NetSpend 2011 Annual Report Download - page 12

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Table of Contents
with us. We are actively seeking to sign agreements with additional banks that would act as issuers of payroll cards. As a result of these efforts,
in October 2011, we signed an agreement with a large bank based in New England pursuant to which we will act as the program manager for
the payroll cards to be issued by it. This relationship may also be expanded to include GPR cards in the future. We have also signed an
agreement with Regions Bank ("Regions") pursuant to which it will act as an issuer of payroll cards.
Technology
We develop and maintain all critical operations systems in-house. Our integrated end-to-
end operational and technology platform supports
a wide variety of core processing, client servicing and operational functions. Our proprietary systems include an account hosting database
infrastructure, an integrated layer of banking, cardholder acquisition, cardholder relationship management and transactions processing
applications, a range and variety of third-party client interfaces and a real-time 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 regulatory compliance,
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 have applied for additional patents related to some of the unique features of our products. 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 important as it enhances our ability to offer distinctive services and
products to our cardholders, distributors and Issuing Banks that differentiate 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 UniRush, LLC. Many transaction processors, such as First Data Corporation, Total System Services, Inc., Fidelity
National Information Services and Galileo Processing, Inc., have the ability to manage the processing of prepaid programs and are increasingly
soliciting large distributors of prepaid cards to transfer their programs to their technology platform. Such a migration essentially eliminates our
role as program manager for their card portfolios and we have lost some distributors as a result of this dynamic. In addition, we compete with
banks that offer demand deposit accounts and other traditional issuers of debit cards. We also compete against large retailers, such as Wal-
Mart, who are seeking to integrate more financial services into their product offerings and our competitor Green Dot currently has the exclusive
right to sell GPR cards at Wal-Mart stores. We 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. Although the increased desire
of banks, retailers and alternative financial services providers to promote and develop prepaid debit card programs creates an increased
awareness of prepaid products in the marketplace, it could also have an adverse effect on our business, including increased price competition
and loss of distributor relationships.
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