NetSpend 2010 Annual Report Download - page 27

Table of Contents
The loss of, or changes to, our relationships with MetaBank or our other issuing banks could adversely affect our business, results of
operations and financial position.
We rely on the arrangements we have with our issuing banks to provide us with critical products and services, including the FDIC-insured
depository accounts tied to our GPR cards, access to the ATM networks, membership in the card associations and network organizations and
other banking services. As of December 31, 2010, approximately 74% of our active cards were issued through MetaBank. MetaBank is our
preferred issuing bank and has designated us as a preferred program manager for prepaid debit cards. If our relationship with MetaBank
deteriorates or if we lose our position as a preferred program manager of MetaBank, it could hinder our ability to grow our business and have
an adverse impact on our operating results. If any material adverse event were to affect MetaBank or one or more of our other issuing banks,
including as a result of the recent directives issued by OTS against MetaBank, a significant decline in their financial condition, a decline in the
quality of their services, loss of deposits, their inability to comply with applicable banking and financial service regulatory requirements,
systems failure or their inability to pay us fees, or if we were to lose MetaBank or one or more of our other issuing banks as an issuing bank,
we would be forced to find an alternative provider of these critical banking services. See "Business—Issuing Bank Relationships."
Furthermore, as our issuing banks have appointed us and our distributors as their agents for purposes of providing services in connection with
our prepaid debit cards in various states, the termination of our relationship with one or more of our issuing banks would force us and our
distributors to cease offering prepaid debit cards and related services to the extent that we rely on our status as an agent of our issuing banks in
order to do so. We may not be able to find a replacement bank on terms that are acceptable to us or at all. Any change in our issuing banks
could disrupt our business or result in arrangements with new banks that are less favorable to us than those we have with our existing issuing
banks, either of which could have a material adverse impact on our results of operations and our financial condition. In addition, under our
arrangements with our issuing banks, we have agreed upon sharing of certain revenues, costs and expenses. Changes in these arrangements
could have a material adverse impact on our results of operations.
Our future growth and financial success will be harmed if there is a decline in the use of prepaid debit cards as a payment mechanism or if
there is a decrease in demand for alternative financial services.
We focus on the marketing and sale of GPR cards and related alternative financial services to the underbanked consumer market. Our
strategic focus is dependent upon general growth in the demand for prepaid services, which has been forecasted by a number of third party
industry analysts, some of whom are cited in this prospectus. As the prepaid financial services industry matures, consumers may find prepaid
financial services to be less attractive than traditional bank solutions. Further, other alternatives to prepaid services may develop and limit the
growth of, or cause a decline in the demand for, prepaid debit cards. In addition, negative publicity in the prepaid industry may drive
consumers to other financial services providers. If the growth in demand does not increase at the rate we expect or as some industry analysts
are predicting, our ability to grow could be limited and our results of operations could be materially adversely impacted.
Our business is dependent on our continued participation in the card associations and network organizations, and the termination of our
participation in the card associations or network organizations or changes in the card association or network organization rules could
materially adversely affect our business.
We derive substantially all of our revenue from the compensation paid by our issuing banks for the program management and processing
services that we provide in support of our prepaid debit cards. Because we are not a bank, we are not eligible for membership in the card
associations or network organizations. The rules and regulations of the card associations and network organizations require us to be sponsored
by a bank in order to process prepaid debit card transactions and serve as a program
23