MasterCard 2015 Annual Report Download - page 14

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8
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, acquirers and other customers 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, acquirers and other customers 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, acquirers and other customers 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.
Transaction Processing
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 our customers.
• Cross-Border and Domestic. The MasterCard Network switches 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 country borders. We also provide domestic
(or intra-country) transaction switching 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 switch
approximately half of all transactions using MasterCard and Maestro-branded cards, including most cross-border
transactions. We switch the majority of MasterCard and Maestro-branded domestic transactions in the United States,
United Kingdom, Canada, Brazil and a select number of other countries. Outside of these countries, most domestic
transactions on our products are switched without our involvement.
Other 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.
• Mobile gateways that facilitate transaction routing and prepaid processing for mobile-initiated transactions for our
customers.