Mastercard

What is Mastercard?

Mastercard is a technology and global payment network company that enables electronic payments among consumers, merchants, financial institutions, and businesses. It's one of the world's top payment processors, along with Visa, to enable secure and efficient payments using credit, debit, and prepaid cards carrying the Mastercard brand.

In contrast to a bank, Mastercard neither issues cards, provides credit, nor charges interest. Instead, it is a intermediary, where the network gives the glue that bonds cardholders, merchants, and banks. In case you pay with a Mastercard-branded card, the network processes the payment through authorization, clearing, and settling between the issuer bank of the cardholder and acquirer bank of the merchant.

Key Features

• Global Acceptance: Mastercard is accepted in more than 210 countries with millions of merchant locations for in-merchant, online, and contactless payment.
• Card Types: Credit, debit, and prepaid cards, often co-branded with a retailer or bank that provides rewards, cashback, or no-fee.
• Open-Loop System: Mastercard cards are usable anywhere the card is accepted, as opposed to closed-loop cards which are only usable at a specific merchant.
• Revenue Model: Mastercard's revenue comes predominantly in the shape of transaction charges (on dollar volume gross) and service charges but not cardholder or interest charges.

How It Works?

When the cardholder swipes, taps, or keys in Mastercard information, the network checks the transaction instantly to confirm that the cardholder has available funds or credit. It then makes the necessary payment from the cardholder's bank to the merchant's bank minus a tiny fee.

This seamless process powers everything from routine purchases to cross-border transactions.
Innovations and Services

Mastercard is a major investor in technology, providing sophisticated fraud detection, analytics, and electronic payment capabilities such as contactless and mobile wallet. Some of the recent undertakings include blockchain-based infrastructures to allow quicker, safe transactions and collaboration with cryptocurrency companies to bridge the gap between old and new money.

Example

Let's say you pay for groceries using a Mastercard credit card issued by your bank. The store terminal sends the transaction information to Mastercard's network, which checks with your bank. Once your bank has checked, the funds are transferred to the bank account of the store and you notice the charge on your card statement. All this within seconds, which says something about the speed of Mastercard.