How does MasterCard make money?

How does MasterCard make money?

If you recently made an effortless purchase using your card, it most likely has the word ‘Mastercard’ written on it. However, it is not a card company but a network system that connects the customer and the retailer through a systematic service of approvals and transactions. Here, let’s know How does MasterCard make money?

Mastercard involves four key partakers in their network of transactions, namely the cardholder, the retailer, and their respective banks. Playing a pivotal role, all the authorizations, settlements, and connections are made by Mastercard. In this process, Mastercard charges the retailer a minimal percentage of the transacted amount. In addition, the banks also pay a licensing fee to Mastercard for using their payment services. This is how Mastercard generates the majority of its revenue.

What started as a union of credit card providers in 1966 is now the second-largest payment gateway technology in the world. Mastercard reported net revenue of $15.3 billion in 2020, in light of the global pandemic.

As the world progresses towards a cashless society, Mastercard is bound to expand furthermore. The amount of card transactions is said to escalate as the e-commerce industry is predicted to grow as much as $6.5 trillion by 2023. Mastercard envisions a world without cash and values trust, integrity, respect. Through innovation and execution, they aim to serve their customers better. With a thorough study and data analysis, Mastercard is constantly working to make payments more secure and convenient for everyone around the globe. 

The business model of Mastercard

Behind every smooth transaction is a well-coordinated system that makes the process easy and efficient. The transaction takes place within milliseconds but goes through rounds of comprehensive steps that make the payment secure, quick, and favorable. Mastercard follows a structural method of payment networking that can be divided into three phases:

  1. Authorization: When you are about to make a payment using a Mastercard branded card at any store, an authorization signal is sent out from the retailer’s bank to your bank. This is the first step where the transaction is initiated. First, your bank will go through your information to confirm if you’re eligible to make the payment or not. After it is prompted, the retailer’s bank will give out an affirmative sign to the retailer for processing the transaction. Next, a receipt is printed stating the transaction details that can be kept as a record or evidence of the payment. This takes us to the next phase of the clearing.
  1. Clearing: The clearing phase is the next step wherein the retailer’s bank will send the purchase details to your bank to determine the total amount to be paid. In this, the bank statements of both you and the retailer are revised. After the amount is finalized, the last step of settlement falls through. 
  1. Settlement: In the last settlement stage, the retailer and their bank get the amount transferred to their accounts. The retailer’s bank receives a certain amount of the total transaction amount, which they again have to split with your bank as an interchange fee. Your bank will likely get a larger share of the amount as they are the ones taking a more significant risk with your expenditure. 

The revenue system of Mastercard

After understanding the working business model of Mastercard, you must be wondering as to how Mastercard generates revenue from the money transfer system. One of the trivial steps to be observed in the entire transaction process is the nominal fee charged by Mastercard to the retailer. The price has to be paid to the issuing bank and payment gateway organizations such as Mastercard. 

The company obtains revenue from fees that cover the authorization, clearance, settlement, domestic and international transactions. The revenue system can be divided into three categories: 

  1. Domestic assessment fee: The company charges money to different banks for using its seamless and efficient payment network. If the transaction is done within the same country, the charges applied to your bank and the retailer’s bank are domestic assessment fees. This accounts for $6.7 billion of the $23.6 billion gross revenue of Mastercard for the year 2020.
  1. International assessment fee: The cross-border transactions have higher prices charged to the organizations as the currency conversion fee is included, which is around 0.2% of the transaction amount. The cross-border cost is 0.8% of the transaction amount. The international assessment fee is one of the crucial contributors to the company’s overall revenue, around $3.5 billion as of 2020.
  1. Transaction processing fee: The transaction processing fee has two sub-categories; Connectivity fee and Transaction switching fee. The connectivity fee is the charge applied to the participants for using their service. The Transaction switching fees are the charges the issuer bank receives for executing every step of the transaction process. Right from authorization to the clearance to the settlement, every effort is charged to complete the transaction process. These are minimal charges, but they are accumulated to make up a more significant revenue source.

Other methods of generating revenue are the licensing fee charged to the banks for using the branding privileges and the certification fee for all the mandatory software and logistics required for carrying out the transaction process.

Competitors of Mastercard

Mastercard faces competition from brands such as Visa, American Express, Paypal, Google Pay, etc. Despite these new methods of payment, Mastercard has grown exponentially in recent years. It is a well-established brand that has gained the trust of many financial organizations. Hence, with their excellent user experience, they have continued to stay in business with a stronghold in the market. 

Due to the COVID-19 pandemic, a drastic change in the user is observed. As a result, a shift towards contactless payment, even in everyday transactions, is encouraged. Like various refurbishing processes the company has gone through ever since it started, Mastercard is set to keep up with its competitors and the changing times to continue offering the best services in the payment industry. 

The company must continue to maintain the service and quality of its products. The process must be minimal and effective for the customers to use Mastercard branded cards. Keeping up with the changing times and needs will the brand innovate better and continue being a dominant name in the market. 

How much does Mastercard profit from their business?

Mastercard had increased its net profit margin from 29% in 2009 to 48% in 2019. However, due to the COVID-19 pandemic, the lockdowns have resulted in less expenditure and adversely affected the company. As a result, the revenue dropped down to 7.3% concerning last year.

How does Mastercard market the brand?

Mastercard’s tagline is “Priceless.” Earlier, they started a campaign with a theme that follows the line, “There are some things money can’t buy. For everything else, there’s Mastercard.” This encourages consumers to buy goods and services using their cards and, in turn, using their payment service. 

Mastercard is making a tremendous effort in marketing its service. The brand has reimagined its logo, which does not have the name of the company on it. In addition, to enhance the brand identity, the company has added a sonic element to its product and has produced a global melody.

Facts about Mastercard

  • Mastercard has a secret revenue generator; the company labels it under “Other revenues.” This includes many services and products offered by the company, such as data analytics, consulting, money management program, and research.
  • Mastercard is a sponsor for the UEFA Champions League, the Australian Cricket Team, and a former sponsor of the FIFA world cup and Formula One.
  • Mastercard does most of its business in US dollars, the British pound, the euro, and the Brazilian real.
  • Mastercard is established in over 200 countries and 150 currencies.


Offering financial data services, Mastercard is an American company that considers itself a “technology company in the global payments industry.” Mastercard has managed to bridge the gap between the consumer and the retailer by easing their fiscal communication. With a comprehensive and coherent networking system, Mastercard has connected people globally. Through their service, they have paved the way for a more excellent and more accessible payment portal, which has simplified our lives significantly. Every action the company takes contributes to revenue generation as it brings in more customers for utilizing the service.

Frequently asked questions

  1. What is the per-share value of Mastercard?

As of 20th August 2021, the per-share price of Mastercard is $354.99

  1. Is Mastercard a trustworthy brand?

Yes, Mastercard is a reliable brand as it has established its trust all over the world. With a million retailers and almost 2.2 billion branded cardholders, the company is a dominant brand in the payment industry.

  1. Does Mastercard issue credit/debit cards?

No, Mastercard does not issue cards but creates advanced payment solutions for easy transactions around the world.

  1. What is the difference between Mastercard and Maestro cards?

Mastercard itself issues both these cards. However, Maestro is only a debit card of Mastercard itself, and Mastercard can be branded on credit/ debit or a prepaid card.

How does MasterCard make money?

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