MasterCard 2008 Annual Report Download - page 48

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transactions are more likely to be processed by other ATM/debit point-of-sale networks rather than by us. Any of
these factors may inhibit the growth of our debit business, which could materially and adversely affect our
revenues and overall prospects for future growth.
Global political and other conditions may adversely affect trends in consumer spending, which may
materially and adversely impact our revenue and profitability.
The global payments industry depends heavily upon the overall level of consumer, business and government
spending. In addition to the effects of general economic conditions, increases in interest rates in key countries in
which we operate may adversely affect our financial performance by reducing the number or average purchase
amount of transactions involving payment cards carrying our brands. Also, as we are principally based in the
United States, a negative perception of the United States could impact the perception of our company, which
could adversely affect our business prospects and growth.
As a guarantor of certain obligations of principal members and affiliate debit licensees, we are exposed to
risk of loss or illiquidity if any of our customers default on their MasterCard, Cirrus or Maestro settlement
obligations.
We may incur liability in connection with transaction settlements if an issuer or acquirer fails to fund its
daily settlement obligations due to technical problems, liquidity shortfalls, insolvency or other reasons. If a
principal member or affiliate debit licensee of MasterCard International is unable to fulfill its settlement
obligations to other customers, we may bear the loss even if we do not process the transaction. In addition,
although we are not contractually obligated to do so, we may elect to keep merchants whole if an acquirer
defaults on its merchant payment obligations, in order to maintain the integrity and acceptance of our brands. Our
estimated gross legal settlement exposure, which is calculated using the average daily card charges made during
the quarter multiplied by the estimated number of days to settle, was approximately $24 billion as of
December 31, 2008. We have a revolving credit facility in the amount of $2.5 billion which could be used to
provide liquidity in the event of one or more settlement failures by our customers. While we believe that we have
sufficient liquidity to cover a settlement failure by any of our largest customers on their peak day, concurrent
settlement failures of more than one of our largest customers or of several of our smaller customers may exceed
our available resources and could materially and adversely affect our business and financial condition. In
addition, even if we have sufficient liquidity to cover a settlement failure, we may not be able to recover the cost
of such a payment and may therefore be exposed to significant losses, which could materially and adversely
affect our results of operations, cash flow and financial condition. Moreover, during 2008, many of our financial
institution customers were directly and adversely impacted by the unprecedented events that occurred in the
financial markets and the economic turmoil that ensued around the world. These events present increased risk
that we may have to perform under our settlement guarantees. For more information on our settlement exposure
as of December 31, 2008, see Note 21 (Settlement and Travelers Cheque Risk Management) to the consolidated
financial statements included in Item 8 of this Report.
If our transaction processing systems are disrupted or we are unable to process transactions efficiently or
at all, our revenue or profitability would be materially reduced.
Our transaction processing systems may experience service interruptions as a result of fire, natural or
man-made disasters, power loss, disruptions in long distance or local telecommunications access, fraud,
terrorism, accident or other catastrophic events. A disaster or other problem at our primary and/or back-up
facilities or our other owned or leased facilities could interrupt our services. Additionally, we rely on third-party
service providers, such as AT&T, BT and Orange, for the timely transmission of information across our global
data transportation network. If one of our service providers fails to provide the communications capacity or
services we require, as a result of natural disaster, operational disruption, terrorism or any other reason, the
failure could interrupt our services, adversely affect the perception of our brands’ reliability and materially
reduce our revenue or profitability.
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