NetSpend 2011 Annual Report Download - page 24

Table of Contents
make it materially more difficult for us to attract new distributors and retain our existing distributors. This would make it harder for us to sell
cards to consumers and could have a material adverse effect on our future revenue and profits. Further, it is possible that FinCEN, or another
federal or state regulator, could adopt additional laws or rules that would lead to a similar result.
Our business is dependent on our continued participation in the Networks, and the termination of our participation in the Networks or
changes in the Network 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 their prepaid debit cards. Because we are not a bank, we are not eligible for membership in the Networks.
The rules and regulations of the Networks require us to be sponsored by a bank in order to process prepaid debit card transactions and serve as
a program manager for our Issuing Banks' prepaid debit card programs. We currently participate in the Networks through sponsorship by our
Issuing Banks. If we or one of our Issuing Banks fails to comply with the rules and regulations of the Networks or we fail to comply with the
applicable program requirements of our Issuing Banks, the Networks could limit, suspend or terminate our participation in their organizations
or levy fines against us.
The termination of our participation in the Networks, or any changes in their rules and regulations or our Issuing Banks' program
requirements that would impair our participation in the Networks, could require us to alter or suspend processing services that we provide to
the Issuing Banks with respect to our prepaid debit cards, which would adversely affect our business. Further, if any of our Issuing Banks loses
its sponsorship in the Networks, and we are unable to secure another bank to sponsor us with such Network, we would not be able to process
transactions with respect to our prepaid debit cards and our business would be materially and adversely affected.
The information technology systems and networks maintained by us and the third parties on whom we rely could fail due to factors,
including those beyond our control, which could negatively impact our existing customer relationships and our business reputation.
We depend on the efficient and uninterrupted operation of our end-to-
end operational and technology platform. This platform is comprised
of a complex system of computers, software, data centers and networks. Our ability to efficiently process transactions also depends on the
systems of a wide variety of third parties, including our Issuing Banks, distributors, the Networks and processors over which we have limited or
no control. Our technology platform, and the third party systems on which we rely, could be exposed to damage or interruption from, among
other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry and computer viruses. Our property and business
interruption insurance may not be adequate to compensate for all losses or failures that may occur. Protracted or frequent system failures could
negatively impact our existing customer relationships and our business reputation.
We have entered into outsourcing and other agreements related to certain business operations, and any difficulties experienced in these
arrangements could result in additional expense, loss of cardholders and revenue or an interruption of our services.
We have entered into outsourcing agreements with third parties to provide certain customer service and related support functions to our
cardholders, including the outsourcing of customer service through facilities located in the Philippines and Guatemala. As a result, we must
rely on third parties over which we have limited control to perform certain of our operations and, in certain circumstances, interface with our
cardholders. If these third parties are unable to perform to our requirements, we may be forced to pursue alternative strategies to provide these
services, which could result in delays, interruptions, additional expenses and loss of cardholders.
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