Mastercard

Mastercard is a payment technology company headquartered in Purchase, New York, that operates one of the two largest international card networks. Its network links the banks and other institutions that issue Mastercard-branded cards with the institutions that sign up merchants to accept them, and it authorizes, clears and settles the transactions between them. Mastercard Incorporated is listed on the New York Stock Exchange under the ticker MA.

The company does not issue cards, lend money to cardholders or hold merchant accounts. Those roles belong to its customers, the financial institutions that hold its licences. Mastercard sets the rules they follow, runs the processing network and owns the brand. Its closest counterpart is Visa, and the two are the principal examples of open-loop card networks.

Mastercard traces its origin to 1966, when a group of American banks formed the Interbank Card Association to run a shared card system in competition with Bank of America's BankAmericard, the forerunner of Visa. The association adopted the name Master Charge for its card a few years later and renamed both card and organisation MasterCard in 1979. It expanded abroad through alliances with European card organisations, and in 2002 merged with Europay International, its long-standing European partner.

For most of its history the organisation was a membership association owned by its member banks. In 2006 it became a public company through an initial public offering. The company restyled its name as Mastercard, with a lower-case c, in 2016. It has since broadened beyond cards through acquisitions, including the British payment systems operator Vocalink, which runs the technology behind several United Kingdom bank payment schemes, as well as businesses in open banking, fraud analytics and digital identity.

Mastercard operates the four-party card model. The four parties are the cardholder, the card issuer, the merchant and the merchant's acquirer; the network sits in the middle. When a card is used, the acquirer sends an authorization request across Mastercard's network to the issuer, which approves or declines. Approved transactions are later cleared, and the network calculates what each institution owes the others and arranges settlement between them.

Card numbers show which network a card belongs to. Mastercard numbers begin with digits in the ranges 51 to 55 and 2221 to 2720, the leading digits forming the bank identification number assigned to the issuer. Institutions take part either as principal members, which connect and settle directly, or as affiliates sponsored by a principal.

Mastercard's income comes from fees charged to issuers and acquirers, not from cardholders or directly from merchants. These scheme fees are based on the value of transactions on its cards, the number of transactions it switches, cross-border activity and a growing range of additional services such as fraud scoring, data analytics and consulting.

The network also sets the default interchange fee that acquirers pay issuers on each transaction. Mastercard does not keep interchange; it passes between its customers. The rates nonetheless matter greatly to the company, since they give banks a reason to issue its cards, and they have been the main source of its disputes with merchants and regulators.

• Card brands. The Mastercard brand covers credit, debit, prepaid and commercial cards. Maestro, a separate debit brand, is being retired in Europe in favour of Debit Mastercard, and Cirrus is the brand of its cash machine network.
• Push payments. Mastercard Send moves money to a card account in near real time for payouts and transfers between people.
• Security. The company provides network tokenization, its Identity Check programme for online cardholder authentication, and fraud and cyber-risk scoring tools.
• Account-to-account and data services. Through acquired businesses it supplies real-time bank payment infrastructure, open banking connectivity and bill payment services.

Mastercard is one of the owners of EMVCo, the body that manages the chip, contactless and related specifications, whose name records the initials of Europay, Mastercard and Visa.

Participants agree to the Mastercard Rules and related standards, the company's version of card network rules. They govern licensing, card design, acceptance obligations for merchants, security requirements, dispute and chargeback procedures and the monitoring of merchants with excessive fraud or disputes. Acquirers are responsible for their merchants' compliance and issuers for their card programs, and the company can levy assessments for breaches. Payment facilitators and other intermediaries must be registered with the network by a sponsoring member.

Mastercard is not a bank, but it is subject to payment system oversight in many jurisdictions and to competition law everywhere. In the European Union its consumer interchange rates are limited by the 2015 interchange cap, and in the United States the debit provisions of the Durbin Amendment apply to cards issued on its network. Some countries, including India and Russia, have required card transaction data to be stored or processed locally.

The company has faced decades of antitrust action over interchange and acceptance rules. The European Commission ruled against its cross-border interchange fees in 2007 and fined it 570 million euros in 2019 for restricting merchants' access to cheaper cross-border acquiring. In the United States, merchants brought class actions against Mastercard, Visa and large banks from 2005 that led to multi-billion-dollar settlements, and comparable collective claims have been pursued in the United Kingdom.

• Mastercard