MasterCard 2013 Annual Report Download - page 11

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7
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 account balances. 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. 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
customers. We employ various strategies to mitigate against these risks.
Processing Services
Transaction Switching - Authorization, Clearing and Settlement. Through the MasterCard Network, we enable the
routing of a transaction to the issuer for its approval, facilitate the exchange of financial transaction information between
issuers and acquirers after a successfully-conducted transaction, and help to settle the transaction by facilitating the
exchange of funds between parties via settlement banks chosen by us and the customer.
Cross-Border and Domestic Processing. The MasterCard Network processes transactions throughout the world where
the merchant country and issuer country are different (cross-border transactions), providing cardholders with the ability
to use, and merchants to accept, MasterCard cards and other payment devices across multiple country borders. We
also provide domestic (or intra-country) transaction processing services to customers in every region of the world,
which allow issuer customers to facilitate payment transactions between cardholders and merchants within a particular
country. We process approximately half of all transactions using MasterCard-branded cards, including most cross-
border transactions. We process the majority of MasterCard-branded domestic transactions in the United States, United
Kingdom, Canada, Brazil and a select number of other countries. Outside of these countries, most domestic transaction
activity on our products is processed without our involvement.
Extended Processing. We extend our processing capabilities in the payments value chain in various regions and across
the globe with an expanded suite of issuer, prepaid, acquirer, third-party, gateway and mobile processing solutions.
Our offerings include:
• MasterCard Integrated Processing Solutions® (“IPS”), a debit and prepaid issuer processing platform designed
to provide medium to large global issuing customers with a complete processing solution to help create
differentiated products and services and allow quick deployment of payments portfolios across banking
channels, including authorizing transactions and assisting issuers in managing both their risk and the cards
issued to their customers.
• Payment gateways, including: (1) DataCash® and MasterCard Internet Gateway Service (MiGs), which offer
a single interface to provide e-commerce merchants with the ability to process secure payments and offer
value-added solutions, including outsourced electronic payments, fraud prevention and alternative payment
options, and (2) the MasterCard Mobile Payments Gateway, a platform that facilitates transaction routing and
prepaid processing for mobile-initiated transactions for our customers.