MasterCard 2012 Annual Report Download - page 24

Download and view the complete annual report

Please find page 24 of the 2012 MasterCard annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

ourselves or our customers. In addition to obtaining collateral from customers, in situations where a customer is
potentially unable to meet its obligations to us or other customers, we can suspend and ultimately terminate
participation in our network. Additionally, and to further preserve payment system integrity, we reserve the right
to terminate a customer’s right to participate in our network if, for example, the customer fails or refuses to make
payments in the ordinary course of business, or if a liquidating agent, conservator or receiver is appointed for the
customer or the customer is insolvent. In addition to these measures, we have also established a $3 billion
committed credit facility to provide liquidity for general corporate purposes, including to provide liquidity in the
event of customer settlement failure. See our risk factor in “Risk Factors—Business Risks” in Part I, Item 1A of
this Report related to our role as guarantor of certain third-party obligations. See also our risk factor related to the
impact of unprecedented global economic events in financial markets around the world.
Payment System Integrity
The integrity of our payment system can be affected by fraudulent activity and illegal uses of our products
and our system. Fraud is most often committed in connection with lost, stolen or counterfeit cards or stolen
account information, often resulting from security breaches of third-party systems that insufficiently protect
cardholder data that they store, process or transmit. See our risk factor in “Risk Factors—Business Risks” in Part
I, Item 1A of this Report related to account data breaches. Fraud is also more likely to occur in transactions
where the card is not present, such as e-commerce, mobile commerce, mail order and telephone order
transactions. Security and cardholder authentication for these remote channels are particularly critical issues
facing our customers and merchants who engage in these forms of commerce, where a signed cardholder sales
receipt, verification through use of a PIN or the presence of the card or payment device (along with the
embedded security features) or merchant agent is unavailable.
We monitor areas of risk exposure and enforce our standards to combat fraudulent activity. We also operate
several compliance programs to help ensure that the integrity of our payment system is maintained by our
customers and their agents. Key compliance programs include merchant audits (for high fraud, excessive
chargebacks and processing of illegal transactions) and security compliance (including our MasterCard Site Data
Protection Service®, which assists customers, merchants and third-party service providers in protecting
commercial sites from hacker intrusions and subsequent account data compromises) by requiring proper
adherence to the Payment Card Industry Data Security Standards (PCI DSS) and other PCI standards designed to
secure payment application and terminals. Our customers are also required to report instances of fraud to us in a
timely manner so we can monitor trends and initiate action where appropriate.
Our customers generally are responsible for fraud losses associated with the products they issue and the
merchants from which they acquire transactions. However, we have implemented a series of programs and
systems to aid them in detecting and preventing the fraudulent use of MasterCard products. We provide
education programs and various risk management tools to help prevent fraud and ensure safety, including:
• MasterCard SecureCode®, a global internet authentication solution that permits cardholders to
authenticate themselves to their issuer using a unique, personal code;
• Our Site Data Protection program to advance adherence to the PCI DSS and other PCI standards;
• Our Global Vendor Certification Program (GVCP) to ensure card manufacturers comply with
MasterCard-defined physical and logistical security requirements;
• Our Compliance Assessment and Security Testing (CAST) Program to ensure integrated circuit card and
secure elements used in smart cards and mobile payment devices are evaluated against known and state
of the art attack scenarios; and
• Fraud detection and prevention solutions, including our suite of fraud management products and
services, Expert Monitoring Solutions, and DataCash fraud prevention tools for e-commerce merchants.
20