Visa 2007 Annual Report Download - page 38

Table of Contents
geographies. For example, our members in China are not permitted to issue our cards for domestic use in China. Governments in certain other countries have
considered similar restrictions from time to time. Our efforts to effect change in countries where our access to the domestic payments segment is limited may
not be successful, which could adversely affect our ability to maintain or increase our revenues and extend our global brand.
If government regulators determine that we are a systemically important payments system, we may have to change our settlement procedures or
other operations, which could make it more costly to operate our business and reduce our operational flexibility.
A number of international initiatives are underway to maintain financial stability by strengthening financial infrastructure. The Committee on Payment
and Settlement Systems of the central banks of the Group of Ten countries has developed a set of core principles for "systemically important payment
systems." Government regulators in the United States or elsewhere may determine that we are a "systemically important payments system" and impose
settlement risk management requirements on us, including new settlement procedures or other operational rules to address credit and operational risks or new
criteria for member participation and merchant access to our payments system. Any of these developments could make it more costly to operate our business.
Our framework agreement with Visa Europe includes indemnity obligations that could expose us to significant liabilities.
Under our framework agreement with Visa Europe, we are required to indemnify Visa Europe for losses resulting from any claims in the United States
or anywhere else outside of Visa Europe's region arising from our or their activities that relate to our payments business or the payments business of Visa
Europe. This obligation applies whether or not we or any of our related parties or agents participated in the actions that gave rise to such claims. Such an
obligation could expose us to significant liabilities for activities over which we have little or no control. These liabilities would not be covered by our
retrospective responsibility plan.
Business Risks
We face intense competitive pressure on customer pricing, which may materially and adversely affect our revenues and profitability.
We generate revenues from fees we charge our customers that are based on payments volume, transaction messages processed and various other
services we provide. In order to increase payments volume, enter new market segments and expand our card base, we offer incentives to customers, such as
up-front cash payments, fee discounts, credits, performance-based growth incentives, marketing support payments and other support, such as marketing
consulting and market research studies. Over the past several years, we have increased our use of incentives such as up-front cash payments and fee discounts
in many countries, including the United States. In order to stay competitive, we may have to continue to increase our use of incentives. Such pricing pressure
may make the provision of certain products and services less profitable or unprofitable and materially and adversely affect our operating revenues and
profitability. To the extent that we continue to increase incentives to our customers, we will need to further increase payments volume or the amount of
services we provide in order to benefit incrementally from such arrangements and to increase revenues and profit, and we may not be successful in doing so.
In addition, we enter into long-term contracts with certain customers, and continued pressure on fees could prevent us from entering into such agreements in
the future on terms that we consider favorable or may require us to modify existing agreements in order to maintain relationships. Increased pricing pressure
also enhances the importance of cost containment and productivity initiatives in areas other than those relating to customer incentives, and we may not
succeed in these efforts.
Our operating results may suffer because of intense competition in the global payments industry.
The global payments industry is intensely competitive. Our payment programs compete against all forms of payment, including cash, checks and
electronic transactions such as wire transfers and automated clearing house
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