice and discovery. Mastercard incurred charges of $22 million in 2020 to reflect both the estimated attorneys’ fees
incurred by the four merchant claimants in the U.K. Supreme Court appeal, as well as settlements with a number of Pan-European
merchants.
In September 2016, a proposed collective action was filed in the United Kingdom on behalf of U.K. consumers seeking damages for
intra-EEA and domestic U.K. interchange fees that were allegedly passed on to consumers by merchants between 1992 and 2008.
The complaint, which seeks to leverage the European Commission’s 2007 decision on intra-EEA interchange fees, claims damages in
an amount that exceeds £14 billion (approximately $19 billion as of December 31, 2020). In July 2017, the trial court denied the
plaintiffs’ application for the case to proceed as a collective action. In April 2019, the U.K. appellate court granted the plaintiffs’
appeal of the trial court’s decision and sent the case back to the trial court for a re-hearing on the plaintiffs’ collective action
application. In December 2020, the U.K. Supreme Court rejected Mastercard’s appeal of this ruling. The case has been sent back to
the trial court for a re-hearing on the plaintiffs’ collective action application in light of the Supreme Court decision. The hearing is
scheduled to occur in late March 2021.
ATM Non-Discrimination Rule Surcharge Complaints
In October 2011, a trade association of independent Automated Teller Machine (“ATM”) operators and 13 independent ATM
operators filed a complaint styled as a class action lawsuit in the U.S. District Court for the District of Columbia against both
Mastercard and Visa (the “ATM Operators Complaint”). Plaintiffs seek to represent a class of non-bank operators of ATM terminals
that operate in the United States with the discretion to determine the price of the ATM access fee for the terminals they operate.
Plaintiffs allege that Mastercard and Visa have violated Section 1 of the Sherman Act by imposing rules that require ATM operators
to charge non-discriminatory ATM surcharges for transactions processed over Mastercard’s and Visa’s respective networks that are
not greater than the surcharge for transactions over other networks accepted at the same ATM. Plaintiffs seek both injunctive and
monetary relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit,
including attorneys’ fees.
Subsequently, multiple related complaints were filed in the U.S. District Court for the District of Columbia alleging both federal
antitrust and multiple state unfair competition, consumer protection and common law claims against Mastercard and Visa on behalf
of putative classes of users of ATM services (the “ATM Consumer Complaints”). The claims in these actions largely mirror the
allegations made in the ATM Operators Complaint, although these complaints seek damages on behalf of consumers of ATM services
who pay allegedly inflated ATM fees at both bank and non-bank ATM operators as a result of the defendants’ ATM rules. Plaintiffs
seek both injunctive and monetary relief equal to treble the damages they claim to have sustained as a result of the alleged
violations and their costs of suit, including attorneys’ fees.
In January 2012, the plaintiffs in the ATM Operators Complaint and the ATM Consumer Complaints filed amended class action
complaints that largely mirror their prior complaints. In February 2013, the district court granted Mastercard’s motion to dismiss the
complaints for failure to state a claim. On appeal, the Court of Appeals reversed the district court’s order in August 2015 and sent
the case back for further proceedings. In September 2019, the plaintiffs filed their motions for class certification in which the
plaintiffs, in aggregate, allege over $1 billion in damages against all of the defendants. Mastercard intends to vigorously defend
against both the plaintiffs’ liability and damages claims and has opposed class certification. Briefing on class certification is
complete.
U.S. Liability Shift Litigation
In March 2016, a proposed U.S. merchant class action complaint was filed in federal court in California alleging that Mastercard,
Visa, American Express and Discover (the “Network Defendants”), EMVCo and a number of issuing banks (the “Bank Defendants”)
engaged in a conspiracy to shift fraud liability for card present transactions from issuing banks to merchants not yet in compliance
with the standards for EMV chip cards in the United States (the “EMV Liability Shift”), in violation of the Sherman Act and California
law. Plaintiffs allege damages equal to the value of all chargebacks for which class members became liable as a result of the EMV
Liability Shift on October 1, 2015. The plaintiffs seek treble damages, attorney’s fees and costs and an injunction against future
violations of governing law, and the defendants have filed a motion to dismiss. In September 2016, the district court denied the
Network Defendants’ motion to dismiss the complaint, but granted such a motion for EMVCo and the Bank Defendants. In May
2017, the district court transferred the case to New York so that discovery could be coordinated with the U.S. merchant class
interchange litigation described above. In August 2020, the district court issued an order granting the plaintiffs’ request for class
certification. In January 2021, the Network Defendants’ request for permission to appeal the district court’s certification decision to
the appellate court was denied. The case is proceeding with substantive expert discovery.
MASTERCARD 2020 FORM 10-K 101
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Telephone Consumer Protection Class Action
Mastercard is a defendant in a Telephone Consumer Protection Act (“TCPA”) class action pending in Florida. The plaintiffs are
individuals and businesses who allege that approximately 381,000 unsolicited faxes were sent to them advertising a Mastercard co-
brand card issued by First Arkansas Bank (“FAB”). The TCPA provides for uncapped statutory damages of $500 per fax. Mastercard
has asserted various defenses to the claims, and has notified FAB of an indemnity claim that it has (which FAB has disputed). In June
2018, the district court granted Mastercard’s motion to stay the proceedings until the Federal Communications Commission makes a
decision on the application of the TCPA to online fax services. In December 2019, the FCC issued a declaratory ruling clarifying that
the TCPA does not apply to faxes sent to online fax services that are received via e-mail. As a result of the ruling, the stay of the
litigation was lifted in January 2020. In January 2021, the magistrate judge serving on the district court issued a decision
recommending that the district court judge deny plaintiffs’ class certification motion. The plaintiffs have the opportunity to file
objections to this decision with the district court judge.
U.S. Federal Trade Commission Investigation
In June 2020, the U.S. Federal Trade Commission’s Bureau of Competition (“FTC”) informed Mastercard that it has initiated a formal
investigation into compliance with the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act. In
particular, the investigation focuses on Mastercard’s compliance with the debit routing provisions of the Durbin Amendment. The
FTC has issued a subpoena and Mastercard is cooperating with it in the investigation.
U.K. Prepaid Cards Matter
Mastercard is subject to an ongoing confidential legal matter related to prepaid cards in the U.K. This matter focuses exclusively on
historic behavior, and has no prospective impact on Mastercard’s on-going business. In connection with this matter, in the fourth
quarter of 2020, Mastercard recorded a litigation charge of $45 million.
Note 22. Settlement and Other Risk Management
Mastercard’s rules guarantee the settlement of many of the transactions between its customers (“settlement risk”). Settlement
exposure is the settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment
transaction date and subsequent settlement. While the term and amount of the guarantee are unlimited, the duration of settlement
exposure is short term and typically limited to a few days.
Gross settlement exposure is estimated using the average daily payment volume during the three months prior to period end
multiplied by the estimated number of days of exposure. The Company has global risk management policies and procedures, which
include risk standards, to provide a framework for managing the Company’s settlement risk and exposure. In the event of a failed
customer, Mastercard may pursue one or more remedies available under the Company’s rules to recover potential losses.
Historically, the Company has experienced a low level of losses from customer failures.
As part of its policies, Mastercard requires certain customers that are not in compliance with the Company’s risk standards to post
collateral, such as cash, letters of credit, guarantees, or other risk mitigating arrangements. This requirement is based on a review of
the individual risk circumstances for each customer. Mastercard monitors its credit risk portfolio on a regular basis and the
adequacy of collateral on hand. Additionally, from time to time, the Company reviews its risk management methodology and
standards. As such, the amounts of estimated settlement exposure are revised as necessary.
The Company’s estimated settlement exposure was as follows at December 31:
Gross settlement exposure
Collateral applied to settlement exposure
Net uncollateralized settlement exposure
2020
2019
(in millions)
$
$
52,360 $
55,800
(6,021)
(4,772)
46,339 $
51,028
Mastercard also provides guarantees to customers and certain other counterparties indemnifying them from losses stemming from
failures of third parties to perform duties. This includes guarantees of Mastercard-branded travelers cheques issued, but not yet
cashed of $370 million and $367 million at December 31, 2020 and 2019, respectively, of which $294 million and $290 million at
December 31, 2020 and 2019, respectively, is mitigated by collateral arrangements. In addition, the Company enters into
agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses
and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company.
Certain indemnifications do not provide a stated maximum exposure. As the extent of the Company’s obligations under these
agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements
102 MASTERCARD 2020 FORM 10-K
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been
material.
Note 23. Derivative and Hedging Instruments
The Company monitors and manages its foreign currency and interest rate exposures as part of its overall risk management program
which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of
these markets may have on its operating results. A primary objective of the Company’s risk management strategies is to reduce the
financial impact that may arise from volatility in foreign currency exchange rates principally through the use of both foreign
exchange derivative contracts (Derivatives) and foreign currency denominated debt (Net Investment Hedge). In addition, the
Company may enter into interest rate derivative contracts to manage the effects of interest rate movements on the Company’s
aggregate liability portfolio, including potential future debt issuances (Cash Flow Hedges).
Foreign Exchange Risk
Derivatives
The Company enters into foreign exchange derivative contracts to manage currency exposure associated with anticipated receipts
and disbursements which are valued based on currencies other than the functional currency of the entity. The Company may also
enter into foreign exchange derivative contracts to offset possible changes in value due to foreign exchange fluctuations of assets
and liabilities. In addition, the Company is subject to foreign exchange risk as part of its daily settlement activities. This risk is
typically limited to a few days between when a payment transaction takes place and the subsequent settlement with customers. To
manage this risk, the Company enters into short duration foreign exchange derivative contracts based upon anticipated receipts and
disbursements for the respective currency position. The objective of these activities is to reduce the Company’s exposure to gains
and losses resulting from fluctuations of foreign currencies against its functional currencies.
The Company’s derivative contracts are summarized below:
December 31, 2020
December 31, 2019
Notional
Fair
Value
Notional
(in millions)
Fair
Value
Commitments to purchase foreign currency
$
389 $
17 $
185 $
Commitments to sell foreign currency
Options to sell foreign currency
Balance sheet location
Prepaid expenses and other current assets 1
Other current liabilities 1
1,110
—
$
(26)
—
19
(28)
1,506
21
$
3
(25)
2
12
(32)
1
The derivative contracts are subject to enforceable master netting arrangements, which contain various netting and setoff provisions.
The amount of gain (loss) recognized on the consolidated statement of operations for the contracts to purchase and sell foreign
currency is summarized below:
Foreign exchange derivative contracts
General and administrative
Year Ended December 31,
2020
2019
(in millions)
2018
$
40 $
(39) $
53
The fair value of the foreign exchange derivative contracts generally reflects the estimated amounts that the Company would receive
(or pay), on a pre-tax basis, to terminate the contracts. The terms of the foreign exchange derivative contracts are generally less
than 18 months. The Company had no deferred gains or losses related to foreign exchange contracts in accumulated other
comprehensive income as of December 31, 2020 and 2019, as these contracts were not designated as hedging instruments for
accounting.
The Company’s derivative financial instruments are subject to both market and counterparty credit risk. Market risk is the potential
for economic losses to be incurred on market risk sensitive instruments arising from adverse changes in market factors such as
MASTERCARD 2020 FORM 10-K 103
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
foreign currency exchange rates, interest rates and other related variables. Counterparty credit risk is the risk of loss due to failure
of the counterparty to perform its obligations in accordance with contractual terms. To mitigate counterparty credit risk, the
Company enters into derivative contracts with a diversified group of selected financial institutions based upon their credit ratings
and other factors. Generally, the Company does not obtain collateral related to derivatives because of the high credit ratings of the
counterparties.
Net Investment Hedge
The Company uses foreign currency denominated debt to hedge a portion of its net investment in foreign operations against adverse
movements in exchange rates, with changes in the value of the debt recorded within currency translation adjustment in
accumulated other comprehensive income (loss). In 2015, the Company designated its €1.65 billion euro-denominated debt as a net
investment hedge for a portion of its net investment in European operations. As of December 31, 2020, the Company had a net
foreign currency transaction loss of $175 million after tax, in accumulated other comprehensive income (loss) associated with
hedging activity.
Interest Rate Risk
Cash Flow Hedges
During the fourth quarter of 2019, the Company entered into treasury rate locks for a total notional amount of $1 billion, which
were accounted for as cash flow hedges. These contracts were entered into to hedge a portion of the Company’s interest rate
exposure attributable to changes in the treasury rates related to the forecasted debt issuance during 2020. The maximum length of
time over which the Company had hedged its exposure was 30 years. In connection with the issuance of the 2020 USD Notes, these
contracts were settled and the Company paid $175 million. As of December 31, 2020, a cumulative loss of $133 million, after tax,
was recorded in accumulated other comprehensive income (loss) associated with these contracts and will be reclassified as an
adjustment to interest expense over the respective terms of the 2020 USD Notes. As of December 31, 2019, the Company recorded
a pre-tax net unrealized gain of $14 million ($11 million, after tax) in accumulated other comprehensive income (loss) associated
with these contracts.
In 2020, the Company reclassified $4 million, pre-tax, of the deferred loss on cash flow derivative contracts recorded in accumulated
other comprehensive income (loss) to interest expense on the statement of operations. The Company estimates that $6 million, pre-
tax, of the deferred loss will be reclassified into interest expense within the next 12 months.
Note 24. Segment Reporting
Mastercard has concluded it has one reportable operating segment, “Payment Solutions.” Mastercard’s Chief Executive Officer has
been identified as the chief operating decision-maker. All of the Company’s activities are interrelated, and each activity is dependent
upon and supportive of the other. Accordingly, all significant operating decisions are based upon analysis of Mastercard at the
consolidated level.
Revenue by geographic market is based on the location of the Company’s customer that issued the card, as well as the location of
the merchant acquirer where the card is being used. Revenue generated in the U.S. was approximately 33% of total revenue in
2020, 32% in 2019 and 33% in 2018. No individual country, other than the U.S., generated more than 10% of total revenue in those
periods. Mastercard did not have any individual customer that generated greater than 10% of net revenue in 2020, 2019 or 2018.
The following table reflects the geographical location of the Company’s property, equipment and right-of-use assets, net, as of
December 31:
2020
2019
(in millions)
2018
$
$
1,185 $
1,147 $
717
681
1,902 $
1,828 $
613
308
921
United States
Other countries
Total
104 MASTERCARD 2020 FORM 10-K
PART II
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Item 9. Changes in and disagreements with accountants on
accounting and financial disclosure
Not applicable.
Item 9A. Controls and procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) are designed to ensure that information required to be disclosed in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of
the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated
to management, including our President and Chief Executive Officer and our Chief Financial Officer, to allow timely decisions
regarding disclosure. The President and Chief Executive Officer and the Chief Financial Officer, with assistance from other members
of management, have reviewed the effectiveness of our disclosure controls and procedures as of December 31, 2020 and, based on
their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.
Internal Control over Financial Reporting
In addition, Mastercard Incorporated’s management assessed the effectiveness of Mastercard’s internal control over financial
reporting as of December 31, 2020. Management’s report on internal control over financial reporting is included in Part II, Item 8.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the consolidated financial statements
included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness
of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There was no change in Mastercard’s internal control over financial reporting that occurred during the three months ended
December 31, 2020 that has materially affected, or is reasonably likely to materially affect, Mastercard’s internal control over
financial reporting.
Item 9B. Other Information
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, we hereby incorporate by reference
herein the disclosure contained in Exhibit 99.1 of this Report.
MASTERCARD 2020 FORM 10-K 105
PART III
Item 10. Directors, executive officers and corporate governance
Item 11. Executive compensation
Item 12. Security ownership of certain beneficial owners and management and
related stockholder matters
Item 13. Certain relationships and related transactions, and director
independence
Item 14. Principal accountant fees and services
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, executive officers and corporate governance
Information regarding our executive officers is included in section “Information about our executive officers” in Part I of this Report.
Additional information required by this Item with respect to our directors and executive officers, code of ethics, procedures for
recommending nominees, audit committee, audit committee financial experts and compliance with Section 16(a) of the Exchange
Act will appear in our definitive proxy statement to be filed with the SEC and delivered to stockholders in connection with our 2021
annual meeting of stockholders (the “Proxy Statement”).
The aforementioned information in the Proxy Statement is incorporated by reference into this Report.
Item 11. Executive compensation
The information required by this Item with respect to executive officer and director compensation will appear in the Proxy
Statement and is incorporated by reference into this Report.
Item 12. Security ownership of certain beneficial owners and
management and related stockholder matters
The information required by this Item with respect to security ownership of certain beneficial owners and management equity and
compensation plans will appear in the Proxy Statement and is incorporated by reference into this Report.
Item 13. Certain relationships and related transactions, and
director independence
The information required by this Item with respect to transactions with related persons, the review, approval or ratification of such
transactions and director independence will appear in the Proxy Statement and is incorporated by reference into this Report.
Item 14. Principal accountant fees and services
The information required by this Item with respect to auditors’ services and fees will appear in the Proxy Statement and is
incorporated by reference into this Report.
MASTERCARD 2020 FORM 10-K 107
PART IV
Item 15. Exhibits and financial statement schedules
Item 16. Form 10-K summary
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS
Item 15. Exhibits and financial statement schedules
(a) The following documents are filed as part of this Report:
1
2
3
Consolidated Financial Statements
See Index to Consolidated Financial Statements in Part II, Item 8.
Consolidated Financial Statement Schedules
None.
The following exhibits are filed as part of this Report or, where indicated, were previously filed and are hereby
incorporated by reference:
Refer to the Exhibit Index included herein.
Item 16. Form 10-K summary
None.
MASTERCARD 2020 FORM 10-K 109
Exhibit index
Exhibit number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
Exhibit Description
Amended and Restated Certificate of Incorporation of Mastercard Incorporated (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed September 29, 2016 (File No. 001-32877)).
Amended and Restated By-Laws of Mastercard Incorporated (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed April 21, 2020 (File No. 001-32877)).
Indenture, dated as of March 31, 2014, between the Company and Deutsche Bank Trust Company Americas, as
trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on March 31,
2014 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of March 31, 2014 (incorporated by reference to Exhibit 4.2 of the
Company’s Current Report on Form 8-K filed on March 31, 2014 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.000% Notes due 2019 (included in Officer’s Certificate of the
Company, dated as of March 31, 2014) (incorporated by reference to Exhibit 4.3 of the Company’s Current Report
on Form 8-K filed on March 31, 2014 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.375% Notes due 2024 (included in Officer’s Certificate of the
Company, dated as of March 31, 2014) (incorporated by reference to Exhibit 4.4 of the Company’s Current Report
on Form 8-K filed on March 31, 2014 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of December 1, 2015 (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed on December 1, 2015 (File No. 001-32877)).
Form of Global Note representing the Company’s 1.100% Notes due 2022 (included in Officer’s Certificate of the
Company, dated as of December 1, 2015) (incorporated by reference to Exhibit 4.2 of the Company’s Current
Report on Form 8-K filed on December 1, 2015 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.100% Notes due 2027 (included in Officer’s Certificate of the
Company, dated as of December 1, 2015) (incorporated by reference to Exhibit 4.3 of the Company’s Current
Report on Form 8-K filed on December 1, 2015 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.500% Notes due 2030 (included in Officer’s Certificate of the
Company, dated as of December 1, 2015) (incorporated by reference to Exhibit 4.4 of the Company’s Current
Report on Form 8-K filed on December 1, 2015 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of November 21, 2016 (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed on November 21, 2016 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.000% Notes due 2021 (included in Officer’s Certificate of the
Company, dated as of November 21, 2016) (incorporated by reference to Exhibit 4.2 of the Company’s Current
Report on Form 8-K filed on November 21, 2016 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.950% Notes due 2026 (included in Officer’s Certificate of the
Company, dated as of November 21, 2016) (incorporated by reference to Exhibit 4.3 of the Company’s Current
Report on Form 8-K filed on November 21, 2016 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.800% Notes due 2046 (included in Officer’s Certificate of the
Company, dated as of November 21, 2016) (incorporated by reference to Exhibit 4.4 of the Company’s Current
Report on Form 8-K filed on November 21, 2016 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of February 26, 2018 (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed on February 26, 2018 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.5% Notes due 2028 (included in Officer’s Certificate of the
Company, dated as of February 26, 2018) (incorporated by reference to Exhibit 4.1 of the of the Company’s
Current Report on Form 8-K filed on February 26, 2018 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.95% Notes due 2048 (included in Officer’s Certificate of the
Company, dated as of February 26, 2018) (incorporated by reference to Exhibit 4.1 of the Company’s Current
Report on Form 8-K filed on February 26, 2018 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of May 31, 2019 (incorporated by reference to Exhibit 4.1 of the
Company’s Current Report on Form 8-K filed on May 31, 2019 (File No. 001-32877)).
110 MASTERCARD 2020 FORM 10-K
EXHIBIT INDEX
Form of Global Note representing the Company’s 2.950% Notes due 2029 (included in Officer’s Certificate of the
Company, dated as of May 31, 2019) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report
on Form 8-K filed on May 31, 2019 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.650% Notes due 2049 (included in Officer’s Certificate of the
Company, dated as of May 31, 2019) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report
on Form 8-K filed on May 31, 2019 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of December 3, 2019 (incorporated by reference to Exhibit 4.1 of
the Company’s Current Report on Form 8-K filed on December 3, 2019 (File No. 001-32877)).
Form of Global Note representing the Company’s 2.000% Notes due 2025 (included in Officer’s Certificate of the
Company, dated as of December 3, 2019) (incorporated by reference to Exhibit 4.1 of the Company’s Current
Report on Form 8-K filed on December 3, 2019 (File No. 001-32877)).
Officer’s Certificate of the Company, dated as of March 26, 2020 (incorporated by reference to Exhibit 4.1 of the
Company’s Current Report on Form 8-K filed on March 26, 2020 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.300% Notes due 2027 (included in Officer’s Certificate of the
Company, dated as of March 26, 2020) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report
on Form 8-K filed on March 26, 2020 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.350% Notes due 2030 (included in Officer’s Certificate of the
Company, dated as of March 26, 2020) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report
on Form 8-K filed on March 26, 2020 (File No. 001-32877)).
Form of Global Note representing the Company’s 3.850% Notes due 2050 (included in Officer’s Certificate of the
Company, dated as of March 26, 2020) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report
on Form 8-K filed on March 26, 2020 (File No. 001-32877)).
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
$6,000,000,000 Amended and Restated Credit Agreement, dated as of November 14, 2019, among Mastercard
Incorporated, the several lenders and agents from time to time party thereto, Citibank, N.A., as managing
administrative agent and JPMorgan Chase Bank, N.A. as administrative agent (incorporated by reference to
Exhibit 10.1 to the Company’s Annual Report on Form 10-K filed February 14, 2020 (File No. 001-32877)).
Employment Agreement between Mastercard International Incorporated and Ajaypal Banga, dated as of July 1,
2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 8, 2010
(File No. 001-32877)).
Employment Letter Agreement between Mastercard International Incorporated and Ajaypal Banga, dated as of
December 31, 2020.
Employment Agreement between Martina Hund-Mejean and Mastercard International, amended and restated as
of December 24, 2012 (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K
filed February 14, 2013 (File No. 001-32877)).
Amendment to Amended and Restated Employment Agreement between Martina Hund-Mejean and Mastercard
International, dated as of December 21, 2017 (incorporated by reference to Exhibit 10.3.1 to the Company’s
Annual Report on Form 10-K filed February 14, 2018 (File No. 001-32877)).
Contract of Employment between Mastercard UK Management Services Limited and Ann Cairns, amended and
restated as of April 5, 2018 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q filed May 2, 2018 (File No. 001-32877)).
Deed of Employment between Mastercard UK Management Services Limited and Ann Cairns, dated July 6, 2011
(incorporated by reference to Exhibit 10.8.2 to the Company’s Annual Report on Form 10-K filed February 16,
2012 (File No. 001-32877)).
Description of Employment Arrangement with Craig Vosburg (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed May 2, 2018 (File No. 001-32877)).
Description of Employment Arrangement with Gilberto Caldart (incorporated by reference to Exhibit 10.4 to the
Company’s Quarterly Report on Form 10-Q filed April 30, 2019 (File No. 001-32877)).
Description of Employment Arrangement with Tim Murphy (incorporated by reference to Exhibit 10.5 to the
Company’s Quarterly Report on Form 10-Q filed April 30, 2019 (File No. 001-32877)).
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25*
10.1
10.2+
10.2.1+*
10.3+
10.3.1+
10.4+
10.4.1+
10.5+
10.6+
10.7+
MASTERCARD 2020 FORM 10-K 111
EXHIBIT INDEX
10.8+
10.9+
10.10+
10.11+*
10.12+
10.13+
10.14+
10.15+
10.16+
10.17+
10.18+
10.19+
10.20+
10.21
10.22
10.23
10.24
10.25
Description of Employment Arrangement with Michael Froman (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed April 29, 2020 (File No. 001-32877)).
Description of Employment Arrangement with Sachin Mehra (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q filed April 29, 2020 (File No. 001-32877)).
Description of Employment Arrangement with Michael Miebach (incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q filed April 29, 2020 (File No. 001-32877)).
Mastercard International Senior Executive Annual Incentive Compensation Plan, as amended and restated
effective February 4, 2019 .
Mastercard International Incorporated Restoration Program, as amended and restated January 1, 2007 unless
otherwise provided (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K
filed February 19, 2009 (File No. 001-32877)).
Mastercard Incorporated Deferral Plan, as amended and restated effective December 1, 2008 for account
balances established after December 31, 2004 (incorporated by reference to Exhibit 10.25 to the Company’s
Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
Mastercard Incorporated 2006 Long Term Incentive Plan, amended and restated effective June 5, 2012
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 1, 2012
(File No. 001-32877)).
Form of Restricted Stock Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for awards
granted on and subsequent to March 1, 2019) (incorporated by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q filed April 30, 2019 (File No. 001-32877)).
Form of Stock Option Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted
on and subsequent to March 1, 2019) (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed April 30, 2019 (File No. 001-32877)).
Form of Performance Stock Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for
awards granted on and subsequent to March 1, 2019) (incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q filed April 30, 2019 (File No. 001-32877)).
Form of Mastercard Incorporated Long Term Incentive Plan Non-Competition and Non-Solicitation Agreement for
named executive officers (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form
10-K filed February 16, 2012 (File No. 001-32877)).
Amended and Restated Mastercard International Incorporated Executive Severance Plan, amended and restated
as of April 10, 2018 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q
filed May 2, 2018 (File No. 001-32877)).
Amended and Restated Mastercard International Incorporated Change in Control Severance Plan, amended and
restated as of June 25, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q filed July 26, 2018 (File No. 001-32877)).
Schedule of Non-Employee Directors’ Annual Compensation effective as of June 25, 2019 (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed July 30, 2019 (File No.
001-32877)).
2006 Non-Employee Director Equity Compensation Plan, amended and restated effective as of June 26, 2018
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed July 26, 2018
(File No. 001-32877)).
Form of Deferred Stock Unit Agreement for awards under 2006 Non-Employee Director Equity Compensation
Plan, amended and restated effective June 26, 2018 (effective for awards granted on and subsequent to June 25,
2019) (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed July 30,
2019 (File No. 001-32877)).
Form of Restricted Stock Agreement for awards under 2006 Non-Employee Director Equity Compensation Plan,
amended and restated effective June 26, 2018 (effective for awards granted on and subsequent to June 25, 2019)
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed July 30, 2019
(File No. 001-32877)).
Form of Indemnification Agreement between Mastercard Incorporated and certain of its directors (incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed May 2, 2006 (File No.
000-50250)).
112 MASTERCARD 2020 FORM 10-K
10.26
10.27
10.28
10.29
10.30
10.30.1
10.30.2
10.31**
10.31.1
10.31.2
10.32
21*
23.1*
31.1*
31.2*
32.1*
EXHIBIT INDEX
Form of Indemnification Agreement between Mastercard Incorporated and certain of its director nominees
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed May 2, 2006
(File No. 000-50250)).
Deed of Gift between Mastercard Incorporated and Mastercard Foundation (incorporated by reference to Exhibit
10.28 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-1 filed May 3, 2006
(File No. 333-128337)).
Settlement Agreement, dated as of June 4, 2003, between Mastercard International Incorporated and Plaintiffs in
the class action litigation entitled In Re Visa Check/MasterMoney Antitrust Litigation (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 8, 2003 (File No. 000-50250)).
Stipulation and Agreement of Settlement, dated July 20, 2006, between Mastercard Incorporated, the several
defendants and the plaintiffs in the consolidated federal class action lawsuit titled In re Foreign Currency
Conversion Fee Antitrust Litigation (MDL 1409), and the California state court action titled Schwartz v. Visa Int’l
Corp., et al. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
November 1, 2006 (File No. 001-32877)).
Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing, dated as of
February 7, 2011, by and among Mastercard Incorporated, Mastercard International Incorporated, Visa Inc., Visa
U.S.A. Inc., Visa International Service Association and Mastercard’s customer banks that are parties thereto
(incorporated by reference to Exhibit 10.33 to Amendment No.1 to the Company’s Annual Report on Form 10-K/A
filed on November 23, 2011).
Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing,
dated as of August 25, 2014, by and among Mastercard Incorporated, Mastercard International Incorporated, Visa
Inc., Visa U.S.A Inc., Visa International Service Association and Mastercard’s customer banks that are parties
thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed October
30, 2014 (File No. 001-32877)).
Second Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement
Sharing, dated as of October 22, 2015, by and among Mastercard Incorporated, Mastercard International
Incorporated, Visa Inc., Visa U.S.A Inc., Visa International Service Association and Mastercard’s customer banks
that are parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q filed October 29, 2015 (File No. 001-32877)).
Mastercard Settlement and Judgment Sharing Agreement, dated as of February 7, 2011, by and among
Mastercard Incorporated, Mastercard International Incorporated and Mastercard’s customer banks that are
parties thereto (incorporated by reference to Exhibit 10.34 to Amendment No.1 to the Company’s Annual Report
on Form 10-K/A filed on November 23, 2011).
Amendment to Mastercard Settlement and Judgment Sharing Agreement, dated as of August 26, 2014, by and
among Mastercard Incorporated, Mastercard International Incorporated and Mastercard’s customer banks that
are parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
filed October 30, 2014 (File No. 001-32877)).
Second Amendment to Mastercard Settlement and Judgment Sharing Agreement, dated as of October 22, 2015,
by and among Mastercard Incorporated, Mastercard International Incorporated and Mastercard’s customer
banks that are parties thereto (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q filed October 29, 2015 (File No. 001-32877)).
Superseding and Amended Class Settlement Agreement, dated September 17, 2018, by and among Mastercard
Incorporated and Mastercard International Incorporated; Visa, Inc., Visa U.S.A. Inc. and Visa International Service
Association; the Class Plaintiffs defined therein; and the Customer Banks defined therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 18, 2018 (File No.
001-32877)).
List of Subsidiaries of Mastercard Incorporated.
Consent of PricewaterhouseCoopers LLP.
Certification of Michael Miebach, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Sachin Mehra, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Michael Miebach, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
MASTERCARD 2020 FORM 10-K 113
EXHIBIT INDEX
32.2*
99.1*
101.INS
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
Certification of Sachin Mehra, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document.
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
+ Management contracts or compensatory plans or arrangements.
*
** Exhibit omits certain information that has been filed separately with the U.S. Securities and Exchange Commission and has been granted
Filed or furnished herewith.
confidential treatment.
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other
disclosure other than with respect to the terms of the agreements or other documents themselves, and should not be relied upon
for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents
were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs
as of the date they were made or at any other time.
114 MASTERCARD 2020 FORM 10-K
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date:
February 12, 2021
By:
MASTERCARD INCORPORATED
(Registrant)
/s/ MICHAEL MIEBACH
Michael Miebach
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
By:
By:
By:
By:
By:
By:
/s/ MICHAEL MIEBACH
Michael Miebach
President and Chief Executive Officer; Director
(Principal Executive Officer)
/s/ SACHIN MEHRA
Sachin Mehra
Chief Financial Officer
(Principal Financial Officer)
/s/ SANDRA ARKELL
Sandra Arkell
Corporate Controller
(Principal Accounting Officer)
/s/ AJAY BANGA
Ajay Banga
Executive Chairman; Director
/s/ RICHARD K. DAVIS
Richard K. Davis
Director
/s/ STEVEN J. FREIBERG
Steven J. Freiberg
Director
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
115 MASTERCARD 2020 FORM 10-K
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
/s/ JULIUS GENACHOWSKI
Julius Genachowski
Director
/s/ CHOON PHONG GOH
Choon Phong Goh
Director
/s/ MERIT E. JANOW
Merit E. Janow
Lead Independent Director
/s/ OKI MATSUMOTO
Oki Matsumoto
Director
/s/ YOUNGME MOON
Youngme Moon
Director
/s/ RIMA QURESHI
Rima Qureshi
Director
/s/ JOSÉ OCTAVIO REYES LAGUNES
José Octavio Reyes Lagunes
Director
/s/ GABRIELLE SULZBERGER
Gabrielle Sulzberger
Director
/s/ JACKSON TAI
Jackson Tai
Director
/s/ LANCE UGGLA
Lance Uggla
Director
SIGNATURES
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
Date:
February 12, 2021
116 MASTERCARD 2020 FORM 10-K
LIST OF SUBSIDIARIES OF MASTERCARD INCORPORATED
Exhibit 21
The following is a list of subsidiaries of Mastercard Incorporated as of December 31, 2020, omitting subsidiaries which,
considered in the aggregate, would not constitute a significant subsidiary:
Name
Global Mastercard Holdings LP
Mastercard A&M Investment Holdings, LLC
Mastercard Asia/Pacific Pte. Ltd.
Mastercard/Europay U.K. Limited
Mastercard Europe SA
Mastercard AP Financing Pte. Ltd.
Mastercard Financing Solutions LLC
Mastercard Holdings LP
Mastercard International Incorporated
Mastercard Payment Gateway Services Group Limited
Mastercard UK Holdco Limited
Mastercard US Holdings LLC
Jurisdiction
United Kingdom
Delaware
Singapore
United Kingdom
Belgium
Singapore
Delaware
United Kingdom
Delaware
United Kingdom
United Kingdom
Delaware
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-135572;
333-136460 and 333-143777) and Form S-3 (No. 333-223679) of Mastercard Incorporated of our report dated February 12,
2021 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in
this Form 10‑K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 12, 2021
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Michael Miebach, certify that:
1.
I have reviewed this annual report on Form 10-K of Mastercard Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date:
February 12, 2021
By:
/s/ Michael Miebach
Michael Miebach
President and Chief Executive Officer
CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Sachin Mehra, certify that:
1.
I have reviewed this annual report on Form 10-K of Mastercard Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date:
February 12, 2021
By:
/s/ Sachin Mehra
Sachin Mehra
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Mastercard Incorporated (the "Company") on Form 10-K for the period
ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
Michael Miebach, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 12, 2021
/s/ Michael Miebach
Michael Miebach
President and Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Mastercard Incorporated (the "Company") on Form 10-K for the period
ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,
Sachin Mehra, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 12, 2021
/s/ Sachin Mehra
Sachin Mehra
Chief Financial Officer
Section 13(r) Disclosure
EXHIBIT 99.1
Mastercard Incorporated ("Mastercard") has established a risk-based compliance program designed to prevent us from
having business dealings with Iran, as well as other prohibited countries, regions, individuals or entities. This includes
obligating issuers and acquirers to screen account holders and merchants, respectively, against the U.S. Office of
Foreign Assets Control’s (“OFAC”) sanctions lists, including the List of Specially Designated Nationals (“SDN list”).
We identified through our compliance program that for the period covered by this Report, Mastercard processed
transactions resulting from:
•
•
certain acquirers located in the Asia Pacific and Europe regions having acquired transactions for consular
services with Iranian embassies in those regions that accepted Mastercard cards
certain acquirers located in the Europe and Middle East/Africa regions having acquired transactions for an
Iranian airline, which accepted Mastercard cards in these regions
OFAC regulations and other legal authorities provide exemptions for certain activities involving dealings with Iran.
However, Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 requires us to disclose whether
we, or any of our affiliates, have knowingly engaged in certain transactions or dealings involving the Government of Iran
or with certain persons or entities found on the SDN list, regardless of whether these dealings constitute a violation of
OFAC regulations.
We do not calculate net revenues or net profits associated with specific merchants (our customers’ customers).
However, we used our fee schedule and the aggregate number and amount of transactions involving the Iranian
embassies and Iranian airline to estimate the net revenue and net profit we obtained during the three months and year
ended December 31, 2020. Both the number of transactions and our estimated net revenue and net profits for this
period are de minimis.