How Mastercard Makes Money

Mastercard (MA) connects many different participants in various kinds of transactions: consumers, merchants, financial institutions, governments, and more. The large majority of Mastercard’s revenue comes from fees paid by its customers, who are not everyday consumers. Rather, Mastercard’s customers are financial institutions, such as banks, that pay a fee to issue credit and debit cards with the Mastercard brand. These fees can take multiple forms, such as interchange fees and additional four-party system fees.

Mastercard facilitates transactions in more than 150 currencies across more than 210 countries and territories. Though the company does not have a monopoly on the payments industry—not only because of similar operations such as Visa but also because of a growing number of new payment service providers—it is nonetheless hugely successful across the globe. A big part of this success has to do with the Mastercard brand and the cachet it holds.

Mastercard's Financials

In February 2024, Mastercard announced its earnings for the 2023 fiscal year. In 2023, the company brought in revenues of $25.1 billion, a 13% increase year-over-year (YOY). The company had a net income of $11.2 billion for the year, up 13% from 2022.

According to CEO Michael Miebach, the strong revenues are due to healthy consumer spending, cross-border volume growth, and execution of the firm's strategy.

The company reports two segments: payment network and value-added services, which both saw revenue growth in 2023. Growth in payment networks was due to growth in the firm's payment network. Value-added services saw growth due to the firm's cyber and intelligence solutions and continued scaling of fraud and security solutions and identity and authentication solutions.

Mastercard's Business Segments

The company has two business reporting segments: Payment network and value-added services and solutions. It reports only revenues for these segments, not income. The company also reports its revenues by geographic regions, broken down into two: North American markets and international markets.

Payment Network

The Payment Network segment "links issuers and acquirers around the globe to facilitate the switching of transactions, permitting account holders to use a Mastercard product" at acceptance locations worldwide. The payment products consist of consumer credit, consumer debt, and prepaid. The segment also consists of disbursement and remittance services, point of sale services, B2B accounts payable, and consumer bill payments.

For 2023, this segment generated revenue of $15.8 billion; a 10% increase year-over-year (YOY).

Value-Added Services

Value-Added Services consist of cyber and intelligence solutions, data and service solutions, which consist of insights and analytics, consulting and innovation, marketing services, and issuer and merchant loyalty. The segment also consists of processing and gateway services.

In 2023, this segment generated $9.3 billion in revenue; an 18% increase.

North American Markets

The North American markets brought in $8.4 billion in revenue in 2023, a 7% increase YOY. It made up 33% of total revenue.

International Markets

International markets brought in $16.7 billion in revenue; a 16% increase YOY. The region made up 67% of total revenue.

Mastercard's Recent Developments

In June 2023, Mastercard launched a subscriptions control solution. It partnered with Subaio to offer a simple and secure way to identify and unsubscribe from recurring payments via trusted apps from banks.

In June 2023, Mastercard also introduced priceless.com in Israel, which is a lifestyle platform. It will allow all Mastercard holders to curate experiences across the country's cultural sites.