"As the economy and our customers suffer, we're going to suffer," says Robert Selander, CEO of MasterCard since 1997. "Our customers' appetites are going to be very reduced next year because of the new challenges they're facing."

MasterCard, which started in 1966 as a bank-owned entity to promote cards and transmit payments, has been fending for itself since 2006, when it went public. Last year it generated revenue of $4.1 billion, up 24% from 2006, putting it close to entering the Fortune 500 for the first time (it ranked No. 548 last year on the Fortune 1,000). The company has gained a reputation as a smart competitor, wielding new technology (key fobs as credit cards), memorable advertising (its "priceless" campaign), and global reach (three billion cardholders and offices in 40 countries).

At the same time, the company is being tested by enormous challenges, including the historic worldwide financial crisis, waves of litigation over the fees it charges, and relentless competition from its larger rival, Visa (V). (That company, which went public this year, already has the revenues to qualify it for next year's Fortune 500.) What makes Selander upbeat in the midst of crisis, however, is talking about potential business he doesn't have yet from people still using paper money for tens of trillions of dollars' worth of transactions.

"One of the great opportunities, for us and our name-brand competitors, is to grow the pie." Or in credit card industry talk, to "plasticize" the world.

In fact, MasterCard is more like an IT company with great TV commercials. It does not lend money to consumers (its customers, the banks, do that) or set rates for their credit cards, but instead collects fees from banks to electronically zip from banks to merchants the billions of tiny loans and withdrawals we all make every day. The more swipes we make - regardless of whether we can afford that new plasma TV or whether banks will have to write down the loans to us - the more money MasterCard makes.

The company's journey to independence began in 1998, when the government filed an antitrust suit against both MasterCard and Visa, alleging that their ownership by a network of banks effectively stifled competition between the two of them - they accounted for 75% of all credit card purchases - and kept rivals like American Express from doing business with the banks.

Visa and MasterCard eventually lost the suit, bringing on more legal action. MasterCard recently settled a suit with American Express for $1.8 billion for damages stemming from the original antitrust case. Discover's similar suit against MasterCard is scheduled to go to trial in late October.

When Selander took MasterCard public, partly to change the perception of collusion driving these lawsuits, the company raised nearly $2.5 billion at $39 a share (symbol: MA), and its shares shot as high as $320 before falling below $160 in the current stock market swoon. In its new incarnation, MasterCard must now compete hard to win the business of the banks, which are combining by the day in a rapid, forced consolidation.

And it's playing with a disadvantage: its size. Visa's market share of global credit- and debit-card transactions is 68% vs. MasterCard's 28%, according to the industry newsletter The Nilson Report. Combined, those advantages give Visa not only a bigger wallet to fund new programs but also superior leverage with the banks.

So these days at MasterCard's elegant corporate campus designed by architect I.M. Pei in the Westchester County hamlet of Purchase (so named well before MasterCard moved there), Selander is asking his team to embrace the life of an underdog and a public company, operating in credit-tight markets. In a nutshell, that means squeezing more out of the assets it has, which formerly were "used more for the benefit of our brand and company," says Selander. "We have begun to realize, Hey, we can extend the use of those assets to our customers."

One of its biggest is marketing muscle, primarily in the form of the "priceless" campaign. ("There are some things money can't buy. For everything else there's MasterCard.") Since debuting in 1997, the ads have successfully conveyed a sense of the nonmaterial benefits of spending money, something that MasterCard feels distinguishes it from Visa and others.

The philosophy is evident in the way it designs its credit-card rewards products, which it pitches to banks. The rewards focus on experiences, like free vacations, rather than just objects or privileges. Says Larry Flanagan, global chief marketing officer, the custodian of this one-word franchise: "You've got to avoid the pitfalls of a classic campaign like 'priceless' losing its value."

With that in mind, MasterCard works overtime to woo bank customers with one-of-a-kind marketing angles. Its biggest reward experience - and the subject of the first-ever "priceless" spot - is Major League Baseball. Banks buy from MasterCard the right to put MLB teams on their cards or offer cardholders a trip to the World Series.

MasterCard competes tenaciously with Visa for those sponsorships, such as for soccer's World Cup. A lawsuit over who got to sponsor the event ended in 2007 with $90 million paid by the global soccer federation to MasterCard but the sponsorship going to Visa.

Chris McWilton, president of global accounts, and his team spend much of their time calling and visiting MasterCard's four biggest customers - Citigroup (C, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500), and HSBC (HBC) - which make up nearly 30% of its revenues, to make sure they're happy. Lately he's had his hands full. When J.P. Morgan Chase, a majority-Visa debit customer, bought Washington Mutual (WM, Fortune 500), a majority-MasterCard debit customer, analysts suggested that Chase would eventually switch WaMu's cards to Visa. "It will take a long time to play out," says McWilton.(continue reading)