UPDATE 1-MasterCard's revenue misses estimates on higher incentives

(Changes company description to "operator of the world's second largest payment network" from "credit and debit card issuer" in paragraph 1)

July 29 (Reuters) - MasterCard Inc, the operator of the world's second largest payment network, reported lower-than-expected quarterly revenue as the company offered more rebates and incentives to win new and renewed deals.

Shares (Berlin: DI6.BE - news) of MasterCard, which operates the world's second largest payment network, fell about 3 percent in premarket trading on Wednesday.

The company paid $940 million in rebates and incentives in the second quarter, up 21 percent from a year earlier.

MasterCard charges companies using its payment network for transactions on cards that carry its brands. It doesn't issue cards, extend credit or set interest rates.

The company usually pays higher incentives to its partners than larger rival Visa Inc (Xetra: A0NC7B - news) .

Client incentives accounted for nearly 28 percent of MasterCard's gross revenue in the second quarter, way above Visa's 16 percent.

MasterCard's cross-border volumes - the value of transactions made by card holders outside the card-issuer's country - jumped by 17 percent.

The company's net income fell to $921 million in the quarter ended June 30 from $931 million, a year earlier, due to a $44 million after-tax charge related to a U.K. merchant litigation settlement. However, earnings rose on a per-share basis to 81 cents from 80 cents.

Excluding the charge, MasterCard earned 85 cents per share.

Net revenue rose 0.9 percent to $2.39 billion.

Analysts on average had expected a profit of 85 cents per share and revenue of $2.41 billion, according to Thomson Reuters (Dusseldorf: TOC.DU - news) I/B/E/S.

MasterCard's shares were trading at $92.50 before the bell.

Up to Tuesday's close, the stock had risen 10.5 percent this year, while Visa's shares had risen 14 percent. (Reporting by Sudarshan Varadhan in Bengaluru; Editing by Kirti Pandey)