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| Talent and culture | World class talent and culture guided by the Mastercard Way, with a focus on diversity, equity and inclusion and “doing well by doing good” |
| Technology | Leading-edge technology that advances the quality, speed and diversity of our offerings and solutions |
| Government engagement | 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 |
Collectively, the capabilities that we have created organically, and those that we have obtained through acquisitions, support and build upon each other to enhance the total proposition we offer our customers. They enable us to partner with many participants in the broader payments ecosystem and provide choice, security and services to improve the value we provide to our customers.
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Government Regulation
As a technology company operating in the global payments industry, we are subject to government regulation that impacts key aspects of our business. In particular, we are subject to the laws and regulations that affect the payments industry in the many countries in which our products and services are used. We are committed to complying with all applicable laws and regulations and implementing policies, procedures and programs designed to promote compliance. We monitor and coordinate globally while acting locally and establish relationships to assess and 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.
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Payments Oversight and Regulation. Central banks and other regulators around the world either have, or are seeking to establish, formal oversight over participants in the payments industry, as well as authority to regulate certain aspects of the payments systems in their countries. Such authority has resulted in regulation of Mastercard as financial market infrastructure, as well as regulation related to various aspects of our business (including areas such as consumer protections and cybersecurity). In the European Union (the “EU”), 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 payments network platform, as a “specified service provider”, and Mastercard as a “recognized payment system”, which includes supervisions and examination requirements. In addition, EU 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. Examples of other markets where Mastercard is formally overseen include Australia, Brazil, India, Mexico and South Africa. Additionally, certain of our subsidiaries are also regulated as payments institutions, including as money transmitters. This regulation subjects us to licensing obligations, regulatory supervision and examinations, as well as various business conduct and risk management requirements. Interchange Fees. Interchange fees that support the function and value of four-party payments systems like ours are being reviewed or challenged around the world via legislation to regulate interchange fees, competition-related regulatory proceedings, central bank regulation and litigation. Examples include statutes in the U.S. that cap debit interchange for certain regulated activities, proposed legislation in the U.S. to extend routing mandates to credit, our settlement with the European Commission (the “EC”) resolving its investigation into our interregional interchange fees and the EU 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. | | Key 2023 Developments | |
| •In October 2023, the U.S. Federal Reserve issued a proposal that would lower the interchange rate cap for debit and prepaid transactions in the U.S. by approximately 28%-30% (based on an average ticket size of $50), with the cap automatically updating every two years. | |
| •In June 2023, legislation was re-introduced in the U.S. Senate that would extend routing mandates for Mastercard and Visa to credit. The bill stipulates that the top two networks could not be enabled on the same card, leaving room for regional networks to serve as second options. The bill proposes to mandate Mastercard provide authentication, tokenization or other security technology to competing networks, whether or not the transaction is switched by Mastercard. | |
| •In October 2023, the U.S. Consumer Financial Protection Bureau (CFPB) proposed a rule requiring data providers to make covered data available to consumers and authorized third parties, promoting industry standard-setting bodies recognized by the CFPB, and outlining obligations for third parties accessing data on behalf of consumers (including limitations on the collection, use and retention of covered data). | |
| •In October 2023, Mastercard was designated by the Bank of Canada (BoC) as a “prominent payment system” as it relates to its business in Canada (i.e., a payment system that is critical for economic activity in Canada). This designation will result in broad regulatory oversight by the BoC. | |
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. Some jurisdictions are currently considering adopting or have adopted “data localization” requirements, which mandate the collection, storage, and/or other processing of data within their borders. This is the case, for instance, in India, China and Saudi Arabia. Various forms of data localization requirements or data transfer restrictions are also under consideration in other countries and jurisdictions, including the EU.
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Anti-Money Laundering, Countering the Financing of Terrorism, Economic Sanctions and Anti-Corruption. We are subject to anti-money laundering (“AML”) and countering the 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 payments 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, the Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine, 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 U.S. and EU sanctions programs. In the U.S., these obligations include 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.
Issuer and Acquirer Practices Legislation and Regulation. Our issuers and acquirers are subject to numerous regulations and investigations applicable to banks, financial institutions and other licensed entities, 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, Digital Transactions and High-Risk Merchant Categories. Various jurisdictions have enacted or have proposed regulation related to internet transactions which applies to payments system participants, including us and our customers. We may also be impacted by evolving laws surrounding gambling, including fantasy sports, as well as certain legally permissible but high-risk merchant categories, such as adult content, firearms, alcohol and tobacco.
Privacy, Data Protection, AI and Information Security. Aspects of our operations or business are subject to increasingly complex and fragmented privacy, data and information security laws and regulations in the U.S., the EU and elsewhere around the world. For example, in the U.S., we and our customers are respectively subject to, among other laws and regulations, Federal Trade Commission and federal banking agency information safeguarding requirements under the Gramm-Leach-Bliley Act (“GLBA”) that require, among other things, the maintenance of a written, comprehensive information security program and, increasingly, a number of state data and privacy laws. With respect to information security, the U.S. Securities and Exchange Commission (the “SEC”) adopted new disclosure rules that require, among other things, disclosing material cybersecurity incidents in a Current Report on Form 8-K, generally within four business days of determining an incident is material. In the EU, we are subject to the General Data Protection Regulation (the “GDPR”) and its equivalent in the U.K., which requires, among other things, a comprehensive privacy, data protection and information security program to protect the personal and sensitive data of EEA residents. Several regulators and policymakers around the globe use the GDPR as a reference to adopt new or updated privacy, data protection and information security laws and regulations, although divergences have occurred. Laws and regulations in this area are constantly evolving due to several factors, including increasing data collection and data flows, numerous data breaches and security incidents, more sensitive data categories, and emerging technologies such as AI. In addition, the interpretation and application of these privacy, data protection and information security laws and regulations are often uncertain and in a state of flux, thus requiring constant monitoring for compliance.
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ESG. Various jurisdictions have adopted or are increasingly considering adopting laws and regulations impacting our reporting on ESG governance, strategy, risk management, metrics and targets, and results. Regulations already adopted or being considered include required corporate reporting and disclosures on specific topics as well as broader ESG matters. Specific topics include climate (such as the U.K. Streamlined Energy and Carbon Reporting, the EU Corporate Sustainability Reporting Directive, or “EU CSRD”, and the SEC proposed rules related to climate change) and human rights (such as the EU Corporate Sustainability Due Diligence Directive). Broader ESG matters include other environmental matters, treatment of employees and diversity of workforce (such as in the EU CSRD).
Additional Regulatory Developments. Various regulatory agencies also continue to examine a wide variety of issues that could impact us, including evolving laws surrounding buy-now-pay-later, open banking, digital currencies, marijuana, prepaid payroll cards, identity theft, account management guidelines, disclosure rules and marketing.
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 SEC. The information contained on our corporate website, including, but not limited to, our Environmental, Social and Governance Report and our U.S. Consolidated EEO-1 Report, is not incorporated by reference into this Report. Our filings are also available electronically from the SEC at www.sec.gov.
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ITEM 1A. RISK FACTORS
Item 1A. Risk factors
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| RISK HIGHLIGHTS |
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| Legal and Regulatory | | | | Business and Operations | |
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| Payments Industry Regulation | | | | Competition and Technology | | Brand, Reputational Impact and ESG | |
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| Preferential or Protective Government Actions | | | | Information Security and Operational Resilience | | Talent and Culture | |
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| Privacy, Data Protection, AI and Information Security | | | | Stakeholder Relationships | | Acquisitions and Strategic Investments | |
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| Other Regulation | | | | Global Economic and Political Environment | | Settlement and Third-Party Obligations | |
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| Litigation | | | | | | | |
| | | | Class A Common Stock and Governance Structure | |
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Legal and Regulatory
Payments Industry Regulation
Global regulatory and legislative activity related to the payments industry may have a material adverse impact on our overall business and results of operations.
Central banks and similar regulatory bodies have increasingly established or further expanded their authority over certain aspects of payments systems such as ours, including obligations or restrictions with respect to the types of products and services that we may offer, the countries in which our 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. Similarly, jurisdictions that regulate a particular product may consider extending their jurisdiction to other products. For example, debit regulations could lead to regulation of credit products. Moreover, several jurisdictions are demonstrating increased interest about the network fees we charge to our customers (in some cases as part of broader market reviews of retail payments), which could in the future lead to regulation of our network fees. In several jurisdictions, we have been designated as a “systemically important payment system”, with other regulators considering similar designations. This type of regulation and oversight is related to switching activities (authorization, clearing and settlement), and includes policies, procedures and requirements related to risk management, collateral, participant default, timely switching of financial transactions, and capital and financial resources. Parts of our business have also been deemed as a “specified service provider” or considered “critical infrastructure”. The impact to our business created by any new law, regulation or designation is magnified by the potential it has to be replicated in, or conflict with, other jurisdictions, or involve other products within any particular jurisdiction.
The expansion of our products and services as part of our multi-rail strategy has also created the need for us to obtain new types and increasing numbers of regulatory licenses, resulting in increased supervision and additional compliance burdens distinct from those imposed on our core payment network activities. For example, certain of our subsidiaries maintain money transfer licenses to support certain activities. These licenses typically impose supervisory and examination requirements, as well as capital, safeguarding, risk management and other business obligations.
Increased regulation and oversight of payments systems, as well as increased exposure to regulation resulting from changes to our products and services, have resulted and may continue to result in significant compliance and governance burdens or otherwise increase our costs. As a result, customers could be less willing to participate in our payments system and/or use our other products or services, 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/or 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
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we charge our customers could also materially and adversely 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. 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 products associated with our core payment network. 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 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, 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 required to reduce interchange rates, issuers may be less willing to participate in our four-party payments system. Alternatively, they may reduce the benefits associated with our products, choose to charge higher fees to consumers to attempt to recoup a portion of the costs incurred for their services, or 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). These and other impacts could make our products less desirable to consumers, limit our ability to innovate or offer differentiated products, and/or make proprietary three-party networks or other forms of payment more attractive, ultimately reducing the volume of transactions over our network and our profitability.
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 U.S. and Canada, 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, our no-surcharge rules now permit U.S. and Canadian merchants to surcharge credit cards (subject to certain limitations), which over time could lead merchants in some or all merchant categories in these jurisdictions to choose to surcharge as permitted. 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.
•Some jurisdictions have implemented, or are considering, requirements to collect, store and/or process data within their borders, as well as prohibitions on the transfer of data abroad, leading to technological and operational implications as well as increased compliance burdens and other costs.
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•Geopolitical events (such as Russia’s invasion of Ukraine) and resulting OFAC sanctions, adverse trade policies, enforcement of U.S. laws related to countering the financing of terrorism, economic sanctions and anti-corruption, or other types of government actions could lead affected or other jurisdictions to take actions in response that could adversely affect our business. Moreover, given our decision to suspend business operations in Russia, other separate jurisdictions may decide to begin to or increase their focus on growing local payment networks and other solutions.
•Regional groups of countries are considering, or may consider, efforts to restrict our switching of regional transactions.
•Governments have been increasingly creating and expanding local payments structures (such as the Brazilian Instant Payment System-PIX, FedNow in the U.S. and UPI in India), which are increasingly being considered as alternatives to traditional domestic payment solutions and schemes such as ours.
Such developments prevent us from utilizing our global switching capabilities for domestic or regional customers. In addition, to the extent a jurisdiction determines us not to be in compliance with regulatory requirements (including those related to data localization), we have been, and may again in the future be, subject to resource and time pressures in order to come back into compliance. 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 Protection, AI and Information Security
Regulation and enforcement of privacy, data, AI, information security and the digital economy could increase our costs and lead to legal claims and fines, as well as negatively impact our growth and reputation.
We are subject to increasingly complex, fragmented and divergent laws and regulations related to privacy and data protection, data use and governance, AI and information security in the jurisdictions in which we do business. While policymakers around the globe look to the EU and the GDPR when adopting new or updated privacy and data protection laws, divergences have occurred and continue to occur. As a result, new or updated privacy and data protection and information security laws and regulations have led, and may continue to lead, to similar, stricter or at times conflicting requirements, creating an uncertain regulatory environment. For example, some jurisdictions have implemented or are otherwise considering requirements to collect, store and/or process data within their borders, as well as prohibitions on the transfer of data abroad, leading to technological and operational implications. Other jurisdictions have adopted or are otherwise considering adopting sector-specific regulations for the payments industry and other industries in which we participate, including forced data sharing requirements or additional verification requirements. In addition, laws and regulations on AI, data governance and credit decisioning may overlap or conflict with, or diverge from, general privacy rules. Overall, these myriad laws and regulations may require us to modify our data processing practices and policies, incur substantial compliance-related costs and expenses, and otherwise suffer adverse impacts on our business. Failure to comply with any of these laws, regulations and requirements could result in fines, sanctions or other enforcement actions or penalties, which could materially and adversely affect our results of operations and overall business, as well as have an impact on our reputation.
As a user and deployer of AI technology, we are also subject to increasing and evolving laws and regulations related to AI governance and new applications of existing laws and regulations to AI. How our use and deployment of AI will be regulated remains uncertain given the uncertainty that exists as to how AI technology will develop. In addition, the use of AI creates or amplifies risks that are challenging to fully prevent or mitigate. In particular, AI algorithms may generate inaccurate, unintended, unfair or discriminatory outcomes, which may not be easily detectable or explainable, and may inadvertently breach intellectual property, privacy or other rights, as well as confidential information. Our implementation of robust AI governance and risk management frameworks aimed at complying with emerging laws and regulations may not be sufficient protection against these emerging risks.
Further, as we acquire new companies and develop integrated and personalized products and services to meet the needs of a changing marketplace, we have expanded our data profile through additional data types and sources, across multiple channels, and involving new partners. This expansion has amplified the impact of these various laws and regulations on our business. As a result, we are required to constantly monitor our data practices and potentially change them when necessary or appropriate. We also need to provide increased care in our data management, governance and quality practices, particularly as it relates to the use of data in products leveraging AI.
New requirements or changing 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 or use AI 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
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ITEM 1A. RISK FACTORS
products or using information products, which may, in turn, decrease the number of our products that they offer. While we intend to comply with all regulatory requirements, innovate responsibly and deploy Privacy by Design, Data by Design and AI Governance approaches to all of our product development, the speed and pace of changes in laws (as well as stakeholder interests) may not allow us to meet rapidly evolving regulatory and stakeholder expectations. Any of these developments could materially and adversely affect our overall business and results of operations.
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 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. Such regulation has increased significantly in the last several years (as described in “Business - Government Regulation” in Part I, Item 1). Examples include:
•Anti-Money Laundering, Countering the 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 Payments 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 and Acquirer Practices 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 these standards. An increase in the rate of abandoned transactions could adversely impact our volumes or other operational metrics.
Increased regulatory focus on us has resulted and may continue to result in significant compliance and governance burdens or 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. Additionally, our compliance with new economic sanctions and related laws with respect to particular jurisdictions or customers could result in a loss of business, which could be significant. Moreover, while our risk-based compliance program obligates issuers and acquirers to comply with U.S., EU and local sanctions programs (among other obligations), the failure of those issuers and acquirers to identify potential non-compliance issues either during or after their customer onboarding processes could ultimately impact our compliance with economic sanctions and related laws. 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. Current and potential future changes in existing tax laws, including regulatory guidance, are continuously being considered and have been or may be enacted (such as guidelines issued by the Organization for Economic Co-operation and Development (OECD) which impact how multinational enterprises are taxed on their global profits). These changes have and in the future may continue to have an impact on our effective income tax rate and tax payments. Similarly, changes in tax laws and regulations that impact our customers and counterparties, or the economy generally, have impacted and may continue to impact us as well.
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. Jurisdictions around the globe have also increased tax-related audits, which require time and resources to resolve.
Any changes in enacted tax laws, rules, regulatory or judicial interpretations or guidance; any adverse outcome in connection with tax audits in any jurisdiction; or any changes 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.
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ITEM 1A. RISK FACTORS
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 in 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 (as described in Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8). In the event we are found liable in any material litigations or proceedings (particularly 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.
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 U.S. and Canada. Any future limitations on our business resulting from the outcomes of any litigation or regulatory proceeding, including any changes to our rules or business practices, 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
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 competitors both within and outside of the global payments industry and compete in all payment categories, including paper-based payments and all forms of electronic payments. We compete against general purpose payments networks, debit and local networks, ACH and real-time account-based payments systems, digital wallets and other fintechs (focused on online activity across various channels and processing payments using in-house capabilities), government-backed networks and digital currencies. We also face competition from companies that provide alternatives to our value-added services and new adjacent network capabilities (including open banking and digital identity).
Our traditional competitors may have substantially greater financial and other resources than we have, may offer a wider range of programs, services, and payment capabilities than we offer or may use more effective advertising and marketing strategies to achieve broader brand recognition and merchant acceptance than we have. They may also introduce their own innovative programs, value-added services and capabilities that adversely impact our growth.
Certain of our competitors to our core payment network operate three-party payments systems with direct connections to both merchants and consumers, potentially providing competitive advantages. 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.
Certain of our competitors 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 competitors rely principally on technology to support their services that provides cost advantages, and as a result may enjoy lower costs than we do. Many of these competitors are also able to use existing payment networks without being subject to many of the associated costs. Moreover, these competitors also occupy various roles in the payments ecosystem that enable them to influence payment choice of other participants. Any of these factors could put us at a competitive disadvantage.
Our ability to compete may also be affected by regulatory and legislative initiatives, as well as the outcomes of litigation, competition-related regulatory proceedings and both central bank and legislative activity.
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 failure to compete effectively against any of the foregoing threats could materially and adversely affect our overall business and results of operations.
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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.
•Industry participants continue to invest in and develop alternative capabilities, such as account-based payments, which could facilitate P2M transactions that compete with both our core payment network and our additional payment capabilities.
•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. Such regulation may also provide these processors with the opportunity to commoditize the data that are included in the transactions they are servicing. If our customers are disintermediated in their business, we could face diminished demand for our 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. These companies may also develop products or services that compete with our customers within the payments ecosystem and, as a result, could diminish demand for our products and services. When we do partner with fintechs and technology companies, we face a heightened risk when we share data as part of those relationships. While we share this data in a controlled manner subject to applicable anonymization and privacy and data standards, sharing this data without proper oversight could provide partners with a competitive advantage.
•Competitors, customers, fintechs, technology companies, governments and other industry participants may develop products that compete with or replace products and services we currently provide to support our switched transaction and payments offerings. These products could either replace, or force us to change our pricing or practices, for these offerings. In addition, governments that develop or encourage the creation of national or international payments 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 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 so as to meet customer demand for better pricing arrangements and greater rebates and incentives, which moderates our growth. Our inability 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 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 with greater financial resources 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 in order to benefit 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.
Additionally, we face pricing pressure related to real-time account-based payment schemes and cross-border payments (including the increased use of domestic real-time account-based payment schemes offering increasingly lower or subsidized pricing for P2M transactions as well as continued downward pressure on pricing for cross-border payments resulting from competition from real-time account-based payment schemes and from initiatives to lower the cost of cross-border payments to end users (such as the G20
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Roadmap for Enhancing Cross-border Payments)). These factors could have a material adverse impact on our overall business and results of operations.
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 blockchain, AI, machine learning, privacy enhancement and cybersecurity) 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, products and services that could place us at a competitive disadvantage and that could reduce the use of our products and services.
•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 employees with technology expertise.
•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 (including operating companies or non-practicing entities) suggesting that we may be infringing 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 requires resources, which has resulted in and may further result in additional expenses.
•We work with fintechs, technology companies (such as digital players and mobile providers) and traditional customers 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 have and could continue to require us to host and deliver certain products and services on-soil in certain markets, requiring us to alter our technology and delivery model, potentially resulting in additional expenses.
•Various central banks are experimenting with CBDCs which 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 future 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 payments network presents risks that could materially affect our business.
U.K. regulators have designated Vocalink, our real-time account-based payments 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 payments 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 payments platform and oversight by regulators, 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 information security vulnerabilities that are different from those faced on our core payment network. Operational difficulties, such as the temporary unavailability of our services or products, or information security breaches on our real-time account-based payments network could cause a loss of business for these products and services, result in potential liability for us and adversely affect our reputation.
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Working with new customers and end users as we expand our multi-rail solutions and 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 payments markets, we are continually involved in developing and implementing complex multi-rail solutions and diversifying our 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 (such as corporations that are not financial institutions, non-governmental organizations (“NGOs”) and new end users). These differences may present new operational challenges, such as enhanced infrastructure and monitoring for less regulated customers.
Our failure to effectively design and deliver these multi-rail solutions and products and services could make our other offerings less desirable to these customers, or put us at a competitive disadvantage. In addition, if there is a delay in the implementation of our products or services (which could include compliance obligations, such as AML and CFT, and licensing requirements for our products and services that operate under regulatory licenses), if our products or services do not perform as anticipated, or we are unable to otherwise 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 Operational Resilience
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, “hacktivists”, terrorists, nation-states, state-sponsored actors 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, software bugs, server malfunctions, software or hardware failure or other technological failure. These threats include cyber-attacks such as computer viruses, denial-of-service attacks, malicious code (including ransomware), social-engineering attacks (including phishing attacks) or information security breaches and could lead to the misappropriation or loss of consumer account and other information and identity theft. These types of threats have risen significantly due to a significant portion of our workforce working in a hybrid environment. These threats also may be further enhanced in frequency or effectiveness through threat actors’ use of AI.
Our operations rely on the secure transmission, storage and other processing of confidential, proprietary, sensitive and personal 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 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. Geopolitical events and resulting government activity could also lead to information security threats and attacks by affected or sympathizing jurisdictions or other actors, which could put our information and assets at risk, as well as result in network disruption.
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 products and services, which in turn could result in the unauthorized disclosure, release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary, sensitive and personal 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, networks or operations systems that support our business 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, other stakeholders and the broader payments ecosystem, 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. These consequences could be further pronounced in jurisdictions in which we are deemed critical national infrastructure. If such attacks are not detected immediately, or disclosed as required by law, their effect could be compounded.
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In addition to information security risks for our systems and networks, 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 and networks or the systems and networks of our customers, merchants and other third parties could decrease the use and acceptance of our 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. While we offer cyber and intelligence products that are designed to prevent, detect and respond to fraud and cyber-attacks, there can be no assurance that such security solutions will perform as expected or address all possible security threats. Real or perceived defects, failures, errors or vulnerabilities in our security solutions, such as our cyber and intelligence products, could adversely impact our reputation, customer confidence in our solutions and our business and may subject us to litigation, governmental audits and investigation or other liabilities. 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.
In addition, fraudulent activity and increasing cyber-attacks have encouraged legislative and regulatory intervention, and could damage our reputation and reduce the use and acceptance of our 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 and may see their effectiveness enhanced by the use of AI. 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 continuing to take measures to make card and digital payments more secure, increased fraud levels involving our products and services, or misconduct or negligence by third parties switching or otherwise servicing our products and services, could lead to legislative or regulatory intervention, such as enhanced security requirements and liabilities, as well as damage to our reputation. See “Risk Factors - Privacy, Data Protection, AI and Information Security Compliance” in this Part I, Item 1A for more detail concerning related legal risks and obligations.
Despite various mitigation efforts that we undertake, there can be no assurance that we will not suffer material breaches and resulting losses in the future. While we maintain insurance coverage, such coverage may not be adequate to protect us from such losses as well as any liabilities or damages with respect to claims alleging compromises of our confidential, proprietary, sensitive or personal information or our technologies, systems or networks. In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or at all, or that our insurers will not deny coverage as to any future claim. Our risk and exposure to these matters remain heightened due to, among other things, the evolving nature of these threats, our prominent role in the global payments ecosystem, our continued implementation of our strategic priorities, our extensive use of third-party vendors and potential vulnerabilities from previous and future acquisitions, strategic investments or related opportunities. As a result, information security and the continued development and enhancement of our controls, processes and practices designed to protect our computer systems, software, data and networks 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.
Service disruptions that cause us to be unable to process transactions or service our customers could reduce our operational resilience and 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, supply-chain attacks, fire, floods, earthquakes, weather events, power outages, telecommunications disruptions, terrorism, workplace violence, accidents or other catastrophic events (including those related to climate change). 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, networks 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 an 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.
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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.
Many of our customer relationships are not exclusive. Our customers can reassess their future commitments to us subject to the terms of our contracts, and they separately may develop their own services that compete with ours. Our business agreements with these customers may not ultimately 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.
While we have exclusive, or nearly-exclusive, relationships with certain of our customers to issue payment products, other customers have similar exclusive, or nearly-exclusive, relationships with our competitors. These relationships may make it difficult or cost-prohibitive for us to do significant amounts of business with these customers 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.
Consolidation amongst our customers could materially and adversely affect our overall business and results of operations.
Our customers’ industries have undergone substantial, accelerated consolidation in the past. These consolidations have included customers with a substantial Mastercard portfolio being acquired by institutions with a strong relationship with a competitor. Potential future consolidation could occur as a result of bank failures, similar to those that occurred in the U.S. during 2023. 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 “Risk Factors - Settlement and Third-Party Obligations” in this Part I, Item 1A with respect to how we guarantee certain third-party obligations.
With the exception of the U.S. and a select number of other jurisdictions, most in-country (as opposed to cross-border) transactions conducted using cards with our brands are switched by our customers or other processors. Because we do not provide domestic switching services in these countries or 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.
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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 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, we believe a set of larger merchants with increasingly global scope and influence 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 “Risk Factors – Payments Industry Regulation” in this Part I, Item 1A. The continued focus of merchants on the costs of accepting various forms of payment (including digital) 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.
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 is heavily regulated, subjecting us to additional potential exposure under U.S. and international anti-corruption laws (including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act), as well as compliance with various procurement and other laws, regulations, standards and contract terms. Any violation and subsequent judgment or settlement related to the above could subject us to substantial monetary penalties and damages and have a significant reputational impact. Moreover, as a government contractor, we are subject to a government’s right to conduct audits and investigations into both our contract performance and our compliance with applicable laws, regulations and contract terms. Any adverse finding could subject us to civil or criminal penalties, sanctions, or suspension or disbarment.
•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.
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. 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
•Debt limit and budgetary discussions in the U.S. has affected, and could further affect, the U.S. credit rating, impacting consumer confidence and spending
•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
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•Tightening of credit availability that could impact the ability of participating financial institutions to lend to us under the terms of our credit facility
Cross-border transactions. 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 or have included:
•the global COVID-19 pandemic (and the potential of any post-pandemic global economic impact) and potential separate outbreaks of flu, viruses and other diseases (any of which could result in future epidemics or pandemics)
•current and potential future geopolitical conflicts, as well as expansion into regional or global conflicts, and the resulting impacts to our business (this includes Russia’s invasion of Ukraine and the actions taken by the U.S., the EU, other governments and Mastercard in response)
•the threat of terrorism and major environmental and extreme weather events (including those related to climate change)
The impact of and uncertainty that could result from any of these events or factors could ultimately decrease cross-border activity. Additionally, any regulation of interregional interchange fees could also negatively impact our cross-border activity (for example, the targets announced by the G20 Financial Stability Board related to cross-border payments). In each case, decreased cross-border activity could decrease the revenue we receive.
Russia’s invasion of Ukraine. In addition to the cross-border impacts described above, our compliance with sanctions and our decision to suspend our business operations in Russia has led, and could further lead, to other legal ramifications and operational challenges, including fines, the nationalization of our subsidiary and any resulting impacts, and/or lawsuits.
Standards. 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.
Factors such as those discussed above have adversely impacted our business, results of operations and financial condition, and any of these developments potentially 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 2023, approximately 70% of our revenue was generated from activities outside the U.S. 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 U.S. 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 into U.S. dollars of our other revenue currencies and financial assets.
The occurrence of currency fluctuations or exchange controls could have a material adverse impact on our results of operations.
Brand, Reputational Impact and ESG
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 adult content, firearms, alcohol and tobacco) may also, by association, impair our reputation, or result in greater public, regulatory or legislative scrutiny,
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as well as potential litigation. We may also face similar scrutiny to the extent that we are unable to detect and/or prevent illegal activities using our payment products or otherwise occurring over our network.
•We have 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.
•We are headquartered in the U.S. As such, a negative perception of the U.S. 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 on 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 ecosystem, 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.
ESG matters and related stakeholder reaction may impact our reputation, expose us to legal requirements and liability and/or have other business impacts, which could adversely affect our overall business and/or results of operations.
Our brand and reputation are associated with our public commitments to various ESG initiatives, including our goals relating to climate (such as our commitment to achieve net-zero emissions by 2040), financial inclusion, and DEI. Consumers, investors, employees and other stakeholders are increasingly focused on ESG practices. To the extent any of our ESG disclosures, public statements and metrics are subsequently viewed as inaccurate, or we are unable to execute on our ESG initiatives, we may be viewed negatively by stakeholders concerned about these matters. Stakeholders (including those in support of or in opposition to ESG principles) may also have a negative view of us to the extent we are perceived to have not responded appropriately to their ESG concerns or take positions that are contrary to their views or expectations.
In addition, various jurisdictions are increasingly adopting or considering laws and regulations that have or would impact us pertaining to ESG governance, strategy, risk management and metrics/targets/results. These include required corporate reporting and disclosures on specific topics (such as climate and human rights) as well as broader matters (such as other environmental matters, treatment of employees and diversity of workforce). These requirements have, and are likely to continue to, result in increased compliance costs for our business and supply chain, which may increase our operating costs.
Moreover, as governments, investors and other stakeholders face pressure to address climate change and other ESG matters, these stakeholders may express new expectations and focus investments in ways that could cause significant shifts in commerce and consumption behaviors. The impact of and uncertainty that could result from such shifts could ultimately impact our business.
Any of the above issues could have a material or adverse impact to our overall business and/or results of operations.
Talent and Culture
We may not be able to attract and retain a highly qualified and diverse workforce, or maintain our corporate culture, which could harm our overall business and results of operations.
Our performance largely depends on the skills, capabilities and motivation of our employees (including our people leaders), as well as the environment we create for them to enable them to perform their jobs effectively. While attrition and pace of hiring has slowed due to economic uncertainty, the market for specialized skill-sets remains highly competitive, particularly in technology and other areas that are important to the growth of our business. To the extent we are unable to differentiate our value proposition in the market, effectively develop leaders and build robust succession pipelines, it could impact our ability to deliver for our customers. To the extent we cannot design our processes and practices to support equitable outcomes, our ability to attract talent may be significantly impacted and we may experience talent attrition. In addition, escalations in global conflict and a rise in mental health needs are also impacting the well-being of our people. To the extent we are unable to communicate effectively on these issues and provide support to our employees, we could experience a significant impact on our business, reputation and culture. Further,
MASTERCARD 2023 FORM 10-K 39
PART I
ITEM 1A. RISK FACTORS
changes in and enforcement of immigration and work permit laws and visa regulations have made it difficult for employees to work in, or transfer among, jurisdictions where we operate, potentially impairing our ability to attract and retain talent.
Our flexibility policies and programs (in particular, those related to work arrangements) may impact the well-being and productivity of our workforce, which in turn could have a negative impact on the quality of our corporate culture and our ability to innovate. To the extent these policies (including our team-based agreements) do not meet candidate or employee expectations for flexibility, this could also impact our ability to attract and retain talent.
Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent could leave us vulnerable to not anticipating or identifying emerging customer or market opportunities. We also rely on our people leaders to display 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.
Any one or more of the above could harm our overall business and results of operations.
Acquisitions and Strategic Investments
Our efforts to enter into acquisitions, strategic investments or new businesses could be impacted or prevented by regulatory scrutiny and could otherwise result in issues that could disrupt our business and harm our results of operations or reputation.
We continue to evaluate our strategic acquisitions of, and investments in, complementary businesses, products or technologies. As we do so, we face increasing regulatory scrutiny with respect to antitrust, national security and other considerations that could impact these efforts. We also face competition for acquisition targets due to the nature of the market for technology companies. As a result, we could be prevented from successfully completing such acquisitions in the future. If we are not successful in these efforts, we could lose strategic opportunities that are dependent, in part, on inorganic growth.
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. Such an integration also may divert management’s time and resources from our core business and disrupt our operations. Moreover, we have spent, and may continue to spend, time and money on acquisitions or projects that do not sufficiently meet our expectations (either strategically or financially), which has resulted (and may in the future result) in divesting from or otherwise exiting these investments or businesses. Additionally, 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 have inherited and may in the future inherit litigation risk which has or may increase our post-acquisition costs of operations and/or impact our ability to successfully finance that business.
Any acquisition, investment 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. Additionally, targets that we acquire have had, and may in the future have, data practices that do not initially conform to our privacy, data protection and information security standards and data governance model, which could lead to regulatory scrutiny and reputational harm. These targets also have resulted in, and may in the future lead to, information security vulnerabilities for us.
Settlement and Third-Party Obligations
Our role as guarantor, as well as other contractual obligations and discretionary actions, expose us to risk of loss or illiquidity.
We are a guarantor of certain third-party obligations, including those of certain of our customers and service providers. In this capacity, we are exposed to credit and liquidity risk. 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. The recent increased speed of bank failures as recently seen in the U.S. could increase the potential for such losses. Concurrent settlement failures of more than one of our larger customers or of several smaller customers either on a given day or over a condensed period of time may exceed our available resources. Additionally, certain non-guaranteed transactions as well as chargebacks to acquirers in the event of acquirer default could result in elevated brand risk and the potential for financial loss. These impacts 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 results of operations.
40 MASTERCARD 2023 FORM 10-K
PART I
ITEM 1A. RISK FACTORS
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
•any representative of a competitor of Mastercard or of Mastercard Foundation is disqualified from service on our board of directors
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 8, 2024, Mastercard Foundation owned 97,543,508 shares of Class A common stock, representing approximately 10.5% of our general voting power. Historically, Mastercard Foundation had been restricted from selling or otherwise transferring 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 were permitted and had occurred. In July 2023, pursuant to an application in consultation with Mastercard, Mastercard Foundation received court approval to advance that date to January 1, 2024. As a result, Mastercard Foundation is now permitted to sell all or part of its remaining shares, subject to certain conditions. Mastercard Foundation would do so pursuant to an orderly and structured plan to diversify its Mastercard shares over a seven-year period, while remaining a long-term Mastercard stockholder and retaining a significant holding of Mastercard shares in its portfolio. 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 seven-year diversification plan, could discourage or make more difficult acquisition proposals favored by the other holders of the Class A common stock. In addition, because Mastercard Foundation intends to sell its shares over 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 1C. Cybersecurity
Cybersecurity program
As a technology company in the global payments industry entrusted with the safeguarding of sensitive information (including personal information), cybersecurity risk management is an integral part of our overall enterprise risk management program. A robust program to protect our network from cyber and information security threats is critical to managing risk effectively. Our network and platforms incorporate multiple layers of protection, providing greater resiliency and 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. 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, including threats and incidents associated with the use of services provided by third-party providers. Our cybersecurity program provides (among other things) a framework for handling cybersecurity threats and incidents, which includes steps for identifying the nature of a cybersecurity threat (including whether the threat is associated with a third-party provider), assessing the severity of a cybersecurity threat (including advancing to key members of management where appropriate for determination of potential materiality) and implementing cybersecurity processes and procedures.
MASTERCARD 2023 FORM 10-K 41
PART I
ITEM 1C. CYBERSECURITY
Program highlights
•We are committed to the responsible handling of personal information, and we balance our product development activities with a commitment to transparency and control, fairness and non-discrimination, as well as accountability
•Our multi-layered privacy, data protection and information security programs and practices are designed to ensure the safety, security and responsible use of the information and data our stakeholders entrust to us
•We work with our customers, governments, policymakers and others to help develop and implement standards for safe and secure transactions, as well as privacy-centric data practices
•Our programs are informed by third-party assessments and advice regarding best practices from consultants, peer companies and advisors
•Our programs are designed to align with internationally recognized privacy, data protection and information security standards and undergo regular certifications and attestations
•We continually test our systems to discover and address any potential vulnerabilities
•We have processes for evaluating (among other things) the privacy, data protection and information security infrastructure of our third-party providers (including examining any relevant records), and we seek to manage third-party risk with procedures to onboard our third-party providers, monitor their activity during our engagement (where possible) and off-board such third-party service providers at the end of our engagement
•We maintain a business continuity program and cyber insurance coverage
Governance and oversight of privacy, data protection and information security
Board and Committee responsibilities
Our Board and Risk Committee have specific oversight responsibilities with respect to cybersecurity and privacy risk:
•Board: Understanding the issues and risks that are central to the company’s success, including cybersecurity matters
•Risk Committee: Overseeing risks relating to our policies, procedures and strategic approach to information security (inclusive of cybersecurity), privacy and data protection
In general, the Audit Committee and Risk Committee coordinate to oversee our guidelines and policies with respect to risk assessment and risk management and our Audit Committee discusses our financial and operational risk exposures and the steps management has taken to monitor and control such exposures. In this context, the Audit Committee would be informed of a material cybersecurity incident that could have a potential impact on our financial statements.
Management responsibilities
We have a core group of senior executives who are responsible for assessing and managing risk and implementing policies, procedures and strategies pertaining to security governance and data privacy. These executives include:
•Chief Security Officer (CSO), who develops and oversees the programs, policies and controls we have implemented across the organization to reduce and prevent logical and physical risks, including information security and cyber risks to our people, intellectual property, data and tangible property
•Chief Privacy and Data Responsibility Officer, who establishes and oversees the programs, policies, processes and controls we have implemented across the organization to ensure compliance with worldwide laws and regulations regarding how we collect, use, share, store, transfer and otherwise process data and leverage AI, while also managing our relevant engagements with regulators, policymakers and key stakeholders
•Chief Data Officer, who oversees our efforts to maintain an ethical, responsible enterprise data program that adheres to our high standards for data quality, curation and governance while minimizing data risks
•Data Protection Officer, who reports to the Chief Privacy and Data Responsibility Officer and ensures that we continue to adhere to the GDPR and local privacy requirements, including by handling privacy requests from individuals and regulators
In order to be appointed to one of the roles described above, we require expertise with cybersecurity or data privacy (as applicable), as demonstrated by prior work or other cybersecurity or data privacy experience or possession of a cybersecurity or data privacy degree or certification. The individuals currently serving in these roles each meet the applicable expertise requirements.
42 MASTERCARD 2023 FORM 10-K
PART I
ITEM 1C. CYBERSECURITY
How management is informed of and monitors incidents
Our management is responsible for identifying, considering and assessing material cybersecurity risks on an ongoing basis, establishing processes to ensure that such potential cybersecurity risks are monitored, implementing appropriate mitigation measures and maintaining our cybersecurity programs. Our cybersecurity programs are under the direction of our CSO (in coordination with our Chief Privacy and Data Responsibility Officer, Chief Data Officer, among others), who receives reports from our cybersecurity teams and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents. Our management, including the CSO and our cybersecurity teams, follow a risk-based escalation process to notify the Risk Committee outside of the regular reporting cycle as appropriate when they identify an emerging risk or material issue.
Reporting to our Board
Given the importance of information security and privacy to our stakeholders, our Board receives an annual report from our CSO to discuss our program for managing information security risks, including cyber and data security risks. The Risk Committee also receives periodic briefings on data privacy from the Chief Privacy and Data Responsibility Officer. Our Risk Committee receives regular reports on our cyber readiness, our risk profile status, our cybersecurity programs, material cybersecurity risks and mitigation strategies, third-party assessments of our cybersecurity program and other cybersecurity developments. The Risk Committee chair provides reports to the Board on such topics. In addition, our Board and the Risk Committee also receive information about these topics as part of regular business and legal and regulatory updates. In addition, we engage directors as part of cybersecurity and data breach incident simulations.
Despite our efforts to identify and respond to cybersecurity threats, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. See “Risk Factors – Information Security and Operational Resilience” in Part I, Item 1A for more information about these and other risks related to information security.
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, 2023, 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 and address climate-related impacts, 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 2023 FORM 10-K 43
Information about our executive officers
(as of February 13, 2024)
| | | | | | | | | | | | | | | | | | | | |
Name Current Position | | Age | | Previous Mastercard Experience | | Previous Business Experience |
Ajay Bhalla
President, Cyber and
Intelligence Solutions
since November 2018 | | 58 | | President, Enterprise Security Solutions (2014-2018) 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 | | Various leadership positions at HSBC and Xerox Corporation |
| | | |
Linda Kirkpatrick President, Americas since January 2024 | | 47 | | President, North America (2021-2023) 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) Vice President, U.S. Region (2008-2011) Vice President, Investor Relations | | |
Hai Ling
President, Asia Pacific, Europe, Middle East & Africa
since January 2024 | | 53 | | Co-President, International Markets (2022-2023) Co-President, Asia Pacific (2015-2021) President, Enterprise Development (2014-2015) President, Greater China (2010-2014) | | Various roles at Booz Allen Hamilton and Bank of America |
| | | |
Edward McLaughlin
President and Chief Technology Officer, Mastercard Technology
since May 2017 | | 58 | | 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 | | 53 | | Chief Financial Operations Officer (2018-2019) Executive Vice President, Commercial Products (2015-2018) Executive Vice President and Business Financial Officer, North America (2013-2015) Corporate Treasurer (2010-2013) | | Various senior positions at Hess Corporation, including Vice President and Treasurer Various senior treasury and finance positions at General Motors Corporation and GMAC |
44 MASTERCARD 2023 FORM 10-K
| | | | | | | | | | | | | | | | | | | | |
Name
Current Position | | Age | | Previous Mastercard Experience | | Previous Business Experience |
Michael Miebach President and Chief Executive Officer since January 2021 | | 56 | | President (2020) Chief Product Officer (2016-2020) President, Middle East and Africa (2010-2015) | | 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 |
Tim Murphy
Chief Administrative Officer
since April 2021 | | 56 | | General Counsel (2014-2021) 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 | | Associate, Cleary, Gottlieb, Steen and Hamilton, New York and London |
Raja Rajamannar
Chief Marketing and Communications Officer and President, Healthcare
since January 2016 | | 62 | | Chief Marketing Officer (2013-2015) | | 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 |
Raj Seshadri
President, Data and Services
since January 2020 | | 58 | | President, U.S. Issuers (2016-2019) | | 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. |
Craig Vosburg
Chief Product Officer
since January 2021 | | 56 | | 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
| | Senior member-financial services practice, Bain & Company and A.T. Kearney Vice President, CoreStates Financial Corporation |
MASTERCARD 2023 FORM 10-K 45
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUES PURCHASES OF EQUITY SECURITIES
Item 5. Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities
Our Class A common stock trades on the New York Stock Exchange under the symbol “MA”. At February 8, 2024, we had 75 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 226 holders of record of our non-voting Class B common stock as of February 8, 2024, 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, 2023. 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 | | Indexed Returns |
| | | For the Years Ended December 31, |
| Company/Index | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023 |
| Mastercard | | $ | 100.00 | | | $ | 159.16 | | | $ | 191.27 | | | $ | 193.48 | | | $ | 188.34 | | | $ | 232.40 | |
| S&P 500 | | 100.00 | | | 131.49 | | | 155.68 | | | 200.37 | | | 164.08 | | | 207.21 | |
| S&P 500 Financials | | 100.00 | | | 132.13 | | | 129.89 | | | 175.40 | | | 156.92 | | | 175.99 | |
Dividend Declaration and Policy
On December 5, 2023, our Board of Directors declared a quarterly cash dividend of $0.66 per share paid on February 9, 2024 to holders of record on January 9, 2024 of our Class A common stock and Class B common stock. On February 6, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share payable on May 9, 2024 to holders of record on April 9, 2024 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 2023, we repurchased 4.6 million shares for $1.8 billion at an average price of $396.75 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 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | 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 |
| October 1 – 31 | | 1,953,908 | | | $ | 388.82 | | | 1,953,908 | | | $ | 4,213,825,619 | |
| November 1 – 30 | | 1,524,802 | | | $ | 392.00 | | | 1,524,802 | | | $ | 3,616,096,554 | |
| December 1 – 31 | | 1,136,667 | | | $ | 416.75 | | | 1,136,667 | | | $ | 14,142,393,829 | |
| Total | | 4,615,377 | | | $ | 396.75 | | | 4,615,377 | | | |
1Dollar value of shares that may yet be purchased under the share repurchase programs is as of the end of the period. In December 2023 and 2022, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $11.0 billion and $9.0 billion, respectively.
Item 6. [Reserved]
47 MASTERCARD 2023 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, 2022 compared to the year ended December 31, 2021, please see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
Business Overview
Mastercard is a technology company in the global payments industry. We connect consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic payments and making those payment transactions safe, simple, smart, and accessible. We make payments easier and more efficient by providing a wide range of payment solutions and services using our family of well-known and trusted brands, including Mastercard®, Maestro® and Cirrus®. We operate a multi-rail payments network that provides choice and flexibility for consumers, merchants and our customers. Through our unique and proprietary core global payments network, we switch (authorize, clear and settle) payment transactions. We have additional payments capabilities that include automated clearing house (“ACH”) transactions (both batch and real-time account-based payments). Using these capabilities, we offer payment products and services and capture new payment flows. Our value-added services include, among others, cyber and intelligence solutions designed to allow all parties to transact securely, easily and with confidence, as well as other services that provide proprietary insights, drawing on our principled and responsible use of secure consumer and merchant data. Our investments in new networks, such as open banking solutions and digital identity capabilities, support and strengthen our payments and services solutions. Each of our capabilities support and build upon each other and are fundamentally interdependent. For our core global payments network, our franchise model sets the standards and ground-rules that balance value and risk across all stakeholders and allows for interoperability among them. We employ a multi-layered approach to help protect the global payments ecosystem in which we operate.
Mastercard is not a 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.
Financial Results Overview
The following table provides a summary of our key GAAP operating results, as reported:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | 2023
Increase/
(Decrease) | | 2022
Increase/
(Decrease) |
| | 2023 | | 2022 | | 2021 | | |
| | (in millions, except per share data) | | |
| Net revenue | | $ | 25,098 | | | $ | 22,237 | | | $ | 18,884 | | | 13% | | 18% |
| Operating expenses | | $ | 11,090 | | | $ | 9,973 | | | $ | 8,802 | | | 11% | | 13% |
| Operating income | | $ | 14,008 | | | $ | 12,264 | | | $ | 10,082 | | | 14% | | 22% |
| Operating margin | | 55.8 | % | | 55.2 | % | | 53.4 | % | | 0.7 ppt | | 1.8 ppt |
| Income tax expense | | $ | 2,444 | | | $ | 1,802 | | | $ | 1,620 | | | 36% | | 11% |
| Effective income tax rate | | 17.9 | % | | 15.4 | % | | 15.7 | % | | 2.6 ppt | | (0.4) ppt |
| Net income | | $ | 11,195 | | | $ | 9,930 | | | $ | 8,687 | | | 13% | | 14% |
| Diluted earnings per share | | $ | 11.83 | | | $ | 10.22 | | | $ | 8.76 | | | 16% | | 17% |
| Diluted weighted-average shares outstanding | | 946 | | | 971 | | | 992 | | | (3)% | | (2)% |
MASTERCARD 2023 FORM 10-K 48
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, | | 2023
Increase/(Decrease) | | 2022
Increase/(Decrease) |
| | 2023 | | 2022 | | 2021 | | As adjusted | | Currency-neutral | | As adjusted | | Currency-neutral |
| | ($ in millions, except per share data) |
| Adjusted net revenue | | $ | 25,098 | | | $ | 22,200 | | | $ | 18,884 | | | 13% | | 13% | | 18% | | 23% |
| Adjusted operating expenses | | $ | 10,551 | | | $ | 9,549 | | | $ | 8,627 | | | 10% | | 11% | | 11% | | 14% |
| Adjusted operating margin | | 58.0 | % | | 57.0 | % | | 54.3 | % | | 1.0 ppt | | 0.9 ppt | | 2.7 ppt | | 3.4 ppt |
| Adjusted effective income tax rate | | 18.5 | % | | 15.7 | % | | 15.4 | % | | 2.8 ppt | | 2.7 ppt | | 0.3 ppt | | 0.5 ppt |
| Adjusted net income | | $ | 11,607 | | | $ | 10,342 | | | $ | 8,333 | | | 12% | | 12% | | 24% | | 32% |
| Adjusted diluted earnings per share | | $ | 12.26 | | | $ | 10.65 | | | $ | 8.40 | | | 15% | | 15% | | 27% | | 34% |
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.
Key highlights for 2023 as compared to 2022 were as follows:
| | | | | | | | | | | |
| Net revenue | | Adjusted net revenue | |
| GAAP | | Non-GAAP
(currency-neutral) | Both the as reported and as adjusted net revenue increase was attributable to growth in our payment network and value-added services and solutions. |
| up 13% | | up 13% |
|
|
|
|
| | | | | | | | | | | |
| Operating expenses | | Adjusted
operating expenses | |
| GAAP | | Non-GAAP
(currency-neutral) | Both the as reported and as adjusted operating expenses increase was primarily due to higher personnel costs and includes 1 percentage point of growth due to acquisitions. |
| up 11% | | up 11% |
| | |
| | | | | | | | | | | |
Effective income tax rate | | Adjusted effective income tax rate | |
| GAAP | | Non-GAAP | Both the as reported and as adjusted effective income tax rates were higher than the prior year rates primarily due to the release of a $333 million valuation allowance in 2022 and the establishment of a $327 million valuation allowance in 2023, partially offset by the ability to claim more U.S. foreign tax credits generated in 2022 and 2023. |
| 17.9% | | 18.5% |
| | | |
Other 2023 financial highlights were as follows:
•We generated net cash flows from operations of $12.0 billion.
•We repurchased 23.8 million shares of our common stock for $9.0 billion and paid dividends of $2.2 billion.
•We completed a debt offering for an aggregate principal amount of $1.5 billion.
49 MASTERCARD 2023 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 gains and losses on our equity investments which includes mark-to-market fair value adjustments, impairments and gains and losses upon disposition and the related tax impacts. Our non-GAAP financial measures also 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”). We also present growth rates adjusted for the impact of currency, which is a non-GAAP financial measure. 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. We excluded these items because management evaluates the underlying operations and performance of the Company separately from these recurring and nonrecurring items. 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 should not be relied upon as substitutes for measures calculated in accordance with GAAP.
Our non-GAAP financial measures for the comparable periods exclude the impact of the following:
Gains and Losses on Equity Investments
•During 2023, 2022 and 2021, we recorded net pre-tax losses of $61 million ($36 million after tax, or $0.04 per diluted share), net pre-tax losses of $145 million ($126 million after tax, or $0.13 per diluted share) and net pre-tax gains of $645 million ($497 million after tax, or $0.50 per diluted share), respectively. These net gains and losses were primarily related to unrealized fair market value adjustments on marketable and nonmarketable equity securities. In addition, in 2021, net gains also included realized gains on sales of marketable equity securities.
Special Items
Litigation provisions
•During 2023, we recorded pre-tax charges of $539 million ($376 million after tax, or $0.40 per diluted share) related to litigation provisions, which included pre-tax charges of:
◦$344 million as a result of changes in the estimate related to the claims of merchants who opted out of the U.S. merchant class litigation, and
◦$195 million as a result of settlements with a number of U.K. and Pan-European merchants.
•During 2022, we recorded pre-tax charges of $356 million ($263 million after tax, or $0.27 per diluted share) related to litigation provisions, which included pre-tax charges of:
◦$223 million as a result of settlements (both final and agreements in principle) with a number of U.K. merchants, and
◦$133 million as a result of a change in estimate related to the claims of merchants who opted out of the U.S. merchant class litigation.
•During 2021, we recorded pre-tax charges of $94 million ($74 million after tax, or $0.07 per diluted share) related to litigation settlements and estimated attorneys’ fees with U.K. and Pan-European merchants.
Russia-related impacts
•During 2022, we recorded a net pre-tax charge of $30 million ($24 million after tax, or $0.02 per diluted share), directly related to imposed sanctions and the suspension of our business operations in Russia. The net charge was comprised of general and administrative expenses of $67 million, primarily related to incremental employee-related costs and reserves on uncollectible balances with certain sanctioned customers. This charge was offset by net benefits of $37 million in net revenue, primarily related to a reduction in payment network rebates and incentives liabilities as a result of lower estimates of customer performance for certain customer business agreements due to the suspension of our business operations in Russia.
Indirect tax matter
•During 2021, we recorded a pre-tax charge of $88 million ($69 million after tax, or $0.07 per diluted share) to resolve a foreign indirect tax matter for 2015 through 2021 and the related interest expense. The charge was comprised of general and administrative expenses of $82 million and other income (expense) of $6 million.
MASTERCARD 2023 FORM 10-K 50
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
See Note 7 (Investments) and Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 of this Report for further discussion related to certain of our non-GAAP financial measures.
Currency-neutral Growth Rates
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 and are non-GAAP financial measures. 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 of the entity. The impact of the related realized gains and losses resulting from our foreign exchange derivative contracts designated as cash flow hedging instruments is recognized in the respective financial statement line item on the statement of operations when the underlying forecasted transactions impact earnings. We believe the presentation of currency-neutral growth rates provides relevant information to facilitate an understanding of our operating results.
The translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments (“Currency impact”) has been excluded from our currency-neutral growth rates and has been identified in the non-GAAP information below and our “Drivers of Change” tables. See “Foreign Currency - Currency Impact” for further information on our currency impacts and “Financial Results - Net Revenue” and “Financial Results - Operating Expenses” for our “Drivers of Change” tables.
The following tables reconcile our reported financial measures calculated in accordance with GAAP to the respective adjusted non-GAAP financial measures:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2023 |
| | Net revenue | | Operating
expenses | | Operating
margin | | Other
income
(expense) | | Effective
income
tax rate | | Net
income | | Diluted
earnings
per share |
| | ($ in millions, except per share data) |
| Reported - GAAP | | $ | 25,098 | | | $ | 11,090 | | | 55.8 | % | | $ | (369) | | | 17.9 | % | | $ | 11,195 | | | $ | 11.83 | |
| (Gains) losses on equity investments | | ** | | ** | | ** | | 61 | | | 0.1 | % | | 36 | | | 0.04 | |
| Litigation provisions | | ** | | (539) | | | 2.1 | % | | ** | | 0.5 | % | | 376 | | | 0.40 | |
| | | | | | | | | | | |
| Adjusted - Non-GAAP | | $ | 25,098 | | | $ | 10,551 | | | 58.0 | % | | $ | (308) | | | 18.5 | % | | $ | 11,607 | | | $ | 12.26 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2022 |
| | Net revenue | | Operating
expenses | | Operating
margin | | Other income
(expense) | | Effective
income
tax rate | | Net
income | | Diluted
earnings
per share |
| | ($ in millions, except per share data) |
| Reported - GAAP | | $ | 22,237 | | | $ | 9,973 | | | 55.2 | % | | $ | (532) | | | 15.4 | % | | $ | 9,930 | | | $ | 10.22 | |
| (Gains) losses on equity investments | | ** | | ** | | ** | | 145 | | | — | % | | 126 | | | 0.13 | |
| Litigation provisions | | ** | | (356) | | | 1.6 | % | | ** | | 0.3 | % | | 263 | | | 0.27 | |
| Russia-related impacts | | (37) | | | (67) | | | 0.2 | % | | ** | | — | % | | 24 | | | 0.02 | |
| Adjusted - Non-GAAP | | $ | 22,200 | | | $ | 9,549 | | | 57.0 | % | | $ | (387) | | | 15.7 | % | | $ | 10,342 | | | $ | 10.65 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, 2021 |
| | Net revenue | | Operating
expenses | | Operating
margin | | Other income
(expense) | | Effective
income
tax rate | | Net
income | | Diluted
earnings
per share |
| | ($ in millions, except per share data) |
| Reported - GAAP | | $ | 18,884 | | | $ | 8,802 | | | 53.4 | % | | $ | 225 | | | 15.7 | % | | $ | 8,687 | | | 8.76 | |
| (Gains) losses on equity investments | | ** | | ** | | ** | | (645) | | | (0.5) | % | | (497) | | | (0.50) | |
| Litigation provisions | | ** | | (94) | | | 0.5 | % | | ** | | 0.1 | % | | 74 | | | 0.07 | |
| Indirect tax matter | | ** | | (82) | | | 0.4 | % | | 6 | | | 0.1 | % | | 69 | | | 0.07 | |
| Adjusted - Non-GAAP | | $ | 18,884 | | | $ | 8,627 | | | 54.3 | % | | $ | (413) | | | 15.4 | % | | $ | 8,333 | | | $ | 8.40 | |
Note: Tables may not sum due to rounding.
** Not applicable
51 MASTERCARD 2023 FORM 10-K
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, 2023 as compared to the Year Ended December 31, 2022 |
| | Increase/(Decrease) |
| | Net revenue | | Operating expenses | | Operating margin | | Effective income tax rate | | Net income | | Diluted earnings per share |
| Reported - GAAP | | 13 | % | | 11 | % | | 0.7 | ppt | | 2.6 | ppt | | 13 | % | | 16 | % |
| (Gains) losses on equity investments | | ** | | ** | | ** | | 0.1 ppt | | (1) | % | | (1) | % |
| Litigation provisions | | ** | | (1) | % | | 0.5 | ppt | | 0.1 ppt | | 1 | % | | 1 | % |
| Russia-related impacts | | — | % | | 1 | % | | (0.1) ppt | | — ppt | | — | % | | — | % |
| | | | | | | | | |
| Adjusted - Non-GAAP | | 13 | % | | 10 | % | | 1.0 | ppt | | 2.8 ppt | | 12 | % | | 15 | % |
| Currency impact | | — | % | | — | % | | (0.1) | ppt | | (0.1) ppt | | — | % | | — | % |
| Adjusted - Non-GAAP - currency-neutral | | 13 | % | | 11 | % | | 0.9 | ppt | | 2.7 ppt | | 12 | % | | 15 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2022 as compared to the Year Ended December 31, 2021 |
| | Increase/(Decrease) |
| | Net revenue | | Operating expenses | | Operating margin | | Effective income tax rate | | Net income | | Diluted earnings per share |
| Reported - GAAP | | 18 | % | | 13 | % | | 1.8 | ppt | | (0.4) | ppt | | 14 | % | | 17 | % |
| (Gains) losses on equity investments | | ** | | ** | | ** | | 0.5 ppt | | 8 | % | | 9 | % |
| Litigation provisions | | ** | | (3) | % | | 1.1 ppt | | 0.3 ppt | | 2 | % | | 2 | % |
| Russia-related impacts | | — | % | | (1) | % | | 0.2 ppt | | — ppt | | — | % | | — | % |
| Indirect tax matter | | ** | | 1 | % | | (0.4) ppt | | (0.1) ppt | | (1) | % | | (1) | % |
| Adjusted - Non-GAAP | | 18 | % | | 11 | % | | 2.7 ppt | | 0.3 ppt | | 24 | % | | 27 | % |
| Currency impact | | 5 | % | | 3 | % | | 0.8 ppt | | 0.2 ppt | | 8 | % | | 8 | % |
| Adjusted - Non-GAAP - currency-neutral | | 23 | % | | 14 | % | | 3.4 ppt | | 0.5 ppt | | 32 | % | | 34 | % |
Note: Tables may not sum due to rounding.
** Not applicable
Key Metrics and Drivers
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.
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.
Key Drivers
Gross Dollar Volume (“GDV”)1 measures dollar volume of activity, including both domestic and cross-border volume, on cards carrying our brands during the period, on a local currency basis and U.S. dollar-converted basis. GDV represents purchase volume plus cash volume; “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 our volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. We report 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.
MASTERCARD 2023 FORM 10-K 52
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cross-border Volume Growth2 measures the growth of cross-border dollar volume during the period, on a local currency basis and U.S. dollar-converted basis, for all Mastercard-branded programs.
Switched Transactions2 measures the number of transactions switched by Mastercard, which is defined as the number of transactions initiated and switched through our network during the period.
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. Starting in the first quarter of 2022, data related to sanctioned Russian banks was not reported to us and therefore such amounts are not included. Subsequent to the suspension of our business operations in Russia in March 2022, there is no Russian data to be reported.
2 Growth rates are normalized to eliminate the effects of differing switching and carryover days between periods, as needed. Carryover days are those where transactions and volumes from days where the Company does not clear and settle are processed.
The following tables provide a summary of the growth trends in our key drivers.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2023 | | 2022 |
| | Increase/(Decrease) |
| | USD | | Local | | USD | | Local |
Mastercard-branded GDV growth 1 | | 10% | | 12% | | 6% | | 12% |
| United States | | 6% | | 6% | | 10% | | 10% |
| Worldwide less United States | | 13% | | 15% | | 4% | | 13% |
| | | | | | | | |
Cross-border volume growth 1 | | 25% | | 24% | | 33% | | 45% |
| | | | | | | | |
Mastercard-branded GDV growth adjusted for Russia 1,2 | | 11% | | 12% | | 10% | | 18% |
Worldwide less United States GDV growth adjusted for Russia 1,2 | | 13% | | 15% | | 11% | | 22% |
| | | | | | | | |
Cross-border volume growth adjusted for Russia 1,2 | | 25% | | 25% | | 37% | | 50% |
| | | | | |
| | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2023 | | 2022 |
| | Increase/(Decrease) |
| Switched transactions growth | | 14% | | 12% |
| | | | |
Switched transactions growth adjusted for Russia 2 | | 16% | | 21% |
1 Excludes volume generated by Maestro and Cirrus cards.
2 Starting in the first quarter of 2022, as a result of imposed sanctions and the suspension of our business operations in Russia, we have provided adjusted growth rates for our key drivers excluding activity from Russian issued cards from the prior periods.
Key Metrics related to the Payment Network
Assessments represent agreed upon standard pricing provided to our customers based on various forms of payment-related activity. Assessments are used internally by management to monitor operating performance as it allows for comparability and provides visibility into cardholder trends. Assessments do not represent our net revenue.
The following provides additional information on our key metrics related to the payment network:
•Domestic assessments are charges based on activity related to cards that carry the Company’s brands where the merchant country and the country of issuance are the same. These assessments are primarily driven by the domestic dollar volume of activity (e.g., domestic purchase volume, domestic cash volume) or the number of cards issued.
•Cross-border assessments are charges based on activity related to cards that carry the Company’s brands where the merchant country and the country of issuance are different. These assessments are primarily driven by the cross-border dollar volume of activity (e.g., cross-border purchase volume, cross-border cash volume).
53 MASTERCARD 2023 FORM 10-K
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
•Transaction processing assessments are charges primarily driven by the number of switched transactions on our payment network. Switching activities include:
◦Authorization, the process by which a transaction is routed to the issuer for approval
◦Clearing, the determination and exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction
◦Settlement, which facilitates the determination and exchange of funds between parties
These assessments can also include connectivity services and network access which are based on the volume of data transmitted and the number of authorization and settlement messages.
•Other network assessments are primarily charges for licensing, implementation and other franchise fees.
The following table provides a summary of our key metrics related to the payment network.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | 2023 | | 2022 |
| | | | | | | | Increase/(Decrease) | | Increase/(Decrease) |
| | 2023 | | 2022 | | 2021 | | As reported | | Currency-neutral | | As Reported | | Currency-neutral |
| | ($ in millions) |
| Domestic assessments | | $ | 9,566 | | | $ | 8,794 | | | $ | 8,064 | | | 9% | | 9% | | 9% | | 12% |
| Cross-border assessments | | 8,409 | | | 6,597 | | | 4,646 | | | 27% | | 28% | | 42% | | 53% |
| Transaction processing assessments | | 12,067 | | | 10,646 | | | 9,041 | | | 13% | | 13% | | 18% | | 23% |
| Other network assessments | | 963 | | | 766 | | | 668 | | | 26% | | 26% | | 15% | | 14% |
| | | | | | | | | | | |
Foreign Currency
Currency Impact
Our primary revenue functional currencies are the U.S. dollar, euro, British pound and the Brazilian real. 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”), which are used in the calculation of our key metrics related to domestic assessments and cross-border assessments as well as certain volume-related rebates and incentives. GDV is calculated based on local currency spending volume converted to U.S. dollars and euros using average exchange rates for the period. As a result, our key metrics related to domestic assessments and cross-border assessments as well as certain volume-related rebates and incentives are impacted by the strengthening or weakening of the U.S. dollar and euro versus 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 transactional currency 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 2023, GDV on a U.S. dollar-converted basis increased 10.4%, while GDV on a local currency basis increased 11.9% versus 2022. In 2022, GDV on a U.S. dollar-converted basis increased 5.9%, while GDV on a local currency basis increased 12.3% versus 2021. Further, the impact from transactional currency occurs in our key metric related to transaction processing assessments as well as value-added services and solutions revenue and operating expenses when the transacting currency of these items is different than the functional currency of the entity.
To manage the impact of foreign currency variability on anticipated revenues and expenses, we may enter into foreign exchange derivative contracts and designate such derivatives as hedging instruments in a cash flow hedging relationship as discussed further in Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8.
Foreign Exchange Activity
We incur foreign currency gains and losses from remeasuring monetary assets and liabilities, including settlement assets and obligations, 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 our
MASTERCARD 2023 FORM 10-K 54
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
nonfunctional currency monetary assets and liabilities. The gains or losses resulting from the 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 administrative expenses on the consolidated statement of operations. The impact of this foreign exchange activity, along with the related hedging activities, is included 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.
Financial Results
Net Revenue
The components of net revenue were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Years Ended December 31, | | Increase (Decrease) |
| | | 2023 | | 2022 | | 2021 | | 2023 | | 2022 |
| | | ($ in millions) |
| Payment network | | $ | 15,824 | | | $ | 14,358 | | | $ | 11,943 | | | 10% | | 20% |
| Value-added services and solutions | | 9,274 | | | 7,879 | | | 6,941 | | | 18% | | 14% |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|
| ** | | 18 | % | | 14 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| —% | | 13 | % | | 18 | % |
Note: Table may not sum due to rounding
** Not applicable
1 Includes the translational and transactional impact of currency and the related impact of our foreign exchange derivative contracts designated as cash flow hedging instruments.
2 See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
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 2023, the net revenue from these customers was approximately $5.6 billion, or 22%, of total net revenue. The loss of any of these customers or their significant card programs could adversely impact our revenue.
Operating Expenses
Operating expenses increased 11% in 2023 versus the prior year. Adjusted operating expenses increased 10%, or 11% on a currency-neutral basis, versus the prior year, which includes a 1 percentage point increase from acquisitions. On both an as reported and as adjusted basis, the increase was primarily due to higher personnel costs to support the continued investment in our business and the delivery of services to our customers.
The components of operating expenses were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, | | Increase (Decrease) |
| | 2023 | | 2022 | | 2021 | | 2023 | | 2022 |
| | ($ in millions) |
| General and administrative | | $ | 8,927 | | | $ | 8,078 | | | $ | 7,087 | | | 11 | % | | 14 | % |
| Advertising and marketing | | 825 | | | 789 | | | 895 | | | 5 | % | | (12) | % |
| Depreciation and amortization | | 799 | | | 750 | | | 726 | | | 7 | % | | 3 | % |
| Provision for litigation | | 539 | | | 356 | | | 94 | | | ** | | ** |
| Total operating expenses | | 11,090 | | | 9,973 | | | 8,802 | | | 11 | % | | 13 | % |
Special Items 1 | | (539) | | | (423) | | | (176) | | | ** | | ** |
Adjusted total operating expenses | | $ | 10,551 | | | $ | 9,549 | | | $ | 8,627 | | | 10 | % | | 11 | % |
Note: Table may not sum due to rounding.
** Not meaningful
1See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
MASTERCARD 2023 FORM 10-K 56
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Drivers of Change
The following table summarizes the drivers of changes in operating expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | Operational | | Acquisitions | | Currency Impact 1,2 | | Special
Items 2,3 | | Total |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| General and administrative | | 11% | | 13 | % | | 1 | % | | 4 | % | | — | % | | (3) | % | | (1) | % | | — | % | | 11 | % | | 14 | % |
| Advertising and marketing | | 4% | | (9) | % | | — | % | | 1 | % | | — | % | | (4) | % | | ** | | ** | | 5 | % | | (12) | % |
| Depreciation and amortization | | 5% | | (1) | % | | 1 | % | | 8 | % | | — | % | | (4) | % | | ** | | ** | | 7 | % | | 3 | % |
| Provision for litigation | | ** | | ** | | ** | | ** | | ** | | ** | | ** | | ** | | ** | | ** |
| Total operating expenses | | 10% | | 10 | % | | 1 | % | | 4 | % | | — | % | | (3) | % | | 1 | % | | 3 | % | | 11 | % | | 13 | % |
Note: Table may not sum due to rounding.
** Not applicable/meaningful
1Represents the translational and transactional impact of currency.
2See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
3The Special Items driver of change related to provision for litigation is reflected in total operating expenses.
General and Administrative
General and administrative expenses increased 11% on an as reported and currency-neutral basis, in 2023 versus the prior year. Current year results include growth of 1 percentage point from acquisitions. The remaining increase was primarily due to higher personnel costs resulting from incremental headcount to support the continued investment in our business and the delivery of services to our customers.
The components of general and administrative expenses were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Years Ended December 31, | | Increase (Decrease) |
| | 2023 | | 2022 | | 2021 | | 2023 | | 2022 |
| | | ($ in millions) |
Personnel 1 | | $ | 6,022 | | | $ | 5,263 | | | $ | 4,489 | | | 14% | | 17% |
| Professional fees | | 495 | | | 480 | | | 433 | | | 3% | | 11% |
| Data processing and telecommunications | | 1,008 | | | 926 | | | 898 | | | 9% | | 3% |
Foreign exchange activity 2 | | 83 | | | 102 | | | 51 | | | (19)% | | ** |
Other 1, 3 | | 1,319 | | | 1,307 | | | 1,216 | | | 1% | | 7% |
| Total general and administrative expenses | | $ | 8,927 | | | $ | 8,078 | | | $ | 7,087 | | | 11% | | 14% |
| | | | | | | |
| | | | | | | |
Note: Table may not sum due to rounding.
** Not meaningful
1For the year ended December 31, 2022, total general and administrative expenses includes a Special Item for Russia-related impacts of $67 million, of which $35 million is included within Personnel and $32 million is included within Other. See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
2 Foreign exchange activity includes the impact of remeasurement of assets and liabilities denominated in foreign currencies net of the impact of gains and losses on foreign exchange derivative contracts. See Note 23 (Derivative and Hedging Instruments) to the consolidated financial statements included in Part II, Item 8 for further discussion.
3 The year ended December 31, 2021 includes a Special Item related to a foreign indirect tax matter of $82 million. See “Non-GAAP Financial Information” for further information on our non-GAAP adjustments and the reconciliation to GAAP reported amounts.
Advertising and Marketing
Advertising and marketing expenses increased 5%, or 4% on a currency-neutral basis, in 2023 versus the prior year, primarily due to an increase in spending on sponsorships, partially offset by a decrease in media spending.
Depreciation and Amortization
Depreciation and amortization expenses increased 7%, or 6% on a currency-neutral basis, in 2023 versus the prior year, primarily due to increased software capitalization to support the continued growth of our business.
57 MASTERCARD 2023 FORM 10-K
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Provision for Litigation
In 2023, 2022 and 2021, we recorded $539 million, $356 million and $94 million, respectively, related to various legal proceedings. See “Non-GAAP Financial Information” in this section and 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) decreased $163 million in 2023 versus the prior year, primarily due to an increase in our investment income and lower mark-to-market losses on our equity investments in 2023, partially offset by increased interest expense related to our debt portfolio as well as losses on sales of certain assets. Adjusted other income (expense) decreased $79 million versus the prior year, primarily due to an increase in our investment income, partially offset by increased interest expense related to our debt portfolio as well as losses on sales of certain assets.
The components of other income (expense) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, | | Increase (Decrease) |
| | 2023 | | 2022 | | 2021 | | 2023 | | 2022 |
| | ($ in millions) |
| Investment income | | $ | 274 | | | $ | 61 | | | $ | 11 | | | ** | | ** |
| Gains (losses) on equity investments, net | | (61) | | | (145) | | | 645 | | | ** | | ** |
| Interest expense | | (575) | | | (471) | | | (431) | | | 22 | % | | 9 | % |
| Other income (expense), net | | (7) | | | 23 | | | — | | | ** | | ** |
| Total other income (expense) | | (369) | | | (532) | | | 225 | | | (31) | % | | ** |
(Gains) losses on equity investments 1 | | 61 | | | 145 | | | (645) | | | ** | | ** |
Special Items 1 | | — | | | — | | | 6 | | | ** | | ** |
Adjusted total other income (expense) 1 | | $ | (308) | | | $ | (387) | | | $ | (413) | | | (20) | % | | (6) | % |
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.
Income Taxes
The effective income tax rates for the years ended December 31, 2023 and 2022 were 17.9% and 15.4%, respectively. The adjusted effective income tax rates for the years ended December 31, 2023 and 2022 were 18.5% and 15.7%, respectively. Both the as reported and as adjusted effective income tax rates were higher in 2023, primarily due to changes in the valuation allowance associated with the deferred tax asset related to U.S. foreign tax credits. In 2022, we recognized a discrete tax benefit of $333 million to release the valuation allowance resulting from U.S. tax regulations published in the first quarter of 2022 (the “2022 Regulations”). In 2023, the treatment of foreign taxes paid under the 2022 Regulations changed due to the foreign tax legislation enacted in Brazil and Notice 2023-55 (the “Notice”), released by the U.S. Department of Treasury (“Treasury”). Therefore, we recognized a total $327 million discrete tax expense in 2023 to establish the valuation allowance. The discrete tax expense recognized in 2023 was partially offset by our ability to claim more U.S. foreign tax credits generated in 2022 and 2023 due to the Notice released by Treasury.
The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax of 15%. Based on current enacted legislation effective in 2024 and our structure, we do not expect a material impact in 2024. We are monitoring developments and evaluating the impacts these new rules will have on our future effective income tax rate, tax payments, financial condition and results of operations.
See Note 20 (Income Taxes) to the consolidated financial statements included in Part II, Item 8 for further discussion.
MASTERCARD 2023 FORM 10-K 58
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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:
| | | | | | | | | | | | | | |
| | 2023 | | 2022 |
| | (in billions) |
Cash, cash equivalents and investments 1 | | $ | 9.2 | | | $ | 7.4 | |
| Unused line of credit | | 8.0 | | | 8.0 | |
1Investments include available-for-sale securities and held-to-maturity securities. This amount excludes restricted cash and restricted cash equivalents of $1.9 billion and $2.2 billion at December 31, 2023 and 2022, 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 which include litigation provisions and credit and settlement exposure.
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 indicative 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 and market 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:
| | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| | | (in millions) |
| Net cash provided by operating activities | | $ | 11,980 | | | $ | 11,195 | | | $ | 9,463 | |
| Net cash used in investing activities | | (1,351) | | | (1,470) | | | (5,272) | |
| Net cash used in financing activities | | (9,488) | | | (10,328) | | | (6,555) | |
Net cash provided by operating activities increased $0.8 billion in 2023 versus the prior year, primarily due to higher net income after adjusting for non-cash items and an increase in restricted security deposits held for customers, partially offset by restricted cash paid for litigation settlement, higher employee incentives paid and higher customer incentives payments.
Net cash used in investing activities decreased $0.1 billion in 2023 versus the prior year, primarily due to less cash paid for business acquisitions in the current year, partially offset by an increase in purchases of investments in time deposits.
Net cash used in financing activities decreased $0.8 billion in 2023 versus the prior year, primarily due to lower debt payments and higher proceeds from debt issuances in the current year, partially offset by higher repurchases of our Class A common stock and higher dividend payments.
59 MASTERCARD 2023 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 2023, we issued $750 million principal amount of notes due March 2028 and $750 million principal amount of notes due March 2033 (collectively the “2023 USD Notes”). The net proceeds from the issuance of the 2023 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $1.489 billion. In April 2023, we entered into an additional unsecured INR4.97 billion ($61 million as of the date of settlement) term loan, originally due July 2023 (the “April 2023 INR Term Loan”). In July 2023, we modified and combined the existing 2022 INR Term Loan and April 2023 INR Term Loan (the “2023 INR Term Loan”), increasing the total unsecured loans to INR28.1 billion ($342 million as of the date of settlement). The 2023 INR Term Loan is due July 2024.
Our total debt outstanding was $15.7 billion at December 31, 2023, with the earliest maturity of $1.0 billion of principal occurring in April 2024.
As of December 31, 2023, we have a commercial paper program (the “Commercial Paper Program”), under which we are authorized to issue up to $8 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 $8 billion revolving credit facility (the “Credit Facility”) which now expires in November 2028.
Borrowings under the Commercial Paper Program and the Credit Facility are to be used 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, 2023.
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:
| | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| | (in millions, except per share data) |
| Cash dividend, per share | | $ | 2.28 | | | $ | 1.96 | | | $ | 1.76 | |
| Cash dividends paid | | $ | 2,158 | | | $ | 1,903 | | | $ | 1,741 | |
On December 5, 2023, our Board of Directors declared a quarterly cash dividend of $0.66 per share paid on February 9, 2024 to holders of record on January 9, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend was $616 million.
On February 6, 2024, our Board of Directors declared a quarterly cash dividend of $0.66 per share payable on May 9, 2024 to holders of record on April 9, 2024 of our Class A common stock and Class B common stock. The aggregate amount of this dividend is estimated to be $616 million.
MASTERCARD 2023 FORM 10-K 60
PART II
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Repurchased shares of our common stock are considered treasury stock. In December 2023, December 2022 and November 2021, our Board of Directors approved share repurchase programs of our Class A common stock authorizing us to repurchase up to $11.0 billion, $9.0 billion and $8.0 billion, respectively. The program approved in 2023 will become effective after the completion of the share repurchase program approved in 2022. 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 authorizations and repurchase activity of our Class A common stock through December 31, 2023:
| | | | | | | | |
| | (in millions, except per share data) |
|
| Remaining authorization at December 31, 2022 | | $ | 12,174 | |
Dollar-value of shares repurchased in 2023 1 | | $ | 9,032 | |
| Remaining authorization at December 31, 2023 | | $ | 14,142 | |
| Shares repurchased in 2023 | | 23.8 | |
| Average price paid per share in 2023 | | $ | 379.49 | |
|
|
1 The dollar-value of shares repurchased does not include a 1% excise tax that became effective January 1, 2023. The incremental tax is recorded in treasury stock on the consolidated balance sheet and is payable annually beginning in 2024.
See Note 16 (Stockholders' Equity) to the consolidated financial statements included in Part II, Item 8 for further discussion.
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 and incentives when customers meet certain volume thresholds or other incentives 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 within net 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.
61 MASTERCARD 2023 FORM 10-K
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 generally 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, if any, 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 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 include 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 exchange 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 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 $414 million and $94 million on our foreign exchange derivative contracts outstanding at December 31, 2023 and 2022, respectively, before considering the offsetting effect of the underlying hedged activity.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 derivative 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. A hypothetical 10% adverse change in the value of the functional currencies would not have a material impact to the fair value of our short duration foreign exchange derivative contracts outstanding at December 31, 2023 and 2022, respectively.
We are further exposed to foreign exchange rate risk related to translation of our net investment in foreign subsidiaries where the functional currency is different than our U.S. dollar reporting currency. To manage this risk, we may enter into foreign exchange derivative contracts to hedge a portion of our net investment in foreign subsidiaries. As of December 31, 2023, we did not have any foreign exchange derivative contracts designated as a net investment hedge. As of December 31, 2022, the effect of a hypothetical 10% adverse change in the value of the U.S. dollar could result in a fair value loss of approximately $203 million on our foreign exchange derivative contracts designated as a net investment hedge before considering the offsetting effect of the underlying hedged activity.
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, 2023 and 2022.
We are also exposed to interest rate risk related to our fixed-rate debt. To manage this risk, we may enter into interest rate derivative contracts to hedge a portion of our fixed-rate debt that is exposed to changes in fair value attributable to changes in a benchmark interest rate. The effect of a hypothetical 100 basis point adverse change in interest rates would not have a material impact to the fair value of our interest rate derivative contracts designated as a fair value hedge of our fixed-rate debt at December 31, 2023 and 2022, respectively, before considering the offsetting effect of the underlying hedged activity.
63 MASTERCARD 2023 FORM 10-K
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial statements and supplementary data
Mastercard Incorporated
Index to consolidated financial statements
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MASTERCARD 2023 FORM 10-K 64
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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, 2023. 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, 2023. The effectiveness of Mastercard’s internal control over financial reporting as of December 31, 2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on the next page.
65 MASTERCARD 2023 FORM 10-K
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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 sheet of Mastercard Incorporated and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, 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, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, 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.
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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 and incentives which are a portion of total net revenue of $25.1 billion for the year ended December 31, 2023. The Company has business agreements with certain customers that provide for rebates and incentives within net revenue that could be either fixed or variable. Variable rebates and incentives are recorded primarily when volume- and transaction-based revenues are recognized over the contractual term. Variable rebates and incentives are calculated based upon estimated customer performance, such as volume thresholds, 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 the agreements to identify whether all rebates and 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/
February 13, 2024
We have served as the Company’s auditor since 1989.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Operations | | | | | | |
| | | For the Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| | | (in millions, except per share data) |
| 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 | | | | | | | | | |
| | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements. |
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Comprehensive Income | | | | | | |
| | | For the Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| | | (in millions) |
| 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 hedges | | () | | | | | | | |
| Income tax effect | | | | | () | | | () | |
| Translation adjustments on net investment hedges, 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 | | $ | | | | $ | | | | $ | | |
| | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements. |
69 MASTERCARD 2023 FORM 10-K
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| | | | | | | | | | | | | | |
Consolidated Balance Sheet | | | | |
| | December 31, |
| | 2023 | | 2022 |
| | (in millions, except per share data) |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | | | | $ | | |
| Restricted cash for litigation settlement | | | | | | |
| Restricted security deposits held for customers | | | | | | |
| Investments | | | | | | |
| Accounts receivable | | | | | | |
| Settlement assets | | | | | | |
| 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 obligations | | | | | | |
| Restricted security deposits held for customers | | | | | | |
| Accrued litigation | | | | | | |
| Accrued expenses | | | | | | |
| Short-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, $ par value; authorized shares, and shares issued and and shares outstanding, respectively | | | | | | |
Class B common stock, $ par value; authorized shares, and shares issued and outstanding, respectively | | | | | | |
| Additional paid-in-capital | | | | | | |
Class A treasury stock, at cost, and shares, respectively | | () | | | () | |
| Retained earnings | | | | | | |
| Accumulated other comprehensive income (loss) | | () | | | () | |
Mastercard Incorporated Stockholders' Equity | | | | | | |
| Non-controlling interests | | | | | | |
| Total Equity | | | | | | |
| | | | |
| Total Liabilities, Redeemable Non-controlling Interests and Equity | | $ | | | | $ | | |
| | | | |
| The accompanying notes are an integral part of these consolidated financial statements. |
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Changes in Equity |
| | Stockholders’ Equity | | | | |
| | | Common Stock | | Additional
Paid-In
Capital | | Class A
Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Mastercard Incorporated Stockholders' Equity | | Non-
Controlling
Interests | | Total
Equity |
| | | Class A | | Class B | | |
| | | (in millions, except per share data) |
| Balance at December 31, 2020 | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Net income | | — | | | — | | | — | | | — | | | | | | — | | | | | | — | | | | |
| Activity related to non-controlling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | () | |
| Acquisition of non-controlling interest | | — | | | — | | | () | | | — | | | — | | | — | | | () | | | () | | | () | |
| Redeemable non-controlling interest adjustments | | — | | | — | | | — | | | — | | | () | | | — | | | () | | | — | | | () | |
| Other comprehensive income (loss) | | — | | | — | | | — | | | — | | | — | | | () | | | () | | | — | | | () | |
| Dividends | | — | | | — | | | — | | | — | | | () | | | — | | | () | | | — | | | () | |
| Purchases of treasury stock | | — | | | — | | | — | | | () | | | — | | | — | | | () | | | — | | | () | |
| Share-based payments | | — | | | — | | | | | | | | | — | | | — | | | | | | — | | | | |
| Balance at December 31, 2021 | | | | | | | | | | | () | | | | | | () | | | | | | | | | | |
| 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, 2022 | | | | | | | | | | | () | | | | | | () | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Changes in Equity (Continued) |
| | Stockholders’ Equity | | | | |
| | |
Common Stock | | Additional
Paid-In
Capital | | Class A
Treasury
Stock | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Mastercard Incorporated Stockholders' Equity | | Non-
Controlling
Interests | | Total
Equity |
| | | Class A | | Class B | | |
| | | (in millions, except per share data) |
| Balance at December 31, 2022 | | | | | | | | | | | () | | | | | | () | | | | | | | | | | |
| 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, 2023 | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | | | | | | | | | | | | | | | | | | | |
Consolidated Statement of Cash Flows |
| | | For the Years Ended December 31, |
| | | 2023 | | 2022 | | 2021 |
| | | (in millions) |
| Operating Activities | | | | | | |
| Net income | | $ | | | | $ | | | | $ | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Amortization of customer incentives | | | | | | | | | |
| 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 assets | | | | | | | | | |
| Prepaid expenses | | () | | | () | | | () | |
| Accrued litigation and legal settlements | | () | | | | | | () | |
| Restricted security deposits held for customers | | | | | () | | | | |
| Accounts payable | | () | | | | | | | |
| Settlement obligations | | | | | | | | () | |
| 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 | | () | | | () | | | () | |
| Proceeds from sales of equity investments | | | | | | | | | |
| Acquisition of businesses, net of cash acquired | | | | | () | | | () | |
| 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 | | | | | () | | | | |
| Acquisition of non-controlling interest | | | | | | | | () | |
| 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 (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents | | | | | () | | | () | |
| Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period | | | | | | | | | |
| Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period | | $ | | | | $ | | | | $ | | |
| | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
| | | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
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 | | $ | | | | $ | | |
| | $ | | | | | | | | Customer relationships | | | | | | | | | | |
| Other | | | | | | | | — | | |
| Other intangible assets | | $ | | | | $ | | | | | | |
Note 3.
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| | $ | | | | $ | | | | | Value-added services and solutions | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net revenue | | $ | | | | $ | | | | $ | | | |
| | | | | | | |
| Net revenue by geographic region: | | | | | | | |
North American Markets 1 | | $ | | | | $ | | | | $ | | | |
| International Markets | | | | | | | | | | |
| | | | | | | |
| Net revenue | | $ | | | | $ | | | | $ | | | | 1North American Markets includes the United States and Canada, excluding the U.S. Territories.
The Company’s customers are generally billed weekly, with certain billings occurring on a monthly and quarterly basis. The frequency of billing 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 | | | | |
| Prepaid expenses and other current assets | | | | | | |
| Other assets | | | | | | |
Deferred revenue 1 | | | | |
| Other current liabilities | | | | | | |
| Other liabilities | | | | | | |
| | | | |
1 Revenue recognized from performance obligations satisfied in 2023 was $ billion.
The Company’s remaining performance periods for its contracts with customers for its payments network services are typically long-term in nature (generally up to years). As a payments 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 charging fees on its customers’ current period activity. The Company has elected the optional exemption to not disclose the remaining performance obligations related to its payments network services. The Company also earns revenue from value-added services and solutions. At December 31, 2023, the estimated aggregate consideration allocated to unsatisfied performance obligations for these value-added services and solutions is $ billion, which is expected to be recognized through 2028. 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.
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Note 4.
| | $ | | | | $ | | | | Denominator | | | | | | |
| Basic weighted-average shares outstanding | | | | | | | | | |
| Dilutive stock options and stock units | | | | | | | | | |
Diluted weighted-average shares outstanding 1 | | | | | | | | | |
| Earnings per Share | | | | | | |
| Basic | | $ | | | | $ | | | | $ | 8.79 | |
| Diluted | | $ | | | | $ | | | | $ | | |
Note: Table may not sum due to rounding.
1For the years presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.
Note 5.
| | $ | | | | | Restricted cash and restricted cash equivalents | | | | | |
Restricted cash for litigation settlement 1 | | | | | | | |
| Restricted security deposits held for customers | | | | | | | |
| Prepaid expenses and other current assets | | | | | | | |
| | | | | |
| Cash, cash equivalents, restricted cash and restricted cash equivalents | | $ | | | | $ | | | | 1During 2023, the Company reduced its Restricted cash for litigation settlement balance by $ million, including accrued interest, as a settlement became final in August 2023. See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s restricted cash for litigation settlement.
Note 6.
| | $ | | | | $ | | |
| 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 | | | | | | | | | |
| | | |
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Note 7.
| | $ | | |
Held-to-maturity securities 1 | | | | | | |
| Total investments | | $ | | | | $ | | |
1Held-to-maturity securities represent investments in time deposits that mature within one year. The cost of these securities approximates fair value.
Investment income on the consolidated statement of operations primarily consists of interest income generated from cash, cash equivalents, held-to-maturity and available-for-sale investment securities, as well as realized gains and losses on the Company’s investment securities. The realized gains and losses from the sales of available-for-sale securities for 2023, 2022 and 2021 were not material.
Available-for-Sale Securities
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | | | Corporate securities | | | | | | | | () | | | | | | | | | | | | () | | | | |
| | | | | | | | | | | | | |
| Total | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | |
The Company’s government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds which are denominated in the national currency of the issuing country. Corporate securities held at December 31, 2023 and 2022, primarily carried a credit rating of A- or better. Corporate securities are comprised of commercial paper and corporate bonds. The gross unrealized losses on the available-for-sale securities are primarily driven by changes in interest rates. For the available-for-sale securities in gross unrealized loss positions, the Company (1) does not intend to sell the securities, (2) more likely than not, will not be required to sell the securities before recovery of the unrealized losses, and (3) expects that the contractual principal and interest will be received. Unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income.
| | $ | | | | Due after 1 year through 5 years | | | | | | |
| Total | | $ | | | | $ | | |
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| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Nonmarketable securities | | | | | | | | () | | | () | | | | | | | |
| Total equity investments | | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | |
1Recorded in gains (losses) on equity investments, net on the consolidated statement of operations.
2Includes translational impact of currency.
| | $ | | | Equity method | | | | | | |
| Total Nonmarketable securities | | $ | | | | $ | | |
| Cumulative adjustments 1: | | |
| Upward adjustments | | | |
| Downward adjustments (including impairment) | | () | |
| Carrying amount, end of period | | $ | | |
1Includes immaterial translational impact of currency.
| | $ | | | | $ | | | | Downward adjustments (including impairment) | | $ | () | | | $ | () | | | $ | () | |
| Marketable securities: | | | | | | |
| Unrealized gains (losses), net | | $ | | | | $ | () | | | $ | | |
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8.
| | | | | | | | | | | | | | | | | | | | | | | Corporate securities | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Derivative instruments 2: | | | | | | | | | | | | | | | | |
| Foreign exchange contracts | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Marketable securities 3: | | | | | | | | | | | | | | | | |
| Equity securities | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred compensation plan 4: | | | | | | | | | | | | | | | | |
| Deferred compensation assets | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Derivative instruments 2: | | | | | | | | | | | | | | | | |
| Foreign exchange contracts | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Interest rate contracts | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred compensation plan 5: | | | | | | | | | | | | | | | | |
| Deferred compensation liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
1The 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 non-U.S. government and agency securities and corporate 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.
2The 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 for similar derivative instruments. See Note 23 (Derivative and Hedging Instruments) for further details.
3The 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.
4The 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.
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Other Financial Instruments
Certain other 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 assets, restricted security deposits held for customers, accounts payable, settlement obligations and other accrued liabilities.
Note 9.
| | $ | | | | Other | | | | | | |
| Total prepaid expenses and other current assets | | $ | | | | $ | | |
| | $ | | | | Equity investments | | | | | | |
| Income taxes receivable | | | | | | |
| Other | | | | | | |
| Total other assets | | $ | | | | $ | | |
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Note 10.
| | $ | | | | 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 | | $ | | | | $ | | |
Depreciation and amortization expense for the above property, equipment and right-of-use assets was $ million, $ million and $ million for 2023, 2022 and 2021, respectively.
| | $ | | | | Other current liabilities | | | | | | |
| Other liabilities | | | | | | |
Operating lease amortization expense was $ million, $ million and $ million for 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, the weighted-average remaining lease term of operating leases was years and years and the weighted-average discount rate for operating leases was % and %, respectively.
years| Building equipment | | - years |
Equipment and furniture and fixtures | | - years |
| Leasehold improvements | | Shorter of life of improvement or lease term |
| Right-of-use assets | | Shorter of life of the asset or lease term |
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| | 2025 | | | |
| 2026 | | | |
| 2027 | | | |
| 2028 | | | |
| Thereafter | | | |
| Total operating lease payments | | | |
| Less: Interest | | () | |
| Present value of operating lease liabilities | | $ | | |
Note 11.
| | $ | | | | Additions | | | | | | |
| Foreign currency translation | | | | | () | |
| |
| Ending balance | | $ | | | | $ | | |
The Company performed its annual qualitative assessment of goodwill during the fourth quarter of 2023 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, 2023.
Note 12.
| | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | Customer relationships | | | | | () | | | | | | | | | () | | | | |
| Other | | | | | () | | | | | | | | | () | | | | |
| Total | | | | | () | | | | | | | | | () | | | | |
Indefinite-lived intangible assets | | | | | | | | | | | | |
| Customer relationships | | | | | — | | | | | | | | | — | | | | |
| Total | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | |
1Includes technology acquired in business combinations.
The increase in the gross carrying amount of finite-lived intangible assets in 2023 was primarily related to software additions to support the continued growth of the Company. 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 2023, it was determined that the Company’s indefinite-lived intangible assets were not impaired.
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| | 2025 | | | |
| 2026 | | | |
| 2027 | | | |
| 2028 | | | |
| Thereafter | | | |
| Total | | $ | | |
Note 13.
| | $ | | | | Personnel costs | | | | | | |
| Income and other taxes | | | | | | |
| Other | | | | | | |
| Total accrued expenses | | $ | | | | $ | | |
Customer incentives represent amounts to be paid to customers under business agreements. As of December 31, 2023 and 2022, long-term customer incentives included in other liabilities were $ million and $ million, respectively.
million and $ million, respectively. These amounts are separately reported as accrued litigation on the consolidated balance sheet. The decrease during 2023 is primarily due to a $ million decrease in the Company’s provision for litigation and corresponding restricted cash after a settlement became final in August 2023. This decrease was partially offset by the provisions for other litigation. See Note 21 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.
Note 14.
million, $ million and $ million in 2023, 2022 and 2021, 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 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”).
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| | $ | | | | $ | | | | $ | | | | | | | | |
| 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 gain/(loss) 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 | | () | | | () | | | () | | | () | |
Net amounts recognized on the consolidated balance sheet | | $ | | | | $ | | | | $ | () | | | $ | () | |
| | | | | | | | |
| 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 | | * | | * | | | % | | | % |
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| | $ | | | | Accumulated benefit obligation | | | | | | |
| Fair value of plan assets | | | | | | |
For the year ended December 31, 2023, the Company’s projected benefit obligation related to its Pension Plans increased $ million, primarily attributable to foreign currency translation. For the year ended December 31, 2022, the Company’s projected benefit obligation related to its Pension Plans decreased $ million, primarily attributable to actuarial gains related to higher discount rate assumptions.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Interest cost | | | | | | | | | | | | | | | | | | |
| Expected return on plan assets | | () | | | () | | | () | | | | | | | | | | |
| | | | | | | | | |
| Amortization of actuarial loss | | | | | | | | () | | | | | | | | | | |
| Amortization of prior service credit | | | | | | | | | | | () | | | () | | | () | |
| | | | | | | | | |
| Net periodic benefit cost | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
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.
| | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | | | | | | | | | | | |
| Amortization of prior service credit | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | |
| Total other comprehensive loss (income) | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | |
| Total net periodic benefit cost and other comprehensive loss (income) | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | |
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% | | | % | | | % | | * | | * | | * | | 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
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.
% | | | % | | Ultimate trend rate | | | % | | | % |
| Year that the rate reaches the ultimate trend rate | | | | |
Assets
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: cash and cash equivalents %, U.K. government securities %, fixed income %, equity % and real estate %. 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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | | | |
Mutual funds 2 | | | | | | | | | | | | | | | | | | | | | | | | |
Insurance contracts 3 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
|
| | | | $ | | | | $ | | |
Ownership and Governance Structure
% | | | % | | | % | | | % | | Mastercard Foundation (Class A stockholders) | | | % | | | % | | | % | | | % |
| Principal or Affiliate Customers (Class B stockholders) | | | % | | | % | | | % | | | % |
Class B Common Stock Conversions
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.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock Activity
| | | | | Purchases of treasury stock | | () | | | — | |
| Share-based payments | | | | | — | |
| Conversion of Class B to Class A common stock | | | | | () | |
| Balance at December 31, 2021 | | | | | | |
| Purchases of treasury stock | | () | | | — | |
| Share-based payments | | | | | — | |
| Conversion of Class B to Class A common stock | | | | | () | |
| Balance at December 31, 2022 | | | | | | |
| Purchases of treasury stock | | () | | | — | |
| Share-based payments | | | | | — | |
| Conversion of Class B to Class A common stock | | | | | () | |
| Balance at December 31, 2023 | | | | | | |
The Company’s Board of Directors have approved share repurchase programs of its Class A Common Stock authorizing the Company to repurchase shares.
| | $ | | | | $ | | | Dollar-value of shares repurchased 1 | | $ | | | | $ | | | | $ | | |
| Shares repurchased | | | | | | | | | |
| Average price paid per share | | $ | | | | $ | | | | $ | | |
1The dollar-value of shares repurchased does not include a 1% excise tax that became effective January 1, 2023. The incremental tax is recorded in treasury stock on the consolidated balance sheet and is payable annually beginning in 2024.
As of December 31, 2023, the remaining authorization under the share repurchase programs approved by the Company’s Board of Directors was $ billion.
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Note 17.
) | | $ | | | | $ | | | | $ | () | | Translation adjustments on net investment hedges 2 | | | | | () | | | | | | | |
| Cash flow hedges | | | | | | | | |
| | | | | |
Foreign exchange contracts 3 | | () | | | () | | | | | | () | |
| Interest rate contracts | | () | | | | | | | | | () | |
Defined benefit pension and other postretirement plans 4 | | () | | | () | | | () | | | () | |
| Investment securities available-for-sale | | () | | | | | | | | | () | |
| Accumulated other comprehensive income (loss) | | $ | () | | | $ | | | | $ | | | | $ | () | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | Increase / (Decrease) | | Reclassifications | | December 31, 2022 |
| | (in millions) |
Foreign currency translation adjustments 1 | | $ | () | | | $ | () | | | $ | | | | $ | () | |
Translation adjustments on net investment hedges 2 | | | | | | | | | | | | |
| Cash flow hedges | | | | | | | | |
Foreign exchange contracts 3 | | | | | | | | () | | | () | |
| Interest rate contracts | | () | | | | | | | | | () | |
Defined benefit pension and other postretirement plans 4 | | | | | () | | | () | | | () | |
| Investment securities available-for-sale | | () | | | () | | | | | | () | |
| Accumulated other comprehensive income (loss) | | $ | () | | | $ | () | | | $ | () | | | $ | () | |
1During 2023, 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 against the U.S. dollar. During 2022, the increase in the accumulated other comprehensive loss related to foreign currency translation adjustments was driven primarily by the depreciation of the euro and British pound against the U.S. dollar.
2During 2023, the decrease in the accumulated other comprehensive income related to the net investment hedges was driven by the appreciation of the euro against the U.S. dollar. During 2022, the increase in the accumulated other comprehensive income related to the net investment hedges was driven by the depreciation of the euro against the U.S. dollar. See Note 23 (Derivative and Hedging Instruments) for additional information.
3Certain foreign exchange derivative contracts are designated as cash flow hedging instruments. Gains and losses resulting from changes in the fair value of these contracts are deferred in accumulated other comprehensive income (loss) and subsequently reclassified to the consolidated statement of operations when the underlying hedged transactions impact earnings. See Note 23 (Derivative and Hedging Instruments) for additional information.
Note 18.
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Stock Options
Options expire from the date of grant and vest ratably over for awards granted on or after March 1, 2022. For awards granted before March 1, 2022, they vest ratably over . 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 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.
% | | | % | | | % | | Expected term (in years) | | | | | | |
| Expected volatility | | | % | | | % | | | % |
| Expected dividend yield | | | % | | | % | | | % |
| Weighted-average fair value per Option granted | | $ | | | | $ | | | | $ | | |
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.
| | $ | | | | | | | | Granted | | | | | $ | | | | | | |
| Exercised | | () | | | $ | | | | | | |
| Forfeited | | () | | | $ | | | | | | |
| Expired | | | | | $ | | | | | | |
| Outstanding at December 31, 2023 | | | | | $ | | | | | | $ | | |
| Exercisable at December 31, 2023 | | | | | $ | | | | | | $ | | |
| Options vested and expected to vest at December 31, 2023 | | | | | $ | | | | | | $ | | |
As of December 31, 2023, there was $ million of total unrecognized compensation cost related to non-vested Options. The cost is expected to be recognized over a weighted-average period of years.
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| | $ | | | | | | Granted | | | | | $ | | | | |
| Converted | | () | | | $ | | | | |
| Forfeited | | () | | | $ | | | | |
| Outstanding at December 31, 2023 | | | | | $ | | | | $ | | |
| RSUs expected to vest at December 31, 2023 | | | | | $ | | | | $ | | |
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, 2023, there was $ million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of years.
Performance Stock Units
PSUs vest after and are subject to a mandatory one-year post-vest hold, during which they are eligible for dividend equivalents. 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 after receiving the award, the participant retains all of their awards without providing additional service to the Company.
| | $ | | | | | | Granted | | | | | $ | | | | |
| Converted | | () | | | $ | | | | |
| Other | | | | | $ | | | | |
| Outstanding at December 31, 2023 | | | | | $ | | | | $ | | |
| PSUs expected to vest at December 31, 2023 | | | | | $ | | | | $ | | |
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Additional Information
| | $ | | | | $ | | | | 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 grant-date fair value of awards vested | | | | | | | | | |
| Total intrinsic value of RSUs converted into shares of Class A common stock | | | | | | | | | |
PSUs | | | | | | |
| Weighted-average grant-date fair value of awards granted | | | | | | | | | |
| Total grant-date fair value of awards vested | | | | | | | | | |
| Total intrinsic value of PSUs converted into shares of Class A common stock | | | | | | | | | |
| | | |
| | | |
| | | |
|
| | |
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Note 20.
| | $ | | | | $ | | | | Foreign | | | | | | | | | |
| Income before income taxes | | $ | | | | $ | | | | $ | | |
| | $ | | | | $ | | | | State and local | | | | | | | | | |
| Foreign | | | | | | | | | |
| | | | | | | | | |
| Deferred | | | | | | |
| Federal | | () | | | () | | | () | |
| State and local | | () | | | () | | | () | |
| Foreign | | () | | | | | | () | |
| | () | | | () | | | () | |
| Income tax expense | | $ | | | | $ | | | | $ | | |
Effective Income Tax Rate
| | | | $ | | | | | | $ | | | | | | | | | | | | | | | | | |
| Federal statutory tax | | | | | | % | | | | | | % | | | | | | % |
| State tax effect, net of federal benefit | | | | | | % | | | | | | % | | | | | | % |
| Foreign tax effect | | () | | | () | % | | () | | | () | % | | () | | | () | % |
| Valuation allowance - U.S. foreign tax credit | | | | | | % | | () | | | () | % | | | | | | % |
| U.S. tax expense on foreign operations | | | | | | % | | | | | | % | | | | | | % |
| Foreign-derived intangible income deduction | | () | | | () | % | | () | | | () | % | | () | | | () | % |
U.S. tax benefits | | | | | | % | | | | | | % | | () | | | () | % |
| Windfall benefit | | () | | | () | % | | () | | | () | % | | () | | | () | % |
| Other, net | | () | | | () | % | | | | | | % | | () | | | () | % |
| Income tax expense | | $ | | | | | % | | $ | | | | | % | | $ | | | | | % |
Note: Table may not sum due to rounding.
The effective income tax rates for the years ended December 31, 2023, 2022 and 2021 were %, % and %, respectively. The effective income tax rate for 2023 was higher than the effective income tax rate for 2022, primarily due to changes in the valuation allowance associated with the deferred tax asset related to U.S. foreign tax credits. In 2022, the Company recognized a discrete tax benefit of $ million to release the valuation allowance resulting from U.S. tax regulations published in the first
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The effective income tax rate for 2022 was lower than the effective income tax rate for 2021, primarily due to a discrete tax benefit in the first quarter of 2022 related to final U.S. tax regulations published in 2022. These regulations resulted in a valuation allowance release of $ million associated with the U.S. foreign tax credit carryforward deferred tax asset. The regulations limited the Company’s ability to generate foreign tax credits starting in 2022 for certain foreign taxes paid, resulting in additional U.S. tax expense. Additionally, a more favorable geographic mix of earnings in 2022 contributed to the lower effective tax rate. The lower effective income tax rate in 2022 was partially offset by:
•the recognition of U.S. tax benefits in 2021 (the majority of which were discrete) resulting from a higher foreign derived intangible income deduction and greater utilization of foreign tax credits in the U.S.
•a discrete tax benefit in 2021 related to the remeasurement of the Company’s net deferred tax asset in the U.K. due to an enacted tax rate change in 2021
•a discrete tax expense related to an unfavorable court ruling in 2022
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 -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 2023, 2022 and 2021, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction of MAPPL’s income tax liability of $ million, or $ per diluted share, $ million, or $ per diluted share, and $ million, or $ per diluted share, respectively.
Indefinite Reinvestment
As of December 31, 2023 the Company does not accrue taxes on $ billion of foreign earnings which remain permanently reinvested outside the U.S. The Company expects that taxes associated with any future repatriation of these earnings are immaterial.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | Compensation and benefits | | | | | | |
| State taxes and other credits | | | | | | |
| Net operating losses | | | | | | |
| U.S. foreign tax credits | | | | | | |
Property and equipment | | | | | | |
| Intangible assets | | | | | | |
Lease liabilities | | | | | | |
| Other items | | | | | | |
| Less: Valuation allowance | | () | | | () | |
| Total Deferred Tax Assets | | | | | | |
| | | | |
| Deferred Tax Liabilities | | | | |
| Prepaid expenses and other accruals | | | | | | |
| Gains on equity investments | | | | | | |
| Goodwill and intangible assets | | | | | | |
Right-of-use lease assets | | | | | | |
| Other items | | | | | | |
| Total Deferred Tax Liabilities | | | | | | |
| | | | |
| Net Deferred Tax Assets | | $ | | | | $ | | |
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | | | $ | | | Net operating and capital losses 2 | | | | | | | | () | | | | | | | | | | | | | | | | | | () | | | | |
| Total | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | | | $ | | |
1The 2022 activity resulted in a full release of the valuation allowance associated with the U.S. foreign tax credit carryforward due to final U.S. tax regulations published in 2022. The 2023 activity resulted in the establishment of the valuation allowance associated with the U.S. foreign tax credit carryforward due to foreign tax legislation enacted in Brazil and the Notice released by Treasury.
2Capital losses are included within other items in the deferred tax assets section of the components of the Deferred Taxes table above.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | | | | Additions: | | | | | | |
| Current year tax positions | | | | | | | | | |
Prior year tax positions1 | | | | | | | | | |
| Reductions: | | | | | | |
Prior year tax positions1 | | () | | | () | | | () | |
| Settlements with tax authorities | | | | | () | | | () | |
| Expired statute of limitations | | () | | | () | | | () | |
| Ending balance | | $ | | | | $ | | | | $ | | |
1Includes immaterial translational impact of currency.
As of December 31, 2023, the amount of unrecognized tax benefit was $ million. This amount, if recognized, would reduce income tax expense by $ million.
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 is 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 2014. With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2014.
Note 21.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 2012, the parties entered into a definitive settlement agreement with respect to the U.S. MDL Litigation Cases (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. Following an appeal by objectors and as a result of a reversal by the U.S. Court of Appeals for the Second Circuit, 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, with merchants representing slightly more than % of the Damages Class interchange volume ultimately choosing to opt out of the settlement. The district court granted final approval of the Damages Class settlement in December 2019, which was upheld by the appellate court in March 2023 and became final in August 2023 pursuant to the terms of the agreement. 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.
Separately, settlement negotiations with the Rules Relief Class are ongoing. Briefing on summary judgment motions in the Rules Relief Class and opt-out merchant cases was completed in December 2020. In September 2021, the district court granted the Rules Relief Class’s motion for class certification. In January 2024, the district court denied certain of the defendants’ motions for summary judgment and the parties are awaiting decisions on the remaining motions.
As of December 31, 2023 and 2022, Mastercard had accrued a liability of $ million and $ million, respectively, for the U.S. MDL Litigation Cases. During 2023, Mastercard reduced both the accrued liability and restricted cash for litigation settlement by $ million, including accrued interest, as the Damages Class settlement became final in August 2023. As such, as of December 31,
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Europe. Since May 2012, a number of United Kingdom (“U.K.”) merchants filed claims or threatened litigation against Mastercard seeking damages for excessive costs paid for 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”). Mastercard has resolved a substantial amount of these damages claims through settlement or judgment. During 2023, Mastercard incurred charges of $ million as a result of settlements with a number of U.K. and Pan-European merchants. During 2022, Mastercard incurred charges of $ million as a result of settlements (both final and agreements in principle) with a number of U.K. merchants. During 2021, Mastercard incurred charges of $ million to reflect both the litigation settlements and estimated attorneys’ fees with a number of U.K. and Pan-European merchants. Following these settlements, approximately £ billion (approximately $ billion as of December 31, 2023) of unresolved damages claims remain.
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. A number of those matters are now progressing with motion practice and discovery. A hearing involving multiple merchant cases is scheduled for February 2024 concerning certain liability issues with respect to merchant claims for damages related to post-Interchange Fee Regulation consumer interchange fees as well as commercial and inter-regional interchange fees.
In a separate matter, Mastercard and Visa were served with a proposed collective action complaint in the U.K. on behalf of merchants seeking damages for commercial card transactions in both the U.K. and the European Union. In June 2023, the court denied the plaintiffs’ collective action application. In December 2023, the plaintiffs filed a revised application claiming damages against Mastercard in excess of £ billion (approximately $ billion as of December 31, 2023) and the court has scheduled a hearing on this application for April 2024.
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 £ billion (approximately $ billion as of December 31, 2023). Following various hearings since July 2017 regarding collective action and scope, in August 2021, the trial court issued a decision in which it granted class certification to the plaintiffs but narrowed the scope of the class. Since January 2023, the trial court has held hearings on various issues, including whether any causal connection existed between the levels of Mastercard’s intra-EEA interchange fees and U.K. domestic interchange fees and regarding Mastercard’s request to narrow the number of years of damages sought by the plaintiffs on statute of limitations grounds.
Mastercard has been named as a defendant in a proposed consumer collective action filed in Portugal on behalf of Portuguese consumers. The complaint, which seeks to leverage the 2019 resolution of the European Commission’s investigation of Mastercard’s central acquiring rules and interregional interchange fees, claims damages of approximately € billion (approximately $ billion as of December 31, 2023) for interchange fees that were allegedly passed on to consumers by Portuguese merchants for a period of approximately years. Mastercard has submitted a statement of defense that disputes both liability and damages.
In April 2023, the Serbian Competition Commission issued a Statement of Objections (“SO”) against Mastercard. The SO covers historic domestic interchange fees from 2013 to 2018. The SO seeks monetary fines and costs but no business practices changes.
Australia. In May 2022, the Australian Competition & Consumer Commission (“ACCC”) filed a complaint targeting certain agreements entered into by Mastercard and certain Australian merchants related to Mastercard’s debit program. The ACCC alleges that by entering into such agreements, Mastercard engaged in conduct with the purpose of substantially lessening competition in the supply of debit card acceptance services. The ACCC seeks both declaratory relief and monetary fines and costs. A hearing on liability issues has been scheduled for March 2025.
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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 September 2019, the plaintiffs filed with the district court their motions for class certification in which the plaintiffs, in aggregate, allege over $ billion in damages against all of the defendants. In August 2021, the trial court issued an order granting the plaintiffs’ request for class certification. In July 2023, the D.C. Circuit Court affirmed the district court order granting class certification. In January 2024, the defendants requested that the U.S. Supreme Court hear the defendants’ appeal of the certification decision.
Europe. Mastercard was named as a defendant in an action brought by Euronet 360 Finance Limited, Euronet Polska Spolka z.o.o. and Euronet Services spol. s.r.o. (“Euronet”) alleging that certain rules affecting ATM access fees in Poland, the Czech Republic and Greece by Visa and Mastercard, and certain of their subsidiaries, breach various competition laws. Euronet sought damages, costs and injunctive relief to prevent the defendants from enforcing these rules. The matter was resolved via a settlement in October 2023.
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 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. MDL Litigation Cases described above. In August 2020, the district court issued an order granting the plaintiffs’ request for class certification and in January 2021, the Network Defendants’ request for permission to appeal that decision was denied. The plaintiffs have submitted expert reports that allege aggregate damages in excess of $ billion against the Network Defendants. The Network Defendants have submitted expert reports rebutting both liability and damages and all briefs on summary judgment have been submitted.
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 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 $ 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 December 2019, the Federal Communications Commission (“FCC”) issued a declaratory ruling clarifying that the TCPA does not apply to faxes sent to online fax services that are received online via email. In December 2021, the trial court granted plaintiffs’ request for class certification, but narrowed the scope of the class to stand alone fax recipients only. Mastercard’s request to appeal that decision was denied. Briefing on plaintiffs’ motion to amend the class definition and Mastercard’s cross-motion to decertify the stand alone fax recipient class was completed in April 2023.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 22.
| | $ | | | Risk mitigation arrangements applied to settlement exposure 1 | | () | | | () | |
Net settlement exposure 1 | | $ | | | | $ | | |
1The Company corrected its estimated net settlement exposure as of December 31, 2022. The correction was not material to the net settlement exposures previously reported and had no impact to any of the Company’s financial statement line items.
million and $ million at December 31, 2023 and 2022, respectively, of which the Company has risk mitigation arrangements for $ million and $ million at December 31, 2023 and 2022, respectively. 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 is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been material.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 23.
million, after tax, remains 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 due in March 2030 and March 2050.Fair Value Hedges
The Company may enter into interest rate derivative contracts, including interest rate swaps, to manage the effects of interest rate movements on the fair value of the Company's fixed-rate debt and designate such derivatives as hedging instruments in a fair value hedging relationship. Changes in fair value of these contracts and changes in fair value of fixed-rate debt attributable to changes in the hedged benchmark interest rate generally offset each other and are recorded in interest expense on the consolidated statement of operations. Gains and losses related to the net settlements of interest rate swaps are also recorded in interest expense on the consolidated statement of operations. The periodic cash settlements are included in operating activities on the consolidated statement of cash flows.
In 2021, the Company entered into an interest rate swap designated as a fair value hedge related to $ billion of the % Senior Notes due March 2050. In effect, the interest rate swap synthetically converts the fixed interest rate on this debt to a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap Rate. The net impact to interest expense for the years ended December 31, 2023, 2022 and 2021 was not material.
Net Investment Hedges
The Company may use foreign currency denominated debt and/or foreign exchange derivative contracts to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the net investment hedge is recorded as a currency translation adjustment in accumulated other comprehensive income (loss). Forward points are excluded from the effectiveness assessment and are recognized in general and administrative expenses on the consolidated statement of operations over the hedge period. The amounts recognized in earnings related to forward points for 2023, 2022 and 2021 were not material.
In 2015 and 2022, the Company designated its € million and € million euro-denominated debt, respectively, as hedges of a portion of its net investment in its European operations. In 2022, € million of the 2015 euro-denominated debt matured and was de-designated as a net investment hedge. In 2023, the Company de-designated an aggregate notional amount of € million foreign exchange derivative contracts and € million of the euro-denominated debt as net investment hedges to effectively manage changes in its net investment exposures in foreign subsidiaries. The Company accounts for the de-designated foreign exchange derivative contracts as economic hedges as of the de-designation date. The foreign currency transaction gains and losses on the euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recorded in general and administrative expenses on the consolidated statement of operations, net as of the de-designation date. The de-designated foreign exchange derivative contracts and euro-denominated debt will serve as economic hedges to offset possible changes in monetary assets due to foreign exchange fluctuations.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023 and 2022, the Company had net foreign currency gains of $ million and $ million, after tax, respectively, in accumulated other comprehensive income (loss) associated with this hedging activity.
Non-designated Derivatives
The Company may also enter into foreign exchange derivative contracts to serve as economic hedges, such as to offset possible changes in the value of monetary assets and liabilities due to foreign exchange fluctuations, without designating these derivative contracts as hedging instruments. 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 may enter 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 volatility arising from gains and losses resulting from fluctuations of foreign currencies against its functional currencies. Gains and losses resulting from changes in fair value of these contracts are recorded in general and administrative expenses on the consolidated statement of operations, net, along with the foreign currency gains and losses on monetary assets and liabilities.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | Interest rate contracts in a fair value hedge 2 | | | | | | | | | | | | | | | | | | |
Foreign exchange contracts in a net investment hedge 1 | | | | | | | | | | | | | | | | | | |
| Derivatives not designated as hedging instruments | | | | | | | | | | | | |
Foreign exchange contracts 1 | | | | | | | | | | | | | | | | | | |
| Total derivative assets/liabilities | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
1Foreign exchange derivative assets and liabilities are included within prepaid expenses and other current assets and other current liabilities, respectively, on the consolidated balance sheet.
) | | $ | | | | $ | | | | Net revenue | | $ | () | | | $ | | | | $ | | | | Interest rate contracts | | $ | | | | $ | | | | $ | | | | Interest expense | | $ | () | | | $ | () | | | $ | () | |
| | | | | | | | | | | | | | |
| Derivative financial instruments in a net investment hedge relationship: | | | | | | | | | | | | | | |
| Foreign exchange contracts | | $ | () | | | $ | | | | $ | | | | | | | | | | |
The Company estimates that the pre-tax amount of the net deferred loss on cash flow hedges recorded in accumulated other comprehensive income (loss) at December 31, 2023 that will be reclassified into the consolidated statement of operations within the next 12 months is not material. The term of the foreign exchange derivative contracts designated in hedging relationships are generally less than months.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | $ | | | | $ | () | | | | | |
| | | |
Note 24.
% of net revenue in 2023, % in 2022 and % in 2021. No individual country, other than the U.S., generated more than 10% of net revenue in those periods. Mastercard did not have any individual customer that generated greater than 10% of net revenue in 2023, 2022 or 2021. | | $ | | | | $ | | |
| Other countries | | | | | | | | | |
| Total | | $ | | | | $ | | | | $ | | |
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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, 2023 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, 2023. 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, 2023 that has materially affected, or is reasonably likely to materially affect, Mastercard’s internal control over financial reporting.
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ITEM 9B. OTHER INFORMATION
Item 9B. Other information
or trading arrangements for the sale of shares of our common stock as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Action | | Date | | Plans | | Number of Securities to be Sold | | Expiration |
| | | Rule 10b5-1 1 | | Non-Rule 10b5-1 2 | | |
,
| | | | November 2, 2023 | | X | | - | | 23,552 shares of Class A Common Stock underlying employee stock options | | The earlier of (i) the date when all securities under plan are exercised and sold and (ii) November 15, 2024 |
,
| | | | November 28, 2023 | | X | | - | | (i) 48,112 shares of Class A Common Stock underlying employee stock options and (ii) 12,000 shares of Class A Common Stock | | The earlier of (i) the date when all securities under plan are exercised and sold and (ii) November 28, 2024 |
| | | | | | | | | |
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1Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
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 2023 FORM 10-K 116
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 2024 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.
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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:
1Consolidated Financial Statements
See Index to Consolidated Financial Statements in Part II, Item 8.
2Consolidated Financial Statement Schedules
None.
3The 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 2023 FORM 10-K 120
Exhibit index
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| | $8,000,000,000 Amended and Restated Credit Agreement, dated as of November 10, 2022, 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 of the Company’s Annual Report on Form 10-K filed on February 14, 2023 (File No. 001-32877)). |
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| 101.INS | | 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. |
| 101.SCH* | | XBRL Taxonomy Extension Schema Document |
| 101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document |
+ Management contracts or compensatory plans or arrangements.
* Filed or furnished herewith.
** Exhibit omits certain information that has been filed separately with the U.S. Securities and Exchange Commission and has been granted 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.
MASTERCARD 2023 FORM 10-K 121
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.
| | | | | | | | | | | | | | |
| | | | MASTERCARD INCORPORATED |
| | | | (Registrant) |
| | | | |
| Date: | February 13, 2024 | By: | | /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:
| | | | | | | | | | | | | | |
| Date: | February 13, 2024 | By: | | /s/ MICHAEL MIEBACH |
| | | | Michael Miebach |
| | | | President and Chief Executive Officer; Director |
| | | | (Principal Executive Officer) |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ SACHIN MEHRA |
| | | | Sachin Mehra |
| | | | Chief Financial Officer |
| | | | (Principal Financial Officer) |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ SANDRA ARKELL |
| | | | Sandra Arkell |
| | | | Corporate Controller |
| | | | (Principal Accounting Officer) |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ CANDIDO BRACHER |
| | | | Candido Bracher |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ RICHARD K. DAVIS |
| | | | Richard K. Davis |
| | | | Director |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ JULIUS GENACHOWSKI |
| | | | Julius Genachowski |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ CHOON PHONG GOH |
| | | | Choon Phong Goh |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ MERIT E. JANOW |
| | | | Merit E. Janow |
| | | | Chairman of the Board; Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ OKI MATSUMOTO |
| | | | Oki Matsumoto |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ YOUNGME MOON |
| | | | Youngme Moon |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ RIMA QURESHI |
| | | | Rima Qureshi |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ GABRIELLE SULZBERGER |
| | | | Gabrielle Sulzberger |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ HARIT TALWAR |
| | | | Harit Talwar |
| | | | Director |
| | | | |
| Date: | February 13, 2024 | By: | | /s/ LANCE UGGLA |
| | | | Lance Uggla |
| | | | Director |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
MASTERCARD 2023 FORM 10-K 122
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