MasterCard 2014 Annual Report Download - page 9

7
Our Network Architecture and Information Security. The MasterCard Network features a globally integrated structure that provides
scale for our issuers, enabling them to expand into regional and global markets. It features an intelligent architecture that enables
the network to adapt to the needs of each transaction by blending two distinct processing structures:
• a distributed (peer-to-peer) processing structure for transactions that require fast, reliable processing to ensure they are
processed close to where the transaction occurred; and
• a centralized (hub-and-spoke) processing structure for transactions that require value-added processing, such as real-
time access to transaction data for fraud scoring or rewards at the point-of-sale, to ensure advanced processing products
and services are applied to the transaction.
Our network’s architecture enables us to connect all parties regardless of where or how the transaction is occurring. It has 24-hour
a day availability and world-class response time. The network incorporates multiple layers of protection, both for continuity
purposes and to address information security challenges. We engage in multiple efforts to mitigate such challenges, including
regularly testing our systems to address potential vulnerabilities.
Participation Standards. We establish, apply and enforce standards surrounding participation in the MasterCard payments system.
We grant licenses that provide issuers and acquirers that meet specified criteria with certain rights, including access to the network
and usage of cards and payment devices carrying our brands. As a condition of our licenses, issuers and acquirers agree to comply
with our standards surrounding participation and brand usage and acceptance. We monitor areas of risk exposure and enforce our
standards to combat fraudulent, illegal and brand-damaging activity. Issuers and acquirers are also required to report instances of
fraud to us in a timely manner so that we can monitor trends and initiate action when appropriate.
Customer Risk Management. We guarantee the settlement of many of the transactions between our issuers and acquirers to ensure
the integrity of our network. We refer to this as our 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
these risks.
Processing
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 when 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 issuers 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 offerings including:
• Issuer and acquirer solutions designed to provide medium to large customers with a complete processing solution to
help them create differentiated products and services and allow quick deployment of payments portfolios across banking
channels.
• Payment gateways that 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.