MasterCard 2013 Annual Report Download - page 29

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relationships with cardholders and merchants to support our programs and services. We do not issue cards or other
payment devices, extend credit to cardholders or determine the interest rates or other fees charged to cardholders using
our products. Each issuer determines these and most other competitive payment program features. In addition, we do
not establish the discount rate that merchants are charged for acceptance, which is the responsibility of our acquiring
customers. As a result, our business significantly depends on the continued success and competitiveness of our issuing
and acquiring customers and the strength of our relationships with them. In turn, our customers' success depends on
a variety of factors over which we have little or no influence. If our customers become financially unstable, we may
lose revenue or we may be exposed to settlement risk. See our risk factor in “Risk Factors - Business Risks” in this
Part I, Item 1A with respect to how we guarantee certain third party obligations for further discussion.
With the exception of the United States and a select number of other jurisdictions, most in-country (as opposed to cross-
border) transactions conducted using MasterCard, Maestro and Cirrus cards are authorized, cleared and settled by our
customers or other processors. Because we do not provide domestic processing services in these countries and do not,
as described above, have direct relationships with cardholders, we depend on our close working relationships with our
customers to effectively manage our brands, and the perception of our payments system, among consumers in these
countries. We also rely on these customers to help manage our brands and perception among regulators and merchants
in these countries, alongside our own relationships with them. From time to time, our customers may take actions that
we do not believe to be in the best interests of our payments system overall, which may materially and adversely impact
our business. If our customers' actions cause significant negative perception of the global payments industry or our
brands, cardholders may reduce the usage of our programs, which could reduce our revenues and negatively impact
our results of operations.
In addition, our competitors may process a greater percentage of domestic transactions in jurisdictions outside the
United States than we do. As a result, our inability to control the end-to-end processing on cards and other payment
devices carrying our brands in many markets may put us at a competitive disadvantage by limiting our ability to maintain
transaction integrity or introduce value-added programs and services that are dependent upon us processing the
underlying transactions.
We rely on the continuing expansion of merchant acceptance of our products and programs. Although our business
strategy is to invest in strengthening our brands and expanding our acceptance network, there can be no guarantee that
our efforts in these areas will continue to be successful. If the rate of merchant acceptance growth slows or reverses
itself, our business could suffer.
The marketplace's perception of our brands and reputation may materially and adversely affect our overall
business.
Our brands and their attributes are key assets of our business. The ability to attract and retain cardholders to our branded
products depends highly upon the external perception of us and our industry. Our business may be affected by actions
taken by our customers that impact the perception of our brands. From time to time, our customers may take actions
that we do not believe to be in the best interests of our brands, such as creditor practices that may be viewed as
“predatory”. Moreover, adverse developments with respect to our industry or the industries of our customers may also,
by association, impair our reputation, or result in greater regulatory or legislative scrutiny. We have also been pursuing
the use of social media channels at an increasingly rapid pace. Under some circumstances, our use of social media, or
the use of social media by others as a channel for criticism or other purposes, could also cause rapid, widespread
reputational harm to our brands. Such perception and damage to our reputation could have a material and adverse
effect to our overall business.
Our work with governments exposes us to unique risks that could have a material impact on our business and
results of operations.
As we increase our work with national, state and local governments, both indirectly through financial institutions and
with them directly as our customers, we may face various risks inherent in associating or contracting directly with
governments. These risks include, but are not limited to, the following:
• Governmental entities typically fund projects through appropriated monies. Changes in governmental
priorities or other political developments, including disruptions in governmental operations, could impact