Nepedia
Back to Discover
Advanced Reader
💻

Mastercard

technology Maturity 7-9 Next article →

Mastercard Inc. is a major American multinational corporation that provides payment card services.

Paypass chip front
Paypass chip front

Headquartered in Purchase, New York, the company manages complex payment transaction processing. It also offers related services, such as travel-related bookings and payments. The primary business of Mastercard is to facilitate payments between different financial institutions. Specifically, it processes transactions between the bank of a merchant and the card-issuing bank or credit union of a purchaser. This connection allows people to use Mastercard-branded debit, credit, and prepaid cards to make purchases worldwide.

The mechanism of a payment network relies on rapid communication between banks. When a customer uses a card, the network acts as a bridge for data. It moves information from the merchant's bank to the buyer's bank to authorize the sale.

EMVCoContactlessIndicator
EMVCoContactlessIndicator

This digital handshake ensures the store receives payment and the customer's account is updated. This system allows for seamless commerce without the need for physical cash. Mastercard has expanded this reach into various digital sectors, including e-commerce and mobile contactless payments.

Mastercard's history began as a cooperative of many different financial institutions. In the mid-1960s, the credit card market was changing rapidly. Between 1966 and 1968, about 440 new credit cards were introduced in the United States. Many of these were issued by unit banks. A unit bank is a small bank that can legally operate at only one single site. Because they were small, these banks joined regional bankcard associations to achieve economies of scale.

Master Charge decal in window of record shop
Master Charge decal in window of record shop

This allowed them to outsource tedious back-office tasks like card servicing.

In 1966, Karl H. Hinke, an executive at Marine Midland Bank, organized a meeting in Buffalo, New York. He invited representatives from several other banks to join forces. This meeting led to the creation of Interbankard, Inc., which later became the Interbank Card Association (ICA). By the end of 1967, the ICA had 150 members. The brand name eventually became "Master Charge" in 1969. In 1979, the company officially renamed itself MasterCard. The iconic overlapping red and yellow circles were first adopted in 1969 and remain a part of the brand motif today.

The company has grown significantly through technology and public investment. Mastercard held an initial public offering on May 25, 2006. During this event, it sold 95.5 million shares at $39 each. As of April 2024, the company had a market capitalization of $434 billion.

Puce miniature Mastercard paiement sans contact
Puce miniature Mastercard paiement sans contact

Mastercard has also acquired many specialized companies to improve its services. For example, it bought Brighterion in 2017 to use artificial intelligence and machine learning. In 2021, it acquired Ekata for $850 million to help with identity verification. These acquisitions help the company manage modern digital risks.

Mastercard has also introduced advanced security and environmental tools. In 1983, it was the first to use holograms on cards for security. More recently, it introduced biometric cards. These cards have a fingerprint sensor embedded within the secure chip. This allows the cardholder to authenticate themselves directly on the card.

Additionally, the company created a calculator to help customers measure their carbon footprints. This tool helps users understand their personal contributions to global warming and carbon emissions.

Because of its massive scale, Mastercard has faced significant legal challenges. The company and its competitor, Visa, have dealt with numerous antitrust lawsuits. These lawsuits often involve allegations of anticompetitive practices. For instance, the United States Department of Justice sued Mastercard over rules that prevented banks from working with competitors like American Express. In 2003, a multibillion-dollar settlement was reached regarding a case involving merchant fees. These legal battles highlight the immense power and responsibility held by global payment processors.

606 words

Where will your curiosity go next?

Keep exploring at your chosen reading level.

🖼️ Images & Media (5)
File:Master Charge decal in window of record shop.jpg
Master Charge decal in window of record shop.jpg
File:EMVCoContactlessIndicator.svg
EMVCoContactlessIndicator.svg
File:Paypass chip front.png
Paypass chip front.png
File:Puce miniature Mastercard paiement sans contact.jpg
Puce miniature Mastercard paiement sans...
File:Table Mountain, Cape Town (MP) 2018 241.jpg
Table Mountain, Cape Town (MP) 2018 241.jpg
More to explore

🔬 Go deeper

More advanced topics to explore

🪜 Step back

Simpler topics to build understanding

What is Nepedia?

A free, ad-free encyclopedia for children. Every article is written at five reading levels, so the same page works for a five-year-old and a fifteen-year-old — use the level switcher above to see this one change. No account needed to read.