01—Abstract
Summary
Summary of the 10-K filed February 14, 2014. Cited figures are marked; the original filing is the authoritative source.
Mastercard Inc.'s 2013 10-K filing highlights a year of robust growth, driven by increasing transaction volumes and expansion into new payment areas.
The company's core business, processing electronic payments, continues to benefit from the global shift away from cash and checks. Mastercard is actively diversifying its revenue streams by focusing on new markets, encouraging broader product usage (including for everyday needs like transit and parking), and targeting underbanked populations. The company's strategic investments in technology and data analytics are central to its growth strategy, aiming to enhance payment experiences, improve security, and provide valuable insights to its partners.
Despite a strong operational performance, Mastercard faces significant regulatory scrutiny, particularly concerning interchange fees. The company is actively involved in legal, legislative, and regulatory proceedings related to these fees in various jurisdictions.
These ongoing challenges, coupled with intense competition from both traditional players and emerging fintech companies, represent key risks that could impact future financial performance. Nevertheless, Mastercard's global network, technological capabilities, and brand strength position it well to navigate these challenges and capitalize on the evolving payments landscape.
02—Key points
Key Highlights
- Mastercard reported strong net revenue growth of 13% in 2013, driven by increased transaction volumes and dollar volume of activity on its branded cards.
- The company is actively pursuing diversification by expanding into new payment areas such as transit and person-to-person transfers, and focusing on financial inclusion.
- Mastercard's network infrastructure is designed for speed, security, and adaptability, supporting transactions in over 210 countries and territories.
- Significant regulatory and legal scrutiny surrounds interchange fees globally, with ongoing proceedings and legislative proposals impacting the payments industry.
- The company is investing in payment innovations, including digital wallets (MasterPass) and mobile payment solutions, to adapt to the convergence of physical and digital commerce.
- Mastercard is committed to safety and security, leading industry efforts in chip technology (EMV) and tokenization to enhance fraud prevention.
- The company actively repurchased shares, demonstrating a commitment to returning capital to shareholders, with $3.3 billion remaining under its December 2013 repurchase program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 14, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $8.35B$7.39B | +12.9% |
| Operating Expenses | $3.84B$3.45B | +11.3% |
| Operating Income | $4.50B$3.94B | +14.4% |
| Interest Expense | $14.00M$20.00M | −30.0% |
| Net Income | $3.12B$2.76B | +12.9% |
| EPS (Basic) | $2.57$2.20 | +16.8% |
| EPS (Diluted) | $2.56$2.19 | +16.9% |
| Shares Outstanding (Basic) | 1.21B1.25B | −3.4% |
| Shares Outstanding (Diluted) | 1.22B1.26B | −3.4% |
05—Questions
Frequently Asked Questions
What are Mastercard's primary revenue streams?
Mastercard generates revenue primarily through domestic assessments and cross-border volume fees, which are based on the dollar volume of activity on cards bearing its brands. Additionally, it earns revenue from transaction processing fees (based on the number of transactions) and other payment-related products and services, such as consulting, loyalty programs, and fraud detection services.
What are the key risks facing Mastercard, as highlighted in the filing?
Key risks include significant legal, regulatory, and legislative scrutiny concerning interchange fees, which could adversely impact business operations. Intense competition from global networks (like Visa), alternative payment providers, and new entrants is also a significant factor. Additionally, potential disintermediation, cybersecurity threats, and adverse global economic conditions that impact consumer spending are noted risks.
How is Mastercard investing for future growth?
Mastercard is investing in several areas for future growth, including expanding its core businesses globally, diversifying into new payment areas (like transit, person-to-person transfers, and bill payments), focusing on small merchants and financial inclusion initiatives, and leveraging data analytics, loyalty solutions, and fraud protection services. The company is also actively developing innovative platforms for digital and mobile payments to capitalize on the convergence of physical and digital commerce.
What is Mastercard's stance on regulatory challenges regarding interchange fees?
Mastercard acknowledges the significant and intense legal, regulatory, and legislative scrutiny worldwide regarding interchange fees and acceptance practices. The company is actively defending its interchange fees in regulatory proceedings, litigation, and legislative activities, recognizing that adverse outcomes could materially impact its business. The filing details numerous ongoing proceedings in the US, Canada, and Europe related to these fees.
06—Continue