MasterCard 2012 Annual Report Download - page 23

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Processed Transactions. The table below sets forth the total number of transactions processed by
MasterCard for the years ended December 31, 2012 and 2011:
Year ended
December 31, 2012 Year-over-year growth
Year ended
December 31, 2011
(in millions, except percentages)
Processed Transactions ............ 34,156 25% 27,265
Participation Standards
We establish and enforce our standards surrounding participation in MasterCard and the use and acceptance
of cards carrying our brands.
Rulemaking and Application of Standards
Participation in the MasterCard payments network is generally open to financial institutions and other
entities that are our customers. Applicants for participation must meet specified requirements. In general, we
grant licenses by territory to applicants that meet those specified criteria. Licenses provide customers with certain
rights, including access to the network and usage of our brands. Anti-money laundering due diligence reviews
and customer risk management reviews are conducted on all new customers prior to issuing a license and
existing customers are evaluated applying a risk-based approach. All customers must meet the requirements of
our anti-money laundering program, and we can suspend and ultimately terminate participation for non-
compliance with the program. As a condition of our licenses, customers agree to comply with our standards,
which include requirements in our certificate of incorporation, bylaws, policies, rules and operating regulations
and procedures. MasterCard and certain of our affiliates are the governing bodies that establish and apply our
standards, which relate to topics such as participation eligibility and financial soundness criteria; the standards,
design and features of cards and card programs; the use of our trademarks; merchant acquiring activities
(including acceptance standards applicable to merchants); and guaranteed settlement and customer failures.
Customer Risk Management
We guarantee the settlement of many of the transactions between our issuers and acquirers to ensure the
integrity of our network (“settlement exposure”). We do not, however, guarantee payments to merchants by their
acquirer, or the availability of unspent prepaid cardholder balances held by the issuer. As a guarantor of certain
obligations of principal customers, we are exposed to customer credit risk arising from the potential financial
failure of any principal customers of MasterCard, Maestro and Cirrus, and affiliate debit licensees. Our gross
settlement exposure for MasterCard, Maestro and Cirrus-branded transactions, which is primarily estimated using
the average daily card volume during the quarter multiplied by the estimated number of days to settle, was
approximately $38 billion as of December 31, 2012. Principal customers participate directly in MasterCard
programs and are responsible for the settlement and other activities of their sponsored affiliate customers.
To minimize the contingent risk to MasterCard of a failure of a customer to meet its settlement obligations,
we monitor the financial health of, economic and political operating environments of, and compliance with our
standards by, our principal customers, affiliate debit licensees and other entities to which we grant licenses. If the
financial condition of a customer or the state of the economy or political environment in which it operates
indicates that it may not be able to satisfy its obligations to us or to our customers, or its payment obligations to
MasterCard merchants, or its obligations to safeguard funds for prepaid cardholders, we may require the
customer to make operational changes and/or post collateral. This collateral is typically in the form of a standby
letter of credit, a bank guarantee or a secured cash account and is required to mitigate our exposure. As of
December 31, 2012, we had customers who had posted approximately $3.8 billion in collateral held for
settlement exposure. If a customer becomes unable or unwilling to meet its obligations to us or other customers,
we are able to draw upon such customer’s collateral, if provided, in order to minimize any potential loss to
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