ma-20201231

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer

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Emerging growth company

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

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The aggregate market value of the registrant’s Class A common stock, par value $0.0001 per share, held by non-affiliates (using the New York Stock Exchange closing price as of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $261.3 billion. There is currently no established public trading market for the registrant’s Class B common stock, par value $0.0001 per share. As of February 9, 2021, there were 985,146,914 shares outstanding of the registrant’s Class A common stock, par value $0.0001 per share and 8,215,424 shares outstanding of the registrant’s Class B common stock, par value $0.0001 per share.

This Report contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements. When used in this Report, the words “believe”, “expect”, “could”, “may”, “would”, “will”, “trend” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements that relate to the Company’s future prospects, developments and business strategies.

Mastercard is a technology company in the global payments industry that connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide, enabling them to use electronic forms of payment instead of cash and checks. We make payments easier and more efficient by providing a wide range of payment solutions and services using our family of well-known brands, including Mastercard®, Maestro® and Cirrus®. We operate a multi-rail network that offers customers one partner to turn to for their domestic and cross-border payment needs. Through our unique and proprietary global payments network, which we refer to as our core network, we switch (authorize, clear and settle) payment transactions and deliver related products and services. We have additional payment capabilities that include automated clearing house (“ACH”) transactions (both batch and real-time account-based payments). We also provide integrated value-added offerings such as cyber and intelligence products, information and analytics services, consulting, loyalty and reward programs, processing and open banking. Our payment solutions offer customers choice and flexibility and are designed to ensure safety and security for the global payments system.

A typical transaction on our core network involves four participants in addition to us: account holder (a person or entity who holds a card or uses another device enabled for payment), issuer (the account holder’s financial institution), merchant and acquirer (the merchant’s 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.

We operate a multi-rail network that offers our customers one partner to turn to for their domestic and cross-border needs. Our core network links issuers and acquirers around the globe to facilitate the switching of transactions, permitting account holders to use a Mastercard product at millions of acceptance locations worldwide. Our core network facilitates an efficient and secure means for receiving payments, a convenient, quick and secure payment method for consumers to access their funds and a channel for businesses to receive insight through information that is derived from our network. We enable transactions for our customers through our core network in more than 150 currencies and in more than 210 countries and territories. Our range of capabilities extend beyond our core network into real-time account-based payments and open banking.

•Interchange Fees. Interchange fees reflect the value merchants receive from accepting our products and play a key role in balancing the costs and benefits that consumers and merchants derive. Generally, interchange fees are collected from acquirers and paid to issuers to reimburse the issuers for a portion of the costs incurred. These costs are incurred by issuers in providing services that benefit all participants in the system, including acquirers and merchants, whose participation in the network enables increased sales to their existing and new customers, efficiencies in the delivery of existing and new products, guaranteed payments and improved experience for the customers. We (or, alternatively, financial institutions) establish “default interchange fees” that apply when there are no other established settlement terms in place between an issuer and an acquirer. We administer the collection and remittance of interchange fees through the settlement process.

•Cross-Border and Domestic. Our core network switches transactions throughout the world when the merchant country and country of issuance are different (“cross-border transactions”), providing account holders with the ability to use, and merchants to accept, our products and services across country borders. We also provide switched transaction services to customers where the merchant country and the country of issuance are the same (“domestic transactions”). We switch over 55% of all transactions for Mastercard and Maestro-branded cards, including nearly all cross-border transactions. We switch the majority of Mastercard and Maestro-branded domestic transactions in the United States, United Kingdom, Canada, Brazil and a select number of other countries.

Core Network Architecture. Our core network features a globally integrated structure that provides scale for our issuers, enabling them to expand into regional and global markets. It is based largely on a distributed (peer-to-peer) architecture with an intelligent edge that enables the network to adapt to the needs of each transaction. Our core network accomplishes this by performing intelligent routing and applying multiple value-added services (such as fraud scoring, tokenization services, etc.) to appropriate transactions in real time. Our core network’s architecture enables us to connect all parties regardless of where or how the transaction is occurring. It has 24-hour a day availability and world-class response time.

Payments System Security. Our payment solutions and products are designed to ensure safety and security for the global payments system. Our core network and additional platforms incorporate multiple layers of protection, providing greater resiliency and best-in-class 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. Through the combined efforts of our Security Operations Centers, Fusion Centers and Mastercard Intelligence Center, 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.

Prepaid. Prepaid accounts are a type of electronic payment that enables consumers to pay in advance whether or not they previously had a bank account or a credit history. These accounts can be tailored to meet specific program, customer or consumer needs, such as paying bills, sending person-to-person payments or withdrawing cash from an ATM. Our focus ranges from digital accounts (such as fintech and gig economy platforms) to business programs such as employee payroll, health savings accounts and solutions for small business owners). Our prepaid programs also offer opportunities in the private and public sectors to drive financial inclusion of previously unbanked individuals through social security payments, unemployment benefits and salary cards.

Commercial Credit and Debit. We offer commercial credit and debit payment products and solutions that meet the payment needs of large corporations, midsize companies, small businesses and government entities. Our solutions streamline procurement and payment processes, manage information and expenses (such as travel and entertainment) and reduce administrative costs. Our card offerings include travel, small business (debit and credit), purchasing and fleet cards. Our SmartData platform provides expense management and reporting capabilities. Our Mastercard In Control™ platform generates virtual account numbers which provide businesses with enhanced controls, more security and better data. Our Mastercard Track Business Payment Service™ (Track BPS) is aimed at improving the way businesses pay and get paid by providing a single connection enabling access to multiple payment rails, greater control and richer data to optimize B2B transactions for both buyers and suppliers.

Loyalty and Rewards. We have built a scalable rewards platform that enables customers to provide consumers with a variety of benefits and services, such as personalized offers and rewards, access to a global airline lounge network, concierge services, insurance services, emergency card replacement, emergency cash advances and a 24-hour account holder service center. For merchants, we provide campaigns with targeted offers and rewards, management services for publishing offers, and accelerated points programs for co-brand and rewards program members. We also provide a loyalty platform that enables stronger relationships with retailers, restaurants, airlines and consumer packaged goods companies by creating experiences that drive loyalty and impactful consumer engagement.

Our capabilities incorporate payments expertise and analytical and executional skills to create end-to-end solutions which are increasingly delivered via platforms embedded in our customers’ day-to-day operations. By observing patterns of payments behavior based on billions of transactions switched globally, we leverage anonymized and aggregated information and a consultative approach to help our customers make better business decisions. Our executional skills such as marketing, digital implementation and program management allow us to assist customers to implement actions based on these insights.

Our family of well-known brands includes Mastercard, Maestro and Cirrus. We manage and promote our brands and brand identities (including our sonic brand identity) through advertising, promotions and sponsorships, as well as digital, mobile and social media initiatives, in order to increase people’s preference for our brands and usage of our products. We sponsor a variety of sporting, entertainment and charity-related marketing properties to align with consumer segments important to us and our customers. Our advertising plays an important role in building brand visibility, preference and overall usage among account holders globally. Our “Priceless®” advertising campaign, which has run in more than 50 languages and in more than 120 countries worldwide, promotes Mastercard usage benefits and acceptance, markets Mastercard payment products and solutions and provides Mastercard with a consistent, recognizable message that supports our brand around the globe.

While technology has increasingly changed the way people get information, interact, shop and make purchases, consumers continue to expect a seamless experience where their payment is simple and secure. Our teams are creating innovative solutions that meet the needs of consumers and merchants in a digital environment by applying emerging technologies. During the global COVID-19 pandemic, we have seen continued trends toward a preference for contactless and the rapid adoption of e-commerce. These trends are further accelerating the secular shift to digital forms of payment. In 2020, we:

•continued to expand our support of real-time payments globally, including being selected to build and operate a new real-time clearing and settlement platform in Canada and partnering with the Saudi Arabian Monetary Authority to enable instant account-to-account payments in the country for the first time. These developments build on other recent achievements, including our selection to enhance the InstaPay real-time retail payment system in the Philippines (including operating the infrastructure for and providing anti-money laundering tools to the its national clearing switch). As of December 31, 2020, we either operated or were implementing real-time payments infrastructure in 12 of the top 50 markets as measured by GDP.

•strengthened Mastercard’s open-banking platform with our acquisition of Finicity, a leading North American provider of real-time access to financial data and insights. The acquisition enables a greater choice of financial services, reinforcing our long-standing partnerships with and commitment to financial institutions and fintechs across the globe. This acquisition also enables us to expand our capabilities across North America and globally, and in particular accelerate the adoption of Finicity’s services in North America. Together with Finicity, we will be able to focus on serving the needs of the lending market, including through helping to streamline loan application processes and improve credit decisioning, thereby helping to drive further financial inclusion.

We own a number of valuable trademarks that are essential to our business, including Mastercard, Maestro and Cirrus, through one or more affiliates. We also own numerous other trademarks covering various brands, programs and services offered by us to support our payment programs. Trademark and service mark registrations are generally valid indefinitely as long as they are used and/or properly maintained. Through license agreements with our customers, we authorize the use of our trademarks on a royalty-free basis in connection with our customers’ issuing and merchant acquiring businesses. In addition, we own a number of patents and patent applications relating to payment solutions, transaction processing, smart cards, contactless, mobile, biometrics, AI, security systems, blockchain and other technologies, which are important to our business operations. These patents expire at varying times depending on the jurisdiction and filing date.

•General Purpose Payment Networks. We compete worldwide with payment networks such as Visa, American Express, JCB, China UnionPay and Discover, among others. Some competitors have more market share than we do in certain jurisdictions. Some also have different business models that may provide an advantage in pricing, regulatory compliance burdens or otherwise. Globally, financial institutions may issue both Mastercard and Visa-branded payment products, and we compete with Visa for business on the basis of individual portfolios or programs. In addition, a number of our customers issue American Express and/or Discover-branded payment cards in a manner consistent with a four-party system. We continue to face intense competitive pressure on the prices we charge our issuers and acquirers, and we seek to enter into business agreements with them through which we offer incentives and other support to issue and promote our payment products.

•Debit and Local Networks. We compete with ATM and point-of-sale debit networks in various countries. In addition, in many countries outside of the United States, local debit brands serve as the main domestic brands, while our brands are used mostly to enable cross-border transactions (typically representing a small portion of overall transaction volume). Certain jurisdictions have also created domestic card schemes focused mostly on debit. In addition, several governments are promoting, or considering promoting, local networks for domestic switching. See “Risk Factors” in Part I, Item 1A for a more detailed discussion of the risks related to payments system regulation and government actions that may prevent us from competing effectively.

•Alternative Payments Systems and New Entrants. As the global payments industry becomes more complex, we face increasing competition from alternative payment systems and emerging payment providers. Many of these providers, who in many circumstances can also be our partners or customers, have developed payments systems focused on online activity in e-commerce and mobile channels (in some cases, expanding to other channels), and may process payments using in-house account transfers, real-time account-based payment networks or global or local networks. Examples include digital wallet providers (such as Paytm, PayPal, Alipay and Amazon), POS financing/buy now pay later providers (such as Klarna), mobile operator services, mobile phone-based money transfer and microfinancing services (such as mPesa), handset manufacturers and cryptocurrencies. We also compete with merchants and governments.

General. Government regulation impacts key aspects of our business. We are subject to regulations that affect the payments industry in the many countries in which our integrated products and services are used. We are committed to comply with all applicable laws and regulations and implement policies, procedures and programs designed to promote compliance. We coordinate globally while acting locally and leverage our relationships to 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.

Payments Oversight and Regulation. Central banks and other regulators in several jurisdictions around the world either have, or are seeking to establish, formal oversight over the payments industry, as well as authority to regulate certain aspects of the payment systems in their countries. Such authority has resulted in regulation of various aspects of our business. In the European Union, 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 payment network platform, to be a “specified service provider”, which includes supervisions and examination requirements. In addition, European Union 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.

Interchange Fees. Interchange fees that support the function and value of four-party payments systems like ours are being reviewed or challenged in various jurisdictions around the world via legislation to regulate interchange fees, competition-related regulatory proceedings, central bank regulation and litigation. Examples include statutes in the United States that cap debit interchange for certain regulated activities, our settlement with the European Commission resolving its investigation into our interregional interchange fees and the European Union 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.

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. In China, we are currently excluded from domestic switching and are seeking market access, which is uncertain and subject to a number of factors, including receiving regulatory approval. We are in active discussions to explore different solutions.

Anti-Money Laundering, Counter Financing of Terrorism, Economic Sanctions and Anti-Corruption. We are subject to anti-money laundering (“AML”) and counter-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 payment 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, 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 the U.S. sanctions programs, including 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 Practice Legislation and Regulation. Our customers are subject to numerous regulations and investigations applicable to banks, financial institutions and others in their capacity as issuers and otherwise, 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.

Privacy, Data and Information Security. Aspects of our operations or business are subject to increasingly complex privacy and data protection laws in the United States, the European Union and elsewhere around the world. For example, in the United States, we and our customers are respectively subject to Federal Trade Commission and federal banking agency information safeguarding requirements under the Gramm-Leach-Bliley Act that require the maintenance of a written, comprehensive information security program. In the European Union, we are subject to the General Data Protection Regulation (the “GDPR”), which requires a comprehensive privacy and data protection program to protect the personal and sensitive data of EEA residents. A number of regulators and policymakers around the globe are using the GDPR as a reference to adopt new or updated privacy and data protection laws, including in the U.S. (California), Argentina, Brazil, Canada, Chile, India, Indonesia and Kenya. Some jurisdictions, such as India, are currently considering adopting or have adopted “data localization” requirements, which mandate the collection, processing, and/or storage of data within their borders. We believe that various forms of data localization requirements are under consideration in other countries and jurisdictions, including the European Union. Due to increasing data collection and data flows, numerous data breaches and security incidents as well as the use of emerging technologies such as artificial intelligence, regulations in this area are constantly evolving with regulatory and legislative authorities in numerous parts of the world adopting proposals to regulate data and protect information. In addition, the interpretation and application of these privacy and data protection laws are often uncertain and in a state of flux, thus requiring constant monitoring for compliance.

Regulators increasingly seek to regulate certain aspects of payments systems such as ours, or establish or expand their authority to do so. Many jurisdictions have enacted such regulations, establishing, and potentially further expanding, obligations or restrictions with respect to the types of products and services that we may offer, the countries in which our integrated 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. New regulations and oversight could also relate to our clearing and settlement activities (including risk management policies and procedures, collateral requirements, participant default policies and procedures, the ability to complete timely switching of financial transactions, and capital and financial resource requirements). Several jurisdictions have also inquired about the network fees we charge to our customers (typically as part of broader market reviews of retail payments). In addition, several central banks or similar regulatory bodies around the world have increased, or are seeking to increase, their formal oversight of the electronic payments industry. In some cases, we have been designated as a “systemically important payment system”, and other regulators may consider designating us as systemically important or in a similar category resulting in heightened regulatory oversight. These obligations, designations and restrictions may further expand and could conflict with each other as more jurisdictions impose oversight of payment systems. Moreover, as regulators around the world increasingly look to replicate similar regulation of payments and other industries, efforts in any one jurisdiction may influence approaches in other jurisdictions. Similarly, new initiatives within a jurisdiction involving one product may lead to regulation of similar or related products (for example, debit regulations could lead to regulation of credit products). As a result, the risks to our business created by any one new law or regulation are magnified by the potential it has to be replicated in other jurisdictions or involve other products within any particular jurisdiction.

Increased regulation and oversight of payment systems may result in costly compliance burdens or otherwise increase our costs. As a result, issuers and acquirers could be less willing to participate in our payments system, 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 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 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. Such changes could lead to new or different criteria for participation in and access to our payments system by financial institutions or other customers. 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.

Interchange rates are a significant component of the costs that merchants pay in connection with the acceptance of our products. 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 integrated 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).

If issuers cannot collect or we are forced to reduce interchange rates, issuers may be less willing to participate in our four-party payments system, or may reduce the benefits offered in connection with the use of our products, reducing the attractiveness of our products to consumers. In particular, changes to interregional interchange fees as a result of the resolution of the European Commission’s investigation could impact our cross-border transaction activity disproportionately versus competitors that are not subject to similar reductions. These and other impacts could lower transaction volumes, and/or make proprietary three-party networks or other forms of payment more attractive. Issuers could reduce the benefits associated with our products or choose to charge higher fees to consumers to attempt to recoup a portion of the costs incurred for their services. In addition, issuers could 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. This could make our products less desirable to consumers, reduce the volume of transactions and our profitability, and limit our ability to innovate or offer differentiated products.

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.

We have historically implemented policies, referred to as no-surcharge rules, in certain jurisdictions, including the United States, 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, we have modified our no-surcharge rules to permit U.S. merchants to surcharge credit cards, subject to certain limitations. It is possible that over time merchants in some or all merchant categories in these jurisdictions may choose to surcharge as permitted by the rule change. 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.

We are subject to increasingly complex regulations related to privacy, data and information security in the jurisdictions in which we do business. These regulations could result in negative impacts to our business. As we continue to develop integrated and personalized products and services to meet the needs of a changing marketplace, as well as acquire new companies, we have expanded our information profile through the collection of additional data from additional sources and across multiple channels. This expansion has amplified the impact of these regulations on our business. Regulation of privacy and data and information security often times require monitoring of and changes to our data practices in regard to the collection, use, disclosure, storage, transfer and/or security of personal and sensitive information, as well as increased care in our data management, governance and quality practices. While we make every effort to comply with all regulatory requirements and we deploy a privacy-by-design and data-by-design approach to all of our product development, the speed and pace of change may not allow us to meet rapidly evolving expectations. We are also subject to enhanced compliance and operational requirements in the European Union, and policymakers around the globe are using these requirements as a reference to adopt new or updated privacy laws that could result in similar or stricter requirements in other jurisdictions. Some jurisdictions are also considering requirements to collect, process and/or store data within their borders, as well as prohibitions on the transfer of data abroad, leading to technological and operational implications. Other jurisdictions are considering adopting sector-specific regulations for the payments industry, including forced data sharing requirements or additional verification requirements that overlap or conflict with, or diverge from, general privacy rules. Failure to comply with these laws, regulations and requirements could result in fines, sanctions or other penalties, which could materially and adversely affect our results of operations and overall business, as well as have an impact on our reputation.

New requirements or 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 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 products, which may, in turn, decrease the number of our payment products that they issue. Moreover, due to account data compromise events and privacy abuses by other companies, as well as the disclosure of monitoring activities by certain governmental agencies in combination with the use of artificial intelligence and new technologies, there has been heightened legislative and regulatory scrutiny around the world that could lead to further regulation and requirements and/or future enforcement. Those developments have also raised public attention on companies’ data practices and have changed consumer and societal expectations for enhanced privacy and data protection. Any of these developments could materially and adversely affect our overall business and results of operations.

In addition, fraudulent activity and increasing cyberattacks have encouraged legislative and regulatory intervention, which could damage our reputation and reduce the use and acceptance of our integrated 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. 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 taking measures to make card and digital payments more secure, increased fraud levels involving our integrated products and services, or misconduct or negligence by third parties switching or otherwise servicing our integrated products and services, could lead to legislative or regulatory intervention, such as enhanced security requirements and liabilities, as well as damage to our reputation.

We are subject to regulations that affect the payments industry in the many jurisdictions in which our integrated 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. Regulation of the payments industry, including regulations applicable to us and our customers, has increased significantly in the last several years. See “Business - Government Regulation” in Part I, Item 1 for a detailed description of such regulation and related legislation. Examples include:

•Anti-Money Laundering, Counter 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.

Increased regulatory focus on us, such as in connection with the matters discussed above, may result in costly compliance burdens and/or may 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. 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 are subject to tax laws and regulations of the U.S. federal, state and local governments as well as various non-U.S. jurisdictions. Potential changes in existing tax laws, including future regulatory guidance, may impact our effective income tax rate and tax payments. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in which we operate, will not materially and adversely affect our effective income tax rate, tax payments, financial condition and results of operations. Similarly, changes in tax laws and regulations that impact our customers and counterparties or the economy generally may also impact our financial condition and results of operations.

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. Any changes in enacted tax laws, rules or regulatory or judicial interpretations; any adverse outcome in connection with tax audits in any jurisdiction; or any change 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.

We are a defendant on 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. See Note 21 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 for more details regarding the allegations contained in these complaints and the status of these proceedings. In the event we are found liable in any material litigations or proceedings, particularly in the event we may be found liable 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.

Global health concerns relating to the COVID-19 outbreak have impacted the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. The outbreak resulted in governments in countries across the globe implementing measures to try to contain the virus, such as travel restrictions, social distancing, and restrictions on business operations which have impacted consumers and businesses. These measures have adversely impacted and may further impact our workforce and operations and the operations of our customers, suppliers and business partners. While some of these measures have eased in certain jurisdictions, others have remained in place. The extent to which current measures are removed or new measures are put in place will depend how the pandemic evolves, as well as the progress of the global roll-out of vaccines.

The COVID-19 pandemic has adversely impacted our business, results of operations and financial condition. There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a global pandemic, and, as a result, the ultimate impact of COVID-19 or a similar health epidemic is highly uncertain and subject to change. The extent to which COVID-19 further impacts our business, results of operations and financial condition will depend on future developments, which are uncertain, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience materially adverse impacts to our business and our result of operations as a result of its global economic impact, including any recession that has occurred or may occur in the future.

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 competitors may also introduce their own innovative programs and services that adversely impact our growth. Beyond our traditional competitors, we also compete against new entrants that 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 new entrants rely principally on the Internet to support their services and may enjoy lower costs than we do, which could put us at a competitive disadvantage. Our

•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. This risk is heightened when we have relationships with these entities where we share Mastercard data. While we share this data in a controlled manner subject to applicable anonymization and privacy and data standards, without proper oversight we could give the partner a competitive advantage.

•Competitors, customers, fintechs, technology companies, governments and other industry participants may develop products that compete with or replace value-added products and services we currently provide to support our switched transaction and payment offerings. These products could replace our own switching and payments offerings or could force us to change our pricing or practices for these offerings. In addition, governments that develop or encourage the creation of national payment 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.

In order to increase transaction volumes, enter new markets and expand our Mastercard-branded cards and enabled 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. We continue to experience pricing pressure. The demand from our customers for better pricing arrangements and greater rebates and incentives moderates our growth. We may not be able to continue our expansion strategy 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, which 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 and have greater financial resources than we do 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 thereunder in order to benefit incrementally 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.

U.K. regulators have designated Vocalink, our real-time account-based payment 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 payment 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 payment platform, 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 security vulnerabilities that are different from those faced on our core network. Operational difficulties, such as the temporary unavailability of our services or products, or security breaches on our real-time account-based payment network could cause a loss of business for these products and services, result in potential liability for us and adversely affect our reputation.

payments markets, we are continually involved in diversifying our integrated 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, for example organizations such as corporations that are not financial institutions and non-governmental organizations (“NGOs”), and end users other than those we have traditionally worked with. These differences may present new operational challenges in the development and implementation of our new products or services. These new customers are typically less regulated, and as a result, enhanced infrastructure and monitoring is required.

Our failure to deliver these integrated products and services could make our other integrated products and services less desirable to customers, or put us at a competitive disadvantage. In addition, if there is a delay in the implementation of our products or services or if our products or services do not perform as anticipated, or we are unable to 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 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, terrorists 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 or accidental technological failure. These threats include cyber-attacks such as computer viruses, malicious code, phishing attacks or information security breaches and could lead to the misappropriation of consumer account and other information and identity theft. The advent of the global COVID-19 pandemic has resulted in a significant rise in these types of threats due to a significant portion of our workforce working from home in a mostly remote environment.

Our operations rely on the secure processing, transmission and storage of confidential, proprietary and other 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 integrated 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. Additionally, geopolitical events and resulting government activity could also lead to information security threats and attacks by affected jurisdictions and their sympathizers.

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 integrated products and services, which in turn could result in the unauthorized disclosure, release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other 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 or operations systems that support our businesses 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 and other parties and the market, 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. If such attacks are not detected immediately, their effect could be compounded.

Despite various mitigation efforts that we undertake, there can be no assurance that we will be immune to these risks and not suffer material breaches and resulting losses in the future, or that our insurance coverage would be sufficient to cover all losses. Our risk and exposure to these matters remain heightened because of, among other things, the evolving nature of these threats, our prominent size and scale and our role in the global payments and technology industries, our plans to continue to implement our digital and mobile channel strategies and develop additional remote connectivity solutions to serve our customers and account holders when and how they want to be served, our global presence, our extensive use of third-party vendors and future joint venture and merger and acquisition opportunities. As a result, information security and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks

In addition to information security risks for our systems, 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 or the systems of our customers, merchants and other third parties could decrease the use and acceptance of our integrated 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. 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.

Our transaction switching systems and other offerings have experienced in limited instances and may continue to experience interruptions as a result of technology malfunctions, fire, weather events, power outages, telecommunications disruptions, terrorism, workplace violence, accidents or other catastrophic events. 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 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 a 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.

Certain customers have exclusive, or nearly-exclusive, relationships with our competitors to issue payment products, and these relationships may make it difficult or cost-prohibitive for us to do significant amounts of business with them 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.

The banking industry has undergone substantial, accelerated consolidation in the past. Consolidations have included customers with a substantial Mastercard portfolio being acquired by institutions with a strong relationship with a competitor. 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.

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 our risk factor in “Risk Factors - Settlement and Third-Party Obligations” in this Part I, Item 1A with respect to how we guarantee certain third-party obligations for further discussion.

With the exception of the United States and a select number of other jurisdictions, most in-country (as opposed to cross-border) transactions conducted using Mastercard, Maestro and Cirrus cards are authorized, cleared and settled by our customers or other processors. Because we do not provide domestic switching services in these countries and do not, as described above, 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.

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 integrated 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, there is a set of larger merchants with increasingly global scope and influence. We believe that these merchants 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 our risk factor in “Risk Factors – Other Regulation” in this Part I, Item 1A with respect to payments industry regulation, including interchange fees. The continued focus of merchants on the costs of accepting various forms of payment, including in connection with the growth of digital payments, 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.

We are a guarantor of certain third-party obligations, including those of certain of our customers. In this capacity, we are exposed to credit and liquidity risk from these customers and certain service providers. 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. Concurrent settlement failures of more than one of our larger customers or of several of our smaller customers either on a given day or over a condensed period of time may exceed our available resources and could materially and adversely affect our results of operations.

Additionally, 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 COVID-19, as well as the threat of terrorism and separate outbreaks of flu, viruses and other diseases, as well as major environmental events (including those related to climate change). The uncertainty that could result from such events could decrease cross-border activity. Additionally, any regulation of interregional interchange fees could also negatively impact our cross-border activity. In each case, decreased cross-border activity could decrease the revenue we receive.

In addition, some of the revenue we generate outside the United States 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 of our other revenue currencies into U.S. dollars, such as what we have experienced in Venezuela.

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 alcohol, tobacco, fire-arms and adult content) may also, by association, impair our reputation, or result in greater public, regulatory or legislative scrutiny. We have also 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. To the extent any of our published sustainability metrics are subsequently viewed as inaccurate or we are unable to execute on our sustainability initiatives, we may be viewed negatively by consumers, investors and other stakeholders concerned about these matters. Also, as we are headquartered in the United States, a negative perception of the United States 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 to our overall business.

As more players enter the global payments system, 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.

Our performance largely depends on the talents and efforts of our employees, particularly our key personnel and senior management. We may be unable to retain or to attract highly qualified employees. The market for key personnel is highly competitive, particularly in technology and other skill areas significant to our business. Additionally, changes in immigration and work permit laws and visa regulations and related enforcement have made it difficult for employees to work in, or transfer among, jurisdictions in which we have operations and could impair our ability to attract and retain qualified employees. Moreover, as a result of the global COVID-19 pandemic, a significant portion of our workforce is working in a mostly remote environment. This remote environment may continue after the pandemic due to potential resulting trends, and could impact the quality of our corporate culture. Failure to attract, hire, develop, motivate and retain highly qualified and diverse employee talent, or to maintain a corporate culture that fosters innovation, creativity and teamwork could harm our overall business and results of operations.

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. In addition, such an integration may divert management’s time and resources from our core business and disrupt our operations. Moreover, we may spend time and money on acquisitions or projects that do not meet our expectations or increase our revenue. 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 may not be able to successfully finance the business following the acquisition as a result of costs of operations, including any litigation risk which may be inherited from the acquisition.

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:

As of February 9, 2021, Mastercard Foundation owned 108,210,635 shares of Class A common stock, representing approximately 11.0% of our general voting power. Mastercard Foundation may not sell or otherwise transfer 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 are permitted and have occurred. Mastercard Foundation is permitted to sell all of its remaining shares after May 1, 2027, subject to certain conditions. 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 restrictions on transfer, could discourage or make more difficult acquisition proposals favored by the other holders of the Class A common stock. In addition, because Mastercard Foundation is restricted from selling its shares for 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.

Name

Current Position

Age

Previous Mastercard Experience

Previous Business Experience

Ajay Banga

Executive Chairman
since January 2021

Chief Executive Officer (2020)

President and Chief Executive Officer (2010-2020)

President and COO (2009-2010)

Several executive positions at Citigroup, including CEO, Asia Pacific region and Chairman and CEO, International Global Consumer Group

Previous senior leadership experience at Nestlé India and PepsiCo in roles of increasing responsibility

Ajay Bhalla
President, Cyber and
Intelligence Solutions
since November 2018

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

Ann Cairns
Vice Chairman
since June 2018

President, International (2011-2018)

Managing director, Alvarez & Marsal

CEO, ABN AMRO

Senior corporate and investment banking roles at Citigroup

Gilberto Caldart
President, International
since June 2018

President, Latin America and Caribbean region (2013-2018)

Division President, South Latin America/Brazil (2008-2013)

Various leadership positions at Citigroup, including Country Business Manager, Brazil

Michael Fraccaro
Chief People Officer
since July 2016

Executive Vice President, Human Resources, Global Products and Solutions (2014-2016)

Senior Vice President, Human Resources, Global Products and Solutions (2012-2014)

Various executive-level human resources positions at HSBC Group, Hong Kong (2000-2012)

Various senior human resources positions in banking and financial services in Australia and the Middle East

Michael Froman

Vice Chairman and President, Strategic Growth

since April 2018

Mr. Froman joined the Company in 2018 in his current role

U.S. Trade Representative in the Executive Office of President Obama (2013-2017)

Assistant to the President and Deputy National Security Advisor for International Economic Policy (2009-2013)

Various senior leadership positions at Citigroup, including CEO, CitiInsurance and COO of Citigroup’s alternative investments business

Name
Current Position

Age

Previous Mastercard Experience

Previous Business Experience

Linda Kirkpatrick

President, North America

since January 2021

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

Edward McLaughlin
President, Operations and Technology
since May 2017

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

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, General Motors Corporation and GMAC

Michael Miebach

President and Chief Executive Officer since January 2021

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
General Counsel
since April 2014

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

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

Name
Current Position

Age

Previous Mastercard Experience

Previous Business Experience

Raj Seshadri
President, Data and Services
since January 2020

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.

Kevin Stanton
Chief Transformation Officer
since January 2020

Chief Services Officer (2018-2019)

President, Mastercard Advisors (2010-2017)

Various senior leadership roles, including President, Canada; Senior Vice President, Strategy and Market Development; and Vice President, Senior Counsel and North America Region Counsel

Vice President, Counsel, Shawmut National Corporation

Craig Vosburg
Chief Product Officer
since January 2021

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

The statement of operations data and the cash dividends declared per share for the years ended December 31, 2020, 2019 and 2018, and the balance sheet data as of December 31, 2020 and 2019, are presented in the audited consolidated financial statements of Mastercard Incorporated included in Part II, Item 8. The statement of operations data and the cash dividends declared per share for the years ended December 31, 2017 and 2016, and the balance sheet data as of December 31, 2018, 2017 and 2016, are not included in this Report, and are provided in Part II, Item 8 of our Annual Reports on Form 10-K for the years ended December 31, 2018, 2017 and 2016.

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, 2019 compared to the year ended December 31, 2018, please see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.

The coronavirus (“COVID-19”) pandemic has spread rapidly across the globe and has had significant negative effects on the global economy. This outbreak has affected business activity, adversely impacting consumers, our customers, suppliers and business partners, as well as our workforce. We continue to monitor the effects of the pandemic and actions taken by governments as they relate to travel restrictions, social distancing measures and restrictions on business operations, as well as the continued impact of these actions on consumers and businesses. While some of these measures have eased in certain jurisdictions, others have remained in place. The extent to which current measures are removed or new measures are put in place will depend upon how the pandemic evolves, as well as the progress of the global roll-out of vaccines.


	Year ended December 31,									2020 Increase/ (Decrease)	2019 Increase/ (Decrease)
	2020			2019			2018
	($ in millions, except per share data)
Net revenue	$	15,301		$	16,883		$	14,950		(9)%	13%
Operating expenses	$	7,220		$	7,219		$	7,668		—%	(6)%
Operating income	$	8,081		$	9,664		$	7,282		(16)%	33%
Operating margin	52.8		%	57.2		%	48.7		%	(4.4) ppt	8.5 ppt
Income tax expense	$	1,349		$	1,613		$	1,345		(16)%	20%
Effective income tax rate	17.4		%	16.6		%	18.7		%	0.8 ppt	(2.1) ppt
Net income	$	6,411		$	8,118		$	5,859		(21)%	39%
Diluted earnings per share	$	6.37		$	7.94		$	5.60		(20)%	42%
Diluted weighted-average shares outstanding	1,006			1,022			1,047			(2)%	(2)%


	Year ended December 31,									2020 Increase/(Decrease)		2019 Increase/(Decrease)
	2020			2019			2018			As adjusted	Currency-neutral	As adjusted	Currency-neutral
	($ in millions, except per share data)

Net revenue	$	15,301		$	16,883		$	14,950		(9)%	(8)%	13%	16%

Adjusted operating expenses	$	7,147		$	7,219		$	6,540		(1)%	(1)%	10%	12%

Adjusted operating margin	53.3		%	57.2		%	56.2		%	(4.0) ppt	(3.7) ppt	1.0 ppt	1.3 ppt

Adjusted effective income tax rate	17.2		%	17.0		%	18.5		%	0.2 ppt	0.3 ppt	(1.5) ppt	(1.3) ppt

Adjusted net income	$	6,463		$	7,937		$	6,792		(19)%	(17)%	17%	20%

Adjusted diluted earnings per share	$	6.43		$	7.77		$	6.49		(17)%	(16)%	20%	23%


Net revenue
GAAP	Non-GAAP (currency-neutral)	Net revenue decreased 8% on a currency-neutral basis due to COVID-19 impacts, and includes a 1 percentage point benefit from acquisitions. Gross dollar volume was flat on a local currency basis. The primary drivers of net revenue were:
down 9%	down 8%
		- Cross-border volume decline of 29% on a local currency basis
		- Rebates and incentives growth of 3%, or 4% on a currency-neutral basis
		These decreases to net revenue were partially offset by:

		- Switched transactions growth of 3%
		- Other revenues growth of 14%, or 15% on a currency-neutral basis, which
		includes 3 percentage points of growth due to acquisitions

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 special items, where applicable, which represent litigation judgments and settlements and certain one-time items, as well as the related tax impacts (“Special Items”). Starting in 2019, our non-GAAP financial measures also exclude the impact of gains and losses on our equity investments which primarily includes mark-to-market fair value adjustments, impairments and gains and losses upon disposition and the related tax impacts. The 2018 amounts were not restated, as the impact of the change was immaterial in relation to our non-GAAP results. Our non-GAAP financial measures for the comparable periods exclude the impact of the following:

In addition, we present growth rates adjusted for the impact of currency, which is a non-GAAP financial measure. 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. 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. We believe the presentation of currency-neutral growth rates provides relevant information to facilitate an understanding of our operating results.


	Year Ended December 31, 2020 as compared to the Year Ended December 31, 2019
	Increase/(Decrease)
	Net revenue		Operating expenses		Operating margin		Effective income tax rate	Net income		Diluted earnings per share
Reported - GAAP	(9)	%	—	%	(4.4)	ppt	0.8 ppt	(21)	%	(20)	%
(Gains) losses on equity investments	**		**		**		— ppt	1	%	1	%
Litigation provisions	**		(1)	%	0.5	ppt	(0.1) ppt	1	%	1	%
Tax act	**		**		**		(0.6) ppt	1	%	1	%
Non-GAAP	(9)	%	(1)	%	(4.0)	ppt	0.2 ppt	(19)	%	(17)	%
Currency impact 2	1	%	—	%	0.3	ppt	0.2 ppt	1	%	1	%
Non-GAAP - currency-neutral	(8)	%	(1)	%	(3.7)	ppt	0.3 ppt	(17)	%	(16)	%


	Year Ended December 31, 2019 as compared to the Year Ended December 31, 2018
	Increase/(Decrease)
	Net revenue		Operating expenses		Operating margin	Effective income tax rate	Net income		Diluted earnings per share
Reported - GAAP	13	%	(6)	%	8.5 ppt	(2.1) ppt	39	%	42	%
(Gains) losses on equity investments 1	**		**		**	(0.2) ppt	(2)	%	(2)	%
Tax act	**		**		**	(0.3) ppt	1	%	1	%
Litigation provisions	**		16	%	(7.5) ppt	1.1 ppt	(20)	%	(21)	%
Non-GAAP	13	%	10	%	1.0 ppt	(1.5) ppt	17	%	20	%
Currency impact 2	3	%	2	%	0.3 ppt	0.2 ppt	3	%	3	%
Non-GAAP - currency-neutral	16	%	12	%	1.3 ppt	(1.3) ppt	20	%	23	%

Gross Dollar Volume (“GDV”)1 measures dollar volume of activity on cards carrying our brands during the period, on a local currency basis and U.S. dollar-converted basis. Dollar volume represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “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 Mastercard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. Mastercard reports 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.

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”) and gross euro volume (“GEV”), which are used in the calculation of our domestic assessments, cross-border volume fees and certain volume-related rebates and incentives. In most non-European regions, GDV is calculated based on local currency spending volume converted to U.S. dollars using average exchange rates for the period. In Europe, GEV is calculated based on local currency spending volume converted to euros using average exchange rates for the period. As a result, certain of our domestic assessments, cross-border volume fees and volume-related rebates and incentives are impacted by the strengthening or weakening of the U.S. dollar versus non-European local currencies and the strengthening or weakening of the euro versus other European 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 currency transactional 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 2020, GDV on a U.S. dollar-converted basis decreased 2.0%, while GDV on a local currency basis increased 0.1% versus 2019. In 2019, GDV on a U.S. dollar-converted basis increased 9.8%, while GDV on a local currency basis increased 13.1% versus 2018. Further, the impact from transactional currency occurs in transaction processing revenue, other revenue and operating expenses when the local currency of these items is different than the functional currency of the entity.

Through December 31, 2020, our approach to manage our transactional currency exposure consisted of hedging a portion of anticipated revenues impacted by transactional currencies by entering into foreign exchange derivative contracts, and recording the related changes in fair value in general and administrative expenses on the consolidated statement of operations. Beginning in January 2021, we started to formally designate certain newly-executed foreign exchange derivative contracts, which meet the established accounting criteria, as cash flow hedges. Starting in the first quarter of 2021, gains and losses resulting from changes in fair value of these designated contracts will be deferred in accumulated other comprehensive income (loss) and subsequently recognized in the respective component of net revenue when the underlying forecasted transactions impact earnings. The related impact of our foreign exchange cash flow hedging activities will be excluded from our currency-neutral growth rates as part of our Currency impact.

We incur foreign currency gains and losses from remeasuring monetary assets and liabilities, including settlement receivables and payables with our customers, 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 a portion of our nonfunctional monetary assets and liabilities. The gains or losses resulting from 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

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 an indication 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 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.

Repurchased shares of our common stock are considered treasury stock. In December 2020, 2019 and 2018, our Board of Directors approved share repurchase programs authorizing us to repurchase up to $6.0 billion, $8.0 billion and $6.5 billion, respectively, of our Class A common stock. The program approved in 2020 will become effective after completion of the share repurchase program authorized in 2019. 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 activity of our Class A common stock through December 31, 2020, under the plans approved in 2019 and 2018:

We enter into business agreements with certain customers that provide for rebates or support when customers meet certain volume thresholds as well as other support incentives, which are 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 as a reduction to gross 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.

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.

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 decrease or increase earnings in the period. In certain situations, we will have offsetting tax credits or taxes in other jurisdictions.

We account for our business combinations using the acquisition method of accounting. The acquisition purchase price, including contingent consideration, 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 included 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.

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 currency 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 and reporting 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 $58 million and $144 million on our foreign exchange derivative contracts outstanding at December 31, 2020 and 2019, respectively, before considering the offsetting effect of the underlying hedged activity.

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 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. The effect of a hypothetical 10% adverse change in the value of the functional currencies could result in a fair value loss of approximately $23 million on our short duration foreign exchange derivative contracts outstanding at December 31, 2020. The Company did not have any outstanding short duration foreign exchange derivative contracts related to this activity at December 31, 2019.

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, 2020. 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, 2020. The effectiveness of Mastercard’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on the next page.

We have audited the accompanying consolidated balance sheets of Mastercard Incorporated and its subsidiaries (the “Company”) as of December 31, 2020 and 2019 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, 2020, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 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, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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.

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.

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.

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.

As described in Notes 1 and 3 to the consolidated financial statements, the Company provides certain customers with rebates or incentives which totaled $8.3 billion for the year ended December 31, 2020. The Company has business agreements with certain customers that provide for rebates or other support when customers meet certain volume hurdles as well as other support incentives, which are tied to performance. Rebates and incentives are recorded as a reduction of gross revenue primarily when volume- and transaction-based revenues are recognized over the contractual term. Rebates and incentives are calculated based upon estimated customer performance 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.

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 rebate and incentive contracts to identify whether all 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.


Consolidated Statement of Operations
	For the Years Ended December 31,
	2020		2019		2018
	(in millions, except per share data)
Net Revenue	$	15,301	$	16,883	$	14,950
Operating Expenses
General and administrative	5,910		5,763		5,174
Advertising and marketing	657		934		907
Depreciation and amortization	580		522		459
Provision for litigation	73		—		1,128
Total operating expenses	7,220		7,219		7,668
Operating income	8,081		9,664		7,282
Other Income (Expense)
Investment income	24		97		122
Gains (losses) on equity investments, net	30		167		—
Interest expense	(380)		(224)		(186)
Other income (expense), net	5		27		(14)
Total other income (expense)	(321)		67		(78)
Income before income taxes	7,760		9,731		7,204
Income tax expense	1,349		1,613		1,345
Net Income	$	6,411	$	8,118	$	5,859

Basic Earnings per Share	$	6.40	$	7.98	$	5.63
Basic weighted-average shares outstanding	1,002		1,017		1,041
Diluted Earnings per Share	$	6.37	$	7.94	$	5.60
Diluted weighted-average shares outstanding	1,006		1,022		1,047

The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Statement of Comprehensive Income
	For the Years Ended December 31,
	2020		2019		2018
	(in millions)
Net Income	$	6,411	$	8,118	$	5,859
Other comprehensive income (loss):
Foreign currency translation adjustments	345		10		(319)
Income tax effect	(59)		13		40
Foreign currency translation adjustments, net of income tax effect	286		23		(279)

Translation adjustments on net investment hedge	(177)		36		96
Income tax effect	40		(8)		(21)
Translation adjustments on net investment hedge, net of income tax effect	(137)		28		75

Cash flow hedges	(189)		14		—
Income tax effect	42		(3)		—
Reclassification adjustment for cash flow hedges	4		—		—
Income tax effect	(1)		—		—
Cash flow hedges, net of income tax effect	(144)		11		—

Defined benefit pension and other postretirement plans	(12)		(21)		(16)
Income tax effect	2		3		3
Reclassification adjustment for defined benefit pension and other postretirement plans	(1)		(1)		(2)
Income tax effect	—		—		—
Defined benefit pension and other postretirement plans, net of income tax effect	(11)		(19)		(15)





Investment securities available-for-sale	(1)		3		(3)
Income tax effect	—		(1)		1
Investment securities available-for-sale, net of income tax effect	(1)		2		(2)





Other comprehensive income (loss), net of income tax effect	(7)		45		(221)
Comprehensive Income	$	6,404	$	8,163	$	5,638

The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Balance Sheet
	December 31,
	2020		2019
	(in millions, except per share data)
Assets
Current assets:
Cash and cash equivalents	$	10,113	$	6,988
Restricted cash for litigation settlement	586		584
Investments	483		688
Accounts receivable	2,646		2,514
Settlement due from customers	1,706		2,995
Restricted security deposits held for customers	1,696		1,370
Prepaid expenses and other current assets	1,883		1,763

Total current assets	19,113		16,902
Property, equipment and right-of-use assets, net	1,902		1,828
Deferred income taxes	491		543
Goodwill	4,960		4,021
Other intangible assets, net	1,753		1,417
Other assets	5,365		4,525
Total Assets	$	33,584	$	29,236

Liabilities, Redeemable Non-controlling Interests and Equity
Current liabilities:
Accounts payable	$	527	$	489
Settlement due to customers	1,475		2,714
Restricted security deposits held for customers	1,696		1,370
Accrued litigation	842		914
Accrued expenses	5,430		5,489
Current portion of long-term debt	649		—
Other current liabilities	1,228		928
Total current liabilities	11,847		11,904
Long-term debt	12,023		8,527
Deferred income taxes	86		85
Other liabilities	3,111		2,729
Total Liabilities	27,067		23,245

Commitments and Contingencies

Redeemable Non-controlling Interests	29		74

Stockholders’ Equity
Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,396 and 1,391 shares issued and 987 and 996 shares outstanding, respectively	—		—
Class B common stock, $0.0001 par value; authorized 1,200 shares, 8 and 11 shares issued and outstanding, respectively	—		—
Additional paid-in-capital	4,982		4,787
Class A treasury stock, at cost, 409 and 395 shares, respectively	(36,658)		(32,205)
Retained earnings	38,747		33,984
Accumulated other comprehensive income (loss)	(680)		(673)
Mastercard Incorporated Stockholders' Equity	6,391		5,893
Non-controlling interests	97		24
Total Equity	6,488		5,917

Total Liabilities, Redeemable Non-controlling Interests and Equity	$	33,584	$	29,236

The accompanying notes are an integral part of these consolidated financial statements.


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, 2017	$	—	$	—	$	4,365	$	(20,764)	$	22,364	$	(497)	$	5,468	$	29	$	5,497
Adoption of revenue standard	—		—		—		—		366		—		366		—		366
Adoption of intra-entity asset transfers standard	—		—		—		—		(183)		—		(183)		—		(183)
Net income	—		—		—		—		5,859		—		5,859		—		5,859
Activity related to non-controlling interests	—		—		—		—		—		—		—		(6)		(6)
Redeemable non-controlling interest adjustments	—		—		—		—		(3)		—		(3)		—		(3)
Other comprehensive income (loss)	—		—		—		—		—		(221)		(221)		—		(221)
Dividends	—		—		—		—		(1,120)		—		(1,120)		—		(1,120)
Purchases of treasury stock	—		—		—		(4,991)		—		—		(4,991)		—		(4,991)
Share-based payments	—		—		215		5		—		—		220		—		220
Balance at December 31, 2018	—		—		4,580		(25,750)		27,283		(718)		5,395		23		5,418
Net income	—		—		—		—		8,118		—		8,118		—		8,118
Activity related to non-controlling interests	—		—		—		—		—		—		—		1		1
Redeemable non-controlling interest adjustments	—		—		—		—		(9)		—		(9)		—		(9)
Other comprehensive income (loss)	—		—		—		—		—		45		45		—		45
Dividends	—		—		—		—		(1,408)		—		(1,408)		—		(1,408)
Purchases of treasury stock	—		—		—		(6,463)		—		—		(6,463)		—		(6,463)
Share-based payments	—		—		207		8		—		—		215		—		215
Balance at December 31, 2019	—		—		4,787		(32,205)		33,984		(673)		5,893		24		5,917


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, 2019	—		—		4,787		(32,205)		33,984		(673)		5,893		24		5,917
Net income	—		—		—		—		6,411		—		6,411		—		6,411
Activity related to non-controlling interests	—		—		—		—		—		—		—		73		73
Redeemable non-controlling interest adjustments	—		—		—		—		(7)		—		(7)		—		(7)
Other comprehensive income (loss)	—		—		—		—		—		(7)		(7)		—		(7)
Dividends	—		—		—		—		(1,641)		—		(1,641)		—		(1,641)
Purchases of treasury stock	—		—		—		(4,459)		—		—		(4,459)		—		(4,459)
Share-based payments	—		—		195		6		—		—		201		—		201
Balance at December 31, 2020	$	—	$	—	$	4,982	$	(36,658)	$	38,747	$	(680)	$	6,391	$	97	$	6,488

The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Statement of Cash Flows
	For the Years Ended December 31,
	2020		2019		2018
	(in millions)
Operating Activities
Net income	$	6,411	$	8,118	$	5,859
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of customer and merchant incentives	1,072		1,141		1,235
Depreciation and amortization	580		522		459
(Gains) losses on equity investments, net	(30)		(167)		—
Share-based compensation	254		250		196
Deferred income taxes	73		(7)		(244)
Other	14		24		31
Changes in operating assets and liabilities:
Accounts receivable	(86)		(246)		(317)
Income taxes receivable	(2)		(202)		(120)
Settlement due from customers	1,288		(444)		(1,078)
Prepaid expenses	(1,552)		(1,661)		(1,769)
Accrued litigation and legal settlements	(73)		(662)		869
Restricted security deposits held for customers	326		290		(6)
Accounts payable	26		(42)		101
Settlement due to customers	(1,242)		477		849
Accrued expenses	(114)		657		439
Long-term taxes payable	(37)		2		(20)
Net change in other assets and liabilities	316		133		(261)
Net cash provided by operating activities	7,224		8,183		6,223
Investing Activities
Purchases of investment securities available-for-sale	(220)		(643)		(1,300)
Purchases of investments held-to-maturity	(198)		(215)		(509)
Proceeds from sales of investment securities available-for-sale	361		1,098		604
Proceeds from maturities of investment securities available-for-sale	140		376		379
Proceeds from maturities of investments held-to-maturity	121		383		929
Purchases of property and equipment	(339)		(422)		(330)
Capitalized software	(369)		(306)		(174)
Purchases of equity investments	(214)		(467)		(91)
Acquisition of businesses, net of cash acquired	(989)		(1,440)		—
Settlement of interest rate derivative contracts	(175)		—		—
Other investing activities	3		(4)		(14)
Net cash used in investing activities	(1,879)		(1,640)		(506)
Financing Activities
Purchases of treasury stock	(4,473)		(6,497)		(4,933)
Dividends paid	(1,605)		(1,345)		(1,044)
Proceeds from debt, net	3,959		2,724		991
Payment of debt	—		(500)		—
Acquisition of redeemable non-controlling interests	(49)		—		—
Contingent consideration paid	—		(199)		—
Tax withholdings related to share-based payments	(150)		(161)		(80)
Cash proceeds from exercise of stock options	97		126		104
Other financing activities	69		(15)		(4)
Net cash used in financing activities	(2,152)		(5,867)		(4,966)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	257		(44)		(6)
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents	3,450		632		745
Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period	8,969		8,337		7,592
Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period	$	12,419	$	8,969	$	8,337

The accompanying notes are an integral part of these consolidated financial statements.

Reference Rate Reform - In March 2020, the FASB issued accounting guidance to provide temporary optional expedients and exceptions to the current contract modifications and hedge accounting guidance in light of the expected market transition from LIBOR to alternative rates. The new guidance provides optional expedients and exceptions to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include (1) contract modifications, (2) hedging relationships, and (3) sale or transfer of debt securities classified as held-to-maturity. The amendments were effective immediately upon issuance of the update. Companies may elect to adopt the amendments prospectively to transactions existing as of or entered from the date of adoption through December 31, 2022. The Company does not expect the impacts to be material.

Mastercard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary course of business. Some of these proceedings are based on complex claims involving substantial uncertainties and unascertainable damages. Accordingly, except as discussed below, it is not possible to determine the probability of loss or estimate damages, and therefore, Mastercard has not established reserves for any of these proceedings. When the Company determines that a loss is both probable and reasonably estimable, Mastercard records a liability and discloses the amount of the liability if it is material. When a material loss contingency is only reasonably possible, Mastercard does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Unless otherwise stated below with respect to these matters, Mastercard cannot provide an estimate of the possible loss or range of loss based on one or more of the following reasons: (1) actual or potential plaintiffs have not claimed an amount of monetary damages or the amounts are unsupportable or exaggerated, (2) the matters are in early stages, (3) there is uncertainty as to the outcome of pending appeals or motions, (4) there are significant factual issues to be resolved, (5) the existence in many such proceedings of multiple defendants or potential defendants whose share of any potential financial responsibility has yet to be determined and/or (6) there are novel legal issues presented. Furthermore, except as identified with respect to the matters below, Mastercard does not believe that the outcome of any individual existing legal or regulatory proceeding to which it is a party will have a material adverse effect on its results of operations, financial condition or overall business. However, an adverse judgment or other outcome or settlement with respect to any proceedings discussed below could result in fines or payments by Mastercard and/or could require Mastercard to change its business practices. In addition, an adverse outcome in a regulatory proceeding could lead to the filing of civil damage claims and possibly result in significant damage awards. Any of these events could have a material adverse effect on Mastercard’s results of operations, financial condition and overall business.

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, 2020 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

In addition, Mastercard Incorporated’s management assessed the effectiveness of Mastercard’s internal control over financial reporting as of December 31, 2020. 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.

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 2021 annual meeting of stockholders (the “Proxy Statement”).

Date:

February 12, 2021

By:

/s/ MICHAEL MIEBACH

Michael Miebach

President and Chief Executive Officer; Director

(Principal Executive Officer)

Date:

February 12, 2021

By:

/s/ SACHIN MEHRA

Sachin Mehra

Chief Financial Officer

(Principal Financial Officer)

Date:

February 12, 2021

By:

/s/ SANDRA ARKELL

Sandra Arkell

Corporate Controller

(Principal Accounting Officer)

Date:

February 12, 2021

By:

/s/ AJAY BANGA

Ajay Banga

Executive Chairman; Director

Date:

February 12, 2021

By:

/s/ RICHARD K. DAVIS

Richard K. Davis

Director

Date:

February 12, 2021

By:

/s/ STEVEN J. FREIBERG

Steven J. Freiberg

Director

Date:

February 12, 2021

By:

/s/ JULIUS GENACHOWSKI

Julius Genachowski

Director

Date:

February 12, 2021

By:

/s/ CHOON PHONG GOH

Choon Phong Goh

Director

Date:

February 12, 2021

By:

/s/ MERIT E. JANOW

Merit E. Janow

Lead Independent Director

Date:

February 12, 2021

By:

/s/ OKI MATSUMOTO

Oki Matsumoto

Director

Date:

February 12, 2021

By:

/s/ YOUNGME MOON

Youngme Moon

Director

Date:

February 12, 2021

By:

/s/ RIMA QURESHI

Rima Qureshi

Director

Date:

February 12, 2021

By:

/s/ JOSÉ OCTAVIO REYES LAGUNES

José Octavio Reyes Lagunes

Director

Date:

February 12, 2021

By:

/s/ GABRIELLE SULZBERGER

Gabrielle Sulzberger

Director

Date:

February 12, 2021

By:

/s/ JACKSON TAI

Jackson Tai

Director

Date:

February 12, 2021

By:

/s/ LANCE UGGLA

Lance Uggla

Director



PART I	6	Item 1.	Business
	20	Item 1A.	Risk factors
	33	Item 1B.	Unresolved staff comments
	33	Item 2.	Properties
	33	Item 3.	Legal proceedings
	33	Item 4.	Mine safety disclosures
	34	-	Information about our executive officers


PART II	38	Item 5.	Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities
	40	Item 6.	Selected financial data
	41	Item 7.	Management’s discussion and analysis of financial condition and results of operations
	55	Item 7A.	Quantitative and qualitative disclosures about market risk
	56	Item 8.	Financial statements and supplementary data
	105	Item 9.	Changes in and disagreements with accountants on accounting and financial disclosure
	105	Item 9A.	Controls and procedures
	105	Item 9B.	Other Information


PART III	107	Item 10.	Directors, executive officers and corporate governance
	107	Item 11.	Executive compensation
	107	Item 12.	Security ownership of certain beneficial owners and management and related stockholder matters
	107	Item 13.	Certain relationships and related transactions, and director independence
	107	Item 14.	Principal accountant fees and services


PART IV	109	Item 15.	Exhibits and financial statement schedules
	109	Item 16.	Form 10-K summary


	Base period		Indexed Returns
			For the Years Ended December 31,
Company/Index	2015		2016		2017		2018		2019		2020
Mastercard	$	100.00	$	106.91	$	157.88	$	197.86	$	314.91	$	378.44
S&P 500	100.00		111.96		136.40		130.42		171.49		203.04
S&P 500 Financials	100.00		122.80		150.04		130.49		172.41		169.49


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	1,552,273	$	335.39	1,552,273	$	4,340,730,451
November 1 – 30	779,892	314.13		779,892	4,095,745,017
December 1 – 31	785,846	336.44		785,846	9,831,351,292
Total	3,118,011	330.34		3,118,011



	Quarter ended								Year ended December 31
	March 31		June 30		September 30		December 31
	Increase/(Decrease)
Gross dollar volume (local currency basis)	8	%	(10)	%	1	%	1	%	—	%
Cross-border volume (local currency basis)	(1)	%	(45)	%	(36)	%	(29)	%	(29)	%
Switched transactions	13	%	(10)	%	5	%	4	%	3	%


	For the Years Ended December 31,						Increase (Decrease)
	2020		2019		2018		2020	2019
	($ in millions)
Domestic assessments	$	6,656	$	6,781	$	6,138	(2)%	10%
Cross-border volume fees	3,512		5,606		4,954		(37)%	13%
Transaction processing	8,731		8,469		7,391		3%	15%
Other revenues	4,717		4,124		3,348		14%	23%
Gross revenue	23,616		24,980		21,831		(5)%	14%
Rebates and incentives (contra-revenue)	(8,315)		(8,097)		(6,881)		3%	18%
Net revenue	$	15,301	$	16,883	$	14,950	(9)%	13%


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Portions of the registrant’s definitive proxy statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.


	Year Ended December 31, 2020						As of December 31, 2020
	GDV						Cards
	(in billions)		Growth (Local)		% of Total GDV		(in millions)	Percentage Increase from December 31, 2019
Mastercard-branded Programs1,2
Consumer Credit	$	2,425	(7)	%	38	%	894	2	%
Consumer Debit and Prepaid	3,230		8	%	51	%	1,338	11	%
Commercial Credit and Debit	682		(6)	%	11	%	102	22	%


Operating expenses	Adjusted operating expenses
GAAP	Non-GAAP (currency-neutral)	Adjusted operating expense decreased 1% on a currency-neutral basis, which included a 4 percentage point increase due to acquisitions. Excluding acquisitions, expenses declined 5 percentage points primarily due to reduced spending on advertising and marketing, travel and professional fees, partially offset by higher personnel and data processing costs to support continued investment in our strategic initiatives.
flat	down 1%


	Year ended December 31, 2020
	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	$	7,220	52.8	%	$	(321)	17.4	%	$	6,411	$	6.37
(Gains) losses on equity investments	**		**		(30)		(0.1)	%	(15)		(0.01)
Litigation provisions	(73)		0.5	%	**		(0.1)	%	67		0.07
Non-GAAP	$	7,147	53.3	%	$	(351)	17.2	%	$	6,463	$	6.43


	Year ended December 31, 2019
	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	$	7,219	57.2	%	$	67	16.6	%	$	8,118	$	7.94
(Gains) losses on equity investments	**		**		(167)		(0.2)	%	(124)		(0.12)
Tax act	**		**		**		0.6	%	(57)		(0.06)
Non-GAAP	$	7,219	57.2	%	$	(100)	17.0	%	$	7,937	$	7.77


	Year ended December 31, 2018
	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	$	7,668	48.7	%	$	(78)	18.7	%	$	5,859	5.60
Ligitation provisions	(1,128)		7.5	%	**		(1.1)	%	1,008		0.96
Tax act	**		**		**		0.9	%	(75)		(0.07)
Non-GAAP	$	6,540	56.2	%	$	(78)	18.5	%	$	6,792	$	6.49


	For the Years Ended December 31,
	Volume				Acquisitions		Currency Impact 1		Other 2				Total
	2020		2019		2020	2019		2020	2019	2020			2019			2020		2019
Domestic assessments	—%		13%		—%	—%		(3)%	(3)%	1	%	3	1	%	3	(2)	%	10	%
Cross-border volume fees	(30)%		14%		—%	—%		—%	(3)%	(7)	%		2	%		(37)	%	13	%
Transaction processing	3%		14%		—%	—%		—%	(2)%	—	%		3	%		3	%	15	%
Other revenues	**		**		3%	2%		(1)%	(1)%	12	%	4	22	%	4	14	%	23	%
Rebates and incentives	(6)%	5	9%	5	—%	—%		(2)%	(3)%	10	%	6	11	%	6	3	%	18	%
Net revenue	(5)%		13%		1%	1%		(1)%	(3)%	(4)	%		2	%		(9)	%	13	%


	For the Years Ended December 31,
	Operational			Special Items 1				Acquisitions				Currency Impact 2				Total
	2020	2019		2020		2019		2020		2019		2020		2019		2020		2019
General and administrative	(1)%	11	%	**		**		4	%	2	%	—	%	(2)	%	3	%	11	%
Advertising and marketing	(30)%	5	%	**		**		—	%	—	%	(1)	%	(2)	%	(30)	%	3	%
Depreciation and amortization	5%	9	%	**		**		6	%	7	%	—	%	(2)	%	11	%	14	%
Provision for litigation	**	**		**		**		**		**		**		**		**		**
Total operating expenses	(5)%	10	%	1	%	(16)	%	4	%	2	%	—	%	(2)	%	—	%	(6)	%


			Key Initiatives


	(in millions, except per share data)

Remaining authorization at December 31, 2019	$	8,304
Dollar-value of shares repurchased in 2020	$	4,473
Remaining authorization at December 31, 2020	$	9,831
Shares repurchased in 2020	14.3
Average price paid per share in 2020	$	312.68


		Page
As of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018
	Management’s report on internal control over financial reporting	57
	Report of independent registered public accounting firm	58
	Consolidated Statement of Operations	60
	Consolidated Statement of Comprehensive Income	61
	Consolidated Balance Sheet	62
	Consolidated Statement of Changes in Equity	63
	Consolidated Statement of Cash Flows	65
	Notes to consolidated financial statements	66


Asset Category						Estimated Useful Life
Buildings						30 years
Building equipment						10 - 15 years
Furniture and fixtures and equipment						3 - 5 years
Leasehold improvements						Shorter of life of improvement or lease term
Right-of-use assets						Shorter of life of the asset or lease term


	December 31, 2020								December 31, 2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	(in millions)
Municipal securities	$	10	$	—	$	—	$	10	$	15	$	—	$	—	$	15
Government and agency securities	64		—		—		64		108		—		—		108
Corporate securities	246		1		—		247		381		1		—		382
Asset-backed securities	—		—		—		—		85		1		—		86
Total	$	320	$	1	$	—	$	321	$	589	$	2	$	—	$	591


	Available-For-Sale
	Amortized Cost		Fair Value
	(in millions)
Due within 1 year	$	115	$	115
Due after 1 year through 5 years	205		206
Total	$	320	$	321


	Balance at December 31, 2019		Purchases (Sales), net		Changes in Fair Value1		Other2		Balance at December 31, 2020
	(in millions)
Marketable securities	$	479	$	1	$	(5)	$	1	$	476
Nonmarketable securities	435		204		35		22		696
Total equity investments	$	914	$	205	$	30	$	23	$	1,172


	December 31, 2020								December 31, 2019
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(in millions)
Assets
Investment securities available for sale 1:
Municipal securities	$	—	$	10	$	—	$	10	$	—	$	15	$	—	$	15
Government and agency securities	26		38		—		64		66		42		—		108
Corporate securities	—		247		—		247		—		382		—		382
Asset-backed securities	—		—		—		—		—		86		—		86

Derivative instruments 2:
Foreign exchange contracts	—		19		—		19		—		12		—		12
Interest rate contracts	—		—		—		—		—		14		—		14
Marketable securities 3:
Equity securities	476		—		—		476		479		—		—		479
Deferred compensation plan 4:
Deferred compensation assets	78		—		—		78		67		—		—		67

Liabilities
Derivative instruments 2:
Foreign exchange derivative liabilities	$	—	$	(28)	$	—	$	(28)	$	—	$	(32)	$	—	$	(32)
Deferred compensation plan 5:
Deferred compensation liabilities	(81)		—		—		(81)		(67)		—		—		(67)


	Operating Leases
	(in millions)
2021	$	137
2022	130
2023	108
2024	95
2025	72
Thereafter	383
Total operating lease payments	925
Less: Interest	(74)
Present value of operating lease liabilities	$	851


	2020						2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Finite-lived intangible assets
Capitalized software	$	2,276	$	(1,126)	$	1,150	$	1,884	$	(988)	$	896
Customer relationships	743		(322)		421		621		(264)		357
Other	44		(41)		3		44		(44)		—
Total	3,063		(1,489)		1,574		2,549		(1,296)		1,253
Indefinite-lived intangible assets
Customer relationships	179		—		179		164		—		164
Total	$	3,242	$	(1,489)	$	1,753	$	2,713	$	(1,296)	$	1,417


	Pension Plans						Postretirement Plan
	2020			2019			2020			2019
	($ in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	531		$	438		$	64		$	57

Service cost	13			11			1			1
Interest cost	9			13			2			2
Actuarial (gain) loss	43			73			7			9
Benefits paid	(18)			(15)			(4)			(5)
Transfers in	3			2			—			—
Foreign currency translation	23			9			—			—
Benefit obligation at end of year	604			531			70			64

Change in plan assets
Fair value of plan assets at beginning of year	518			410			—			—

Actual (loss) gain on plan assets	56			79			—			—
Employer contributions	34			32			4			5
Benefits paid	(18)			(15)			(4)			(5)
Transfers in	5			2			—			—
Foreign currency translation	22			10			—			—
Fair value of plan assets at end of year	617			518			—			—
Funded status at end of year	$	13		$	(13)		$	(70)		$	(64)

Amounts recognized on the consolidated balance sheet consist of:
Noncurrent assets	$	28		$	—		$	—		$	—
Other liabilities, short-term	—			—			(4)			(3)
Other liabilities, long-term	(15)			(13)			(66)			(61)
	$	13		$	(13)		$	(70)		$	(64)

Accumulated other comprehensive income consists of:
Net actuarial (gain) loss	$	12		$	7		$	9		$	2
Prior service credit	1			1			(4)			(5)
Balance at end of year	$	13		$	8		$	5		$	(3)

Weighted-average assumptions used to determine end of year benefit obligations
Discount rate
Non-U.S. Plans	0.70		%	0.70		%	*			*
Vocalink Plan	1.55		%	2.00		%	*			*
Postretirement Plan	*			*			2.50		%	3.25		%

Rate of compensation increase
Non-U.S. Plans	1.50		%	1.50		%	*			*
Vocalink Plan	2.75		%	2.50		%	*			*
Postretirement Plan	*			*			3.00		%	3.00		%


	2020		2019
Healthcare cost trend rate assumed for next year	7.00	%	6.00	%
Ultimate trend rate	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	8		2


	December 31, 2020								December 31, 2019
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
Cash and cash equivalents 1	$	59	$	—	$	—	$	59	$	16	$	—	$	—	$	16

Mutual funds 2	270		117		—		387		153		193		—		346
Insurance contracts 3	—		96		—		96		—		75		—		75


Total	$	329	$	213	$	—	$	542	$	169	$	268	$	—	$	437

Investments at Net Asset Value (“NAV”) 4							75								81
Total Plan Assets							$	617							$	518


				2020		2019		Effective Interest Rate
				(in millions)
2020 USD Notes	3.300	%	Senior Notes due March 2027	$	1,000	$	—	3.420	%
	3.350	%	Senior Notes due March 2030	1,500		—		3.430	%
	3.850	%	Senior Notes due March 2050	1,500		—		3.896	%

2019 USD Notes	2.950	%	Senior Notes due June 2029	1,000		1,000		3.030	%
	3.650	%	Senior Notes due June 2049	1,000		1,000		3.689	%
	2.000	%	Senior Notes due March 2025	750		750		2.147	%

2018 USD Notes	3.500	%	Senior Notes due February 2028	500		500		3.598	%
	3.950	%	Senior Notes due February 2048	500		500		3.990	%

2016 USD Notes	2.000	%	Senior Notes due November 2021	650		650		2.236	%
	2.950	%	Senior Notes due November 2026	750		750		3.044	%
	3.800	%	Senior Notes due November 2046	600		600		3.893	%

2015 EUR Notes 1	1.100	%	Senior Notes due December 2022	859		785		1.265	%
	2.100	%	Senior Notes due December 2027	982		896		2.189	%
	2.500	%	Senior Notes due December 2030	184		169		2.562	%

2014 USD Notes	3.375	%	Senior Notes due April 2024	1,000		1,000		3.484	%

				12,775		8,600
Less: Unamortized discount and debt issuance costs				(103)		(73)
Total debt outstanding				12,672		8,527
Less: Current portion2				(649)		—
Long-term debt				$	12,023	$	8,527


	2020				2019
	Equity Ownership		General Voting Power		Equity Ownership		General Voting Power
Public Investors (Class A stockholders)	88.2	%	88.9	%	87.8	%	88.8	%
Principal or Affiliate Customers (Class B stockholders)	0.8	%	—	%	1.1	%	—	%
Mastercard Foundation (Class A stockholders)	11.0	%	11.1	%	11.1	%	11.2	%


Board authorization dates	December 2020		December 2019		December 2018		December 2017		December 2016
Date program became effective	Not yet effective		January 2020		January 2019		March 2018		April 2017		Total
	(in millions, except average price data)
Board authorization	$	6,000	$	8,000	$	6,500	$	4,000	$	4,000	$	28,500
Dollar-value of shares repurchased in 2018	$	—	$	—	$	—	$	3,699	$	1,234	$	4,933
Remaining authorization at December 31, 2018	$	—	$	—	$	6,500	$	301	$	—	$	6,801
Dollar-value of shares repurchased in 2019	$	—	$	—	$	6,196	$	301	$	—	$	6,497
Remaining authorization at December 31, 2019	$	—	$	8,000	$	304	$	—	$	—	$	8,304
Dollar-value of shares repurchased in 2020	$	—	$	4,169	$	304	$	—	$	—	$	4,473
Remaining authorization at December 31, 2020	$	6,000	$	3,831	$	—	$	—	$	—	$	9,831

Shares repurchased in 2018	—		—		—		19.0		7.2		26.2
Average price paid per share in 2018	$	—	$	—	$	—	$	194.77	$	171.11	$	188.26
Shares repurchased in 2019	—		—		24.8		1.6		—		26.4
Average price paid per share in 2019	$	—	$	—	$	249.58	$	188.38	$	—	$	245.89
Shares repurchased in 2020	—		13.3		1.0		—		—		14.3
Average price paid per share in 2020	$	—	$	313.26	$	304.89	$	—	$	—	$	312.68
Cumulative shares repurchased through December 31, 2020	—		13.3		25.8		20.6		28.2		87.9
Cumulative average price paid per share	$	—	$	313.26	$	251.72	$	194.27	$	141.99	$	212.41


	Outstanding Shares
	Class A	Class B
	(in millions)
Balance at December 31, 2017	1,039.7	14.1
Purchases of treasury stock	(26.2)	—
Share-based payments	2.8	—
Conversion of Class B to Class A common stock	2.3	(2.3)
Balance at December 31, 2018	1,018.6	11.8
Purchases of treasury stock	(26.4)	—
Share-based payments	3.2	—
Conversion of Class B to Class A common stock	0.6	(0.6)
Balance at December 31, 2019	996.0	11.2
Purchases of treasury stock	(14.3)	—
Share-based payments	2.3	—
Conversion of Class B to Class A common stock	2.9	(2.9)
Balance at December 31, 2020	986.9	8.3


	December 31, 2019		Increase / (Decrease)		Reclassifications		December 31, 2020
	(in millions)
Foreign currency translation adjustments1	$	(638)	$	286	$	—	$	(352)
Translation adjustments on net investment hedge2	(38)		(137)		—		(175)
Cash flow hedges

Interest rate contracts3	11		(147)		3		(133)
Defined benefit pension and other postretirement plans4	(9)		(10)		(1)		(20)
Investment securities available-for-sale	1		(1)		—		—
Accumulated Other Comprehensive Income (Loss)	$	(673)	$	(9)	$	2	$	(680)


	December 31, 2018		Increase / (Decrease)		Reclassifications		December 31, 2019
	(in millions)
Foreign currency translation adjustments1	$	(661)	$	23	$	—	$	(638)
Translation adjustments on net investment hedge2	(66)		28		—		(38)
Cash flow hedges

Interest rate contracts3	—		11		—		11
Defined benefit pension and other postretirement plans4	10		(17)		(2)		(9)
Investment securities available-for-sale	(1)		2		—		1
Accumulated Other Comprehensive Income (Loss)	$	(718)	$	47	$	(2)	$	(673)


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in millions)			(in years)	(in millions)
Outstanding at January 1, 2020	6.6	$	117
Granted	0.4	$	263
Exercised	(1.3)	$	75
Forfeited/expired	—	$	229
Outstanding at December 31, 2020	5.7	$	137	6.0	$	1,259
Exercisable at December 31, 2020	3.8	$	106	5.1	$	962
Options vested and expected to vest at December 31, 2020	5.7	$	137	6.0	$	1,257


	Units	Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in millions)			(in millions)
Outstanding at January 1, 2020	2.9	$	166
Granted	0.9	$	288
Converted	(1.2)	$	116
Forfeited	(0.1)	$	218
Outstanding at December 31, 2020	2.5	$	231	$	898
RSUs expected to vest at December 31, 2020	2.4	$	230	$	861