NetSpend 2010 Annual Report Download - page 15

Download and view the complete annual report

Please find page 15 of the 2010 NetSpend annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 127

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127

Table of Contents
reporting infrastructure. In addition to our core systems, we have also developed a number of ancillary systems that support a variety of
customized operational needs, including risk management, customer servicing and financial reconciliation and reporting.
Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements and
other methods to protect our intellectual property and other proprietary rights. In addition, we license technology from third parties.
We have one registered patent and four patent applications pending with the United States Patent and Trademark Office. Most of our
services and products are based on proprietary software and related payments systems solutions. Protecting our rights to our proprietary
software and the patents, copyrights and trade secrets related to them is critical, as it enhances our ability to offer distinctive services and
products to our cardholders, distributors and issuing banks, which differentiates us from our competitors. We have U.S. federal trademark
registrations for the marks "NetSpend", "Skylight" and "All-Access" and several other marks, as well as registrations in a variety of foreign
jurisdictions.
Competition
The financial services industry, including the prepaid card market, is subject to intense and increasing competition. We directly compete
with a number of companies that market open-loop prepaid debit cards through retail and online distribution, including Green Dot Corporation,
Account Now, Inc. and Blackhawk Network Inc. Many transaction processors, such as First Data Corporation, Total System Services, Inc.,
Fidelity National Information Services and Galileo Processing, Inc., have prepaid platform capability and are increasingly in direct competition
with us for prepaid program management opportunities with large distributors. We compete against large retailers such as Wal-Mart seeking to
integrate more profitable financial services into their product offerings. We also anticipate increased competition from alternative financial
services providers who are often well-positioned to service the underbanked and who may wish to develop their own prepaid debit card
programs. In the past year, two of our prior retail distributors Pay-O-Matic, Inc. and Checksmart Financial Company began to distribute their
own GPR cards through their stores. While the increased desire of banks, retailers and alternative financial services providers to develop
successful prepaid debit card programs frequently creates new business opportunities for us, it could also have an adverse effect on our
business, including increased price competition and loss of distributor relationships.
Regulation
We, and the products and services that we market and provide processing services for, are subject to a variety of federal and state laws and
regulations, including, but not limited to:
• Banking laws and regulations;
• Money transmitter and payment instrument laws and regulations;
• State wage payment laws and regulations;
• Anti-money laundering laws;
• Privacy and data security laws and regulations;
• Consumer protection laws and regulations;
• Unclaimed property laws; and
• Card association and network organization rules.
11