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Settlement and Other Risk Management | 9 Months Ended
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Sep. 30, 2024
Settlement and Other Risk Management [Abstract] |
Settlement and Other Risk Management | Settlement and Other Risk Management Mastercard’s rules guarantee the settlement of many of the payment network transactions between its customers (“settlement risk”). Settlement exposure is the settlement risk to customers under Mastercard’s rules due to the difference in timing between the payment transaction date and subsequent settlement. For those transactions the Company guarantees, the guarantee will cover the full amount of the settlement obligation to the extent the settlement obligation is not otherwise satisfied. The duration of the settlement exposure is short-term and generally limited to a few days. Gross settlement exposure is estimated using the average daily payment volume during the three months prior to period end multiplied by the estimated number of days of exposure. The Company has global risk management policies and procedures, which include risk standards, to provide a framework for managing the Company’s settlement risk and exposure. In the event of failed settlement by a customer, Mastercard may pursue one or more remedies available under the Company’s rules to recover potential losses. Historically, the Company has experienced a low level of losses from customer settlement failures. As part of its policies, Mastercard requires certain customers that do not meet the Company’s risk standards to enter into risk mitigation arrangements, including cash collateral and/or forms of credit enhancement such as letters of credit and guarantees. This requirement is based on a review of the individual risk circumstances for each customer. Mastercard monitors its credit risk portfolio and the adequacy of its risk mitigation arrangements on a regular basis. Additionally, the Company periodically reviews its risk management methodology and standards. As such, the amounts of estimated settlement exposure are revised as necessary. The Company’s estimated settlement exposure was as follows:
|  | September 30, 2024 |  | December 31, 2023
|  | (in millions)
Gross settlement exposure |  | $ | 76,524 |  |  | $ | 75,023 |
Risk mitigation arrangements applied to settlement exposure |  | (13,222) |  |  | (12,167) |
Net settlement exposure |  | $ | 63,302 |  |  | $ | 62,856 |
Mastercard also provides guarantees to customers and certain other counterparties indemnifying them from losses stemming from failures of third parties to perform duties. This includes guarantees of Mastercard-branded travelers cheques issued, but not yet cashed of $337 million and $340 million at September 30, 2024 and December 31, 2023, respectively, of which the Company has risk mitigation arrangements for $272 million at September 30, 2024 and December 31, 2023. In addition, the Company enters into agreements in the ordinary course of business under which the Company agrees to indemnify third parties against damages, losses and expenses incurred in connection with legal and other proceedings arising from relationships or transactions with the Company. Certain indemnifications do not provide a stated maximum exposure. As the extent of the Company’s obligations under these agreements depends entirely upon the occurrence of future events, the Company’s potential future liability under these agreements is not determinable. Historically, payments made by the Company under these types of contractual arrangements have not been material.

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