Attached Document Please review the document and answer Discussion Points mentioned at end of doc. C3-1 CASE STUDY 3 MASTERING MASSIVE DATABA

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CASE STUDY 3

MASTERING MASSIVE DATABASES AT
MASTERCARD INTERNATIONAL

Many organizations are working hard to address the opportunities and

storage challenges associated with big data. Industry experts estimate that

the total volume of data is doubling every 18 months and the vast majority

of new data being generated is in business domains. MasterCard

International (www.mastercard.com) is no stranger to wrestling with the

issues associated with massive databases. MasterCard has amassed a data

warehouse that is more than 100-terabytes in size and company insiders

expect that it will growth to more than 1.8 petabytes. The growth of

MasterCards data warehouse is fueled by a client/server network that, on

average, handles 140 million credit card transactions per hour on behalf of

more than 25,000 financial institutions [WALL08]. In 2007, MasterCard’s

worldwide network processed 18.7 billion transactions totaling approximately

$2.3 trillion.

MasterCards computer facility authorizes, clears, and settles each credit

card transaction in real time as a cardholder’s credit card is swiped.

MasterCards bank and business clients expect the system to be fast and

accessible. To meet these expectations, MasterCard expects its network to

have a response time of 140 milliseconds per transaction (or less). It also

has implemented sufficient redundancy and failover systems to be able to

http://www.mastercard.com/

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promise its customers 99.999 percent network availability. Needless to say,

MasterCard customers also expect the transaction processing and data

storage systems to be secure.

For continued success, it is important for MasterCard to grow its volume

of credit card transactions. To do this, the company works to expand its base

of bank clients and business partners by offering them an attractive mix of

products and services. Part of their efforts is directed toward helping its

clients increase the number of customers who hold a MasterCard and use

them to make purchases. To remain competitive against other credit card

issuers such as American Express, Discover, and Visa, MasterCard must also

continue to grow its volume of credit card transactions and it has learned

that one of the best ways to do this is by being a good business partner for

its clients.

In addition to credit cards, MasterCard offers debit cards, prepaid cards,

smart cards with embedded chips, and contactless cards. It also has

business card programs for commercial and public sector organizations of all

sizes. MasterCard partners with its customers to create customized loyalty

programs and reward solutions to provide incentives for cardholders to use

MasterCard to make purchases. By helping its customers identify the

benefits that services that are most appealing to their cardholders,

MasterCard is able to help its partners increase customer satisfaction.

MasterCards global processing system enables customers to extend their

loyalty programs worldwide. Hence, it is not surprising that MasterCard has

been successful in partnering with airlines and hotel chains on loyalty

programs.

MasterCards Data Warehouse Strategy
MasterCards data warehouse has emerged to play an important role in the

companys competitive strategy. This global data repository has become a

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business intelligence (BI) engine that helps the credit card giant and its

clients make more effective business decisions.

Planning for the data warehouse began in the mid-1990s. Interestingly,

MasterCards executive team immediately grasped the data warehouse

concept recommended by the IT division as a potential game changer.

MasterCard executives typically required a detailed business case justifying

IT investment recommendations, but in this case, the executives instantly

recognized the proposed data warehouse as a strategic move to give

MasterCard a competitive edge. Specifically, MasterCard wanted to improve

market share. At the time, MasterCard accounted for only about 25% of

charges for goods sold worldwide using credit cards, with Visa accounting for

50%. Since the creation of the data warehouse, MasterCards market share

increased to 31%. Although Visa continues to be the industry leader,

MasterCards role as a global leader in credit card processing has

strengthened [BASE11].

Financial institutions that use MasterCard rely on the history of credit

card transactions to provide information for targeted marketing and business

planning. For example, a bank that issues credit cards might notice a large

volume of charges for flights on a specific airline. The bank can use this

information to negotiate a deal with the airline to provide special offers and

incentives to cardholders. Similar promotional opportunities could be offered

to a hotel chain that would provide additional incentives (such as stay two

nights and get a third night free) for using MasterCard to reserve and pay

for a room.

MasterCards BI and Reporting Tools
MasterCard runs a combination of homegrown and off-the-shelf analytic

tools to identify buying trends, credit card fraud, and other useful

information. The company can correlate and analyze transactions to

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determine a consumer’s interest or detect anomalies that suggest a card has

been stolen. MasterCard offers bank clients access to these tools, as well as

custom reports.

Among the signature applications provided by MasterCard is its Portfolio

Analytics suite of BI and reporting tools. This suite includes a wide range of

standard reports that let members analyze transactions every day, week, or

month and compare the results to different parts of the country, other parts

of the world, or predefined groups of similar banks.

Another popular tool is the MasterCard Marketing Center, which helps its

customers monitor, analyze, and develop campaigns to increase use of their

cards. For example, a card issuer in Los Angeles might use the data to see

how many cardholders spent $25 or more in January and February on

sporting goods at Wal-Mart stores. Then it might propose to Wal-Mart a mail

marketing campaign before the opening of baseball season, tied to heavy

spenders with an affinity to the Dodgers or Angels. A card issuer in New York

City could use MasterCards BI and reporting tools to identify patterns in

restaurant charges for its most affluent cardholders. This information could

be used to develop an insiders guide to NYC hidden gems for food and

wine to share with select groups of other MasterCard holders.

The process used by MasterCard customers to make access the data

warehouse to populate reports or perform BI queries is illustrated in general

terms in Figure C3.1. Such transactions proceed in the following way:

1. Member bank connects to MasterCard facility, known as MasterCard

Online. This could be by Internet, by means of a mobile access
service, or by means of a private wide area network, such as a frame
relay network. In the case of Internet access, all traffic must go
through a firewall, which assures that unwanted traffic is blocked.

2. User authenticates to MasterCard Online. A dedicated group of

servers is assigned the task of authenticating all incoming transaction
requests to assure that the user has permission to use the facility
and to specify the user’s level of privilege.

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3. MasterCard Online verifies user product licensing. This has to do with
which business enterprise software tools the bank client is able to
use.

4. User request is forwarded to a transaction server, which invokes the

appropriate application software for this transaction. The application
translates the request into the corresponding database requests and
updates.

5. The transaction server forwards a transaction request to the data

warehouse, which processes the request and returns a response to
the member user.

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MasterCard continues to expand the size of the data repository and the

tool set. The goal is to include every transaction handled by members over a

three-year period, capturing the dollar amount, the card number, the

location, and the merchant in each instance. But it is the set of applications

provided to members that is crucial in gaining competitive edge. MasterCard

aims to gain favor with portfolio managers and member banks, who decide

whether to push Visa or MasterCard. If the online tools help those managers

analyze the profitability of the cards in their portfolio better or gain more

customers and transaction volume faster, then MasterCard benefits. To keep

ahead of Visa, the MasterCard IT shop has dozens of full-time developers

tasked to come up with new tools and reports to put in the hands of banks

and other clients. The developers also work with MasterCard clients to create

repeatable custom reports that can focus on any aspect of authorizing a card

or transaction, including charge backs for disputed amounts and fraud.

MasterCard has approximately 1.7 billion cardholders worldwide and

MasterCard can be used for purchases at more than 33 million locations.

While this might seem like sufficient market penetration, MasterCard is

always looking for new ways increase volume of purchase transactions.

Several new payment systems have been implemented including tag & go

PayPass cards that speed up purchasing by avoiding the need to swipe a

card [LAWS12]. PayPass digital wallets have also been developed to speed

up the payment process for online purchases.

MasterCard has embraced smartphone payment systems and are rolling

out smartphone and tablet PC apps that enable banks and business clients

use mobile devices to monitor credit usage patterns and use its data

warehouse BI and reporting tools [TELE12]. As mobility become more

pervasive, MasterCards data repository will be modified to assimilate mobile

transactions with traditional credit card transactions. This will almost

certainly result in an enriched set of BI and reporting tools.

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Discussion Points
1. MasterCard managers are motivated to increase (1) the number of

individuals who have and use a MasterCard credit card, (2) the number
of banks and other clents who issue MasterCards to customers and/or
employees, and (3) the number of locations that accept MasterCard
payments. Discuss how MasterCard could use its data warehouse to help
it expand each of these customer bases.

2. MasterCard makes its analytics tools available to all of its member

banks and other issuers. It knows that getting its clients to use these
tools can be critical to keeping them as loyal customers. Discuss the
steps that MasterCard can take to promote greater use of its BI and
reporting tools by its clients. Who do you think larger or smaller clients
will benefit most from MasterCards analytics tools? Why?

3. Do some Internet research to identify examples of tap & go

applications. What are some typical types of tap & go payment
applications and what growth trends are expected? Do you think that
there are limits to the types of applications that tap & go payments
can be used for? Why or why not?

4. Do some research on the extent to which MasterCards PayPass digital

wallet is being embraced as a payment mechanism for online purchases.
What are the advantages and disadvantages of digital wallets such as
PayPass? What can MasterCard do to encourage online merchants to
accept PayPass digital wallet payments?

5. Supporting mobility and smartphone apps is important to MasterCard.

What challenges does MasterCard face in rolling out smartphone
payment systems? Which of these do you think will be most difficult to
address? Why?

Sources
[BASE11] Basenese, L. Stock Wars: Visa vs. MasterCard. Wall Street
Daily, May 18, 2011. Retrieved online at:
http://www.wallstreetdaily.com/2011/05/18/visa-versus-mastercard-stock/.

[LAWS12] Lawson, S. MasterCard, Startup PaidPiper Tap into Credit Cards
for Mobile Payments. CIO, May 4, 2012. Retrieved online at:
http://www.cio.com.au/article/423876/mastercard_startup_paidpiper_tap_in
to_credit_cards_mobile_payments/

http://www.wallstreetdaily.com/2011/05/18/visa-versus-mastercard-stock/

http://www.cio.com.au/article/423876/mastercard_startup_paidpiper_tap_into_credit_cards_mobile_payments/

http://www.cio.com.au/article/423876/mastercard_startup_paidpiper_tap_into_credit_cards_mobile_payments/

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[WALL08] Wallgum, T. The Man Behind MasterCards 100-Terabyte Data
Warehouse. Computerworld, July 17, 2008. Retrieved online at:
http://news.idg.no/cw/art.cfm?id=32FCBC8A-17A4-0F78-
316BA999B7AFE095

[TELE12] The Telegraph, MasterCard to Let Users Pay by Smartphone
App. May 17, 2012. Retrieved online at:
http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/
9253573/Mastercard-to-let-users-pay-via-smartphone-app.html

http://news.idg.no/cw/art.cfm?id=32FCBC8A-17A4-0F78-316BA999B7AFE095

http://news.idg.no/cw/art.cfm?id=32FCBC8A-17A4-0F78-316BA999B7AFE095

http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/9253573/Mastercard-to-let-users-pay-via-smartphone-app.html

http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/9253573/Mastercard-to-let-users-pay-via-smartphone-app.html

CASE STUDY 3
MasterCards Data Warehouse Strategy
MasterCards BI and Reporting Tools
Discussion Points
Sources