NetSpend 2011 Annual Report Download - page 17

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Table of Contents
ITEM 1A. RISK FACTORS
Risks Relating to Our Business
The market for prepaid debit cards and alternative financial services is highly competitive and competition is increasing as more
companies, many that are larger and have greater resources than we do, endeavor to address the needs of underbanked consumers.
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 platforms. Such a migration essentially eliminates our
role as program manager for their card portfolios and we have lost some accounts 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. The increased desire of banks,
retailers, processors and alternative financial services providers to develop and promote prepaid debit card programs could have an adverse
effect on our business, including increased price competition and the loss of distributor relationships.
Our ability to grow our business is dependent on our ability to compete effectively against other providers of GPR cards and alternative
financial services. Many existing and potential competitors have longer operating histories and greater name recognition than we do. In
addition, many of our existing and potential competitors are substantially larger than we are and have substantially greater financial and other
resources than we do. We also face strong price competition. To stay competitive, we may have to increase the incentives that we offer to our
retail distributors and decrease the prices of our products and services, which could adversely affect our operating results.
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
(collectively, the "Networks") and other banking services. As of December 31, 2011, the majority of our active cards were issued through
MetaBank. If our relationship with MetaBank deteriorates, 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, including as a result of the directives issued by the OCC against
MetaBank, or one or more of our other Issuing Banks or if we were to lose MetaBank or one or more of our other Issuing Banks, we would be
forced to find an alternative provider of these critical banking services.
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.
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