MasterCard 2014 Annual Report Download - page 27

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information on the magnetic stripe. Fraud is also more likely to occur in transactions where the card is not present, which constitutes
an increasing number of transactions. In addition, as outsourcing and specialization become commonplace in the payments industry,
there are more third parties involved in processing transactions using our cards. Increased fraud levels involving our cards, or
misconduct or negligence by third parties processing or otherwise servicing our cards, could lead to regulatory intervention, such
as enhanced security requirements, as well as damage to our reputation, which could reduce the use and acceptance of our cards
or increase our compliance costs, and thereby have a material adverse impact on our business.
Rapid technological developments in our industry present both operational and legal challenges (including potential
intellectual property exposure) which could impact our results of operations or limit our future growth.
The payments industry is subject to rapid and significant technological changes, including continuing developments of technologies
in the areas of smart cards and devices, radio frequency and proximity payment devices (such as contactless payment devices),
electronic commerce and mobile commerce, among others. We cannot predict the effect of technological changes on our business.
We rely in part on third parties, including some of our competitors and potential competitors, for the development of and access
to new technologies. We expect that new services and technologies applicable to the payments industry will continue to emerge,
and these new services and technologies may be superior to, or render obsolete, the technologies we currently use in our programs
and services. In addition, our ability to adopt new services and technologies that we develop may be inhibited by a need for
industry-wide standards and by resistance from customers or merchants to such changes by the complexity of our systems. Our
ability to adopt these technologies can also be inhibited by intellectual property rights of third parties. We have received, and we
may in the future receive, notices or inquiries from patent holders (for example, other operating companies or non-practicing
entities) suggesting that we may be infringing certain patents or that we need to license the use of their patents to avoid infringement.
Such notices may, among other things, threaten litigation against us or our customers or demand significant license fees. Our
future success will depend, in part, on our ability to develop or adapt to technological changes and evolving industry standards.
Failure to keep pace with these technological developments could lead to a decline in the use of our products, which could have
a material adverse impact on our results of operations.
Adverse currency fluctuations and foreign exchange controls could negatively impact our results of operations.
During 2014, approximately 61% of our revenue was generated from activities outside the United States. This revenue (and the
related expense) could be transacted in a non-functional currency or valued based on a currency other than the functional currency
of the entity generating the revenues. Resulting exchange gains and losses are included in our net income. Our risk management
activities provide protection with respect to adverse changes in the value of only a limited number of currencies and are based on
estimates of exposures to these currencies.
In addition, some of the revenue we generate outside the United States is subject to unpredictable currency fluctuations (including
devaluations of currencies) where the values of other currencies change relative to the U.S. dollar. If the U.S. dollar strengthens
compared to currencies in which we generate revenue, this revenue may be translated at a materially lower amount than expected.
Furthermore, we may become subject to exchange control regulations that might restrict or prohibit the conversion of our other
revenue currencies into U.S. dollars.
The occurrence of currency fluctuations or exchange controls could have a material adverse impact on our results of operations.
Acquisitions, strategic investments or entry into new businesses could disrupt our business and harm our results of
operations or reputation.
Although we may continue to make strategic acquisitions of, or acquire interests in joint ventures or other entities related to,
complementary businesses, products or technologies, we may not be able to successfully partner with or integrate any such acquired
businesses, products or technologies. In addition, the integration of any acquisition or investment (including efforts related to an
acquisition of an interest in a joint venture or other entity) may divert management’s time and resources from our core business
and disrupt our operations. Moreover, we may spend time and money on acquisitions or projects that do not meet our expectations
or increase our revenue. To the extent we pay the purchase price of any acquisition in cash, it would reduce our cash reserves
available to us for other uses, and to the extent the purchase price is paid with our stock, it could be dilutive to our stockholders.
Furthermore, we may not be able to successfully finance the business following the acquisition as a result of costs of operations,
including any litigation risk which may be inherited from the acquisition. Any acquisition or entry into a new business could
subject us to new regulations with which we would need to comply, and we could be subject to liability or reputational harm to
the extent we cannot meet any such compliance requirements. Our expansion into new businesses could also result in unanticipated
issues which may be difficult to manage. Although we periodically evaluate potential acquisitions of businesses, products and
technologies and anticipate continuing to make these evaluations, we cannot guarantee that we will be able to execute and integrate
any such acquisitions.