Visa 2007 Annual Report Download - page 42

Table of Contents
domiciled in the United States, a negative perception of the United States could impact the perception of our company, which could materially and adversely
affect our revenues, operating results, prospects for future growth and overall business.
As a guarantor of certain obligations of Visa members, we are exposed to risk of loss or insolvency if any member fails to fund its settlement
obligations.
We indemnify Visa members for any settlement loss suffered due to the failure of a member to fund its daily settlement obligations. In certain
instances, we indemnify members even in situations in which a transaction is not processed by our system. The indemnification creates settlement risk for us
due to the difference in timing between the date of payment transaction and the date of subsequent settlement. The term and amount of the indemnification are
unlimited.
While we believe that we have sufficient liquidity to cover a settlement failure by any of the largest Visa members, concurrent settlement failures of
more than one of our largest members or several of the smaller Visa members, or systemic operational failures that last for more than a single day, may
exceed our available resources and could materially and adversely affect our business and financial condition. In addition, even if we have sufficient liquidity
to cover a settlement failure, we may not be able to recover the amount of such payment and may therefore be exposed to significant losses, which could
materially and adversely affect our results of operations, cash flow and financial condition. Settlement at risk (or exposure) is estimated using the average
daily volumes during the quarter multiplied by the estimated number of days to settle, and the total balance for outstanding travelers cheques. Our estimated
settlement exposure, after consideration of collateral that we require certain financial institutions to post, amounted to approximately $28.8 billion at October
1, 2007.
Some Visa members are composed of groups of financial institutions. Some of these members have elected to limit their responsibility for settlement
losses arising from the failure of their constituent financial institutions in exchange for managing their constituent financial institutions in accordance with our
credit risk policy. To the extent that any settlement failure resulting from a constituent financial institution exceeds the limits established by our credit risk
policy, we would have to absorb the cost of such settlement failure, which could materially and adversely affect our cash flow.
If our transaction processing systems are disrupted or we are unable to process transactions efficiently, our revenues or operating results and the
perception of our brands could be materially and adversely affected.
Our transaction processing systems may experience service interruptions or degradation as a result of processing or other technology malfunction, fire,
natural disasters, power loss, disruptions in long distance or local telecommunications access, fraud, terrorism or accident. Our visibility in the global
payments industry may attract terrorists and hackers to conduct physical or computer-based attacks, leading to an interruption in service, increased costs or the
compromise of data security. Additionally, we rely on service providers for the timely transmission of information across our global data network. If a service
provider fails to provide the communications capacity or services we require, as a result of natural disaster, operational disruption, terrorism or any other
reason, the failure could interrupt our services, adversely affect the perception of our brands' reliability and materially reduce our revenues or profitability.
If we are not able to keep pace with the rapid technological developments in the payments industry to provide customers, merchants and cardholders
with new and innovative payment programs and services, the use of our cards could decline, which could reduce our revenues and income.
The payments industry is subject to rapid and significant technological changes, including continuing developments of technologies in the areas of
smart cards, radio frequency and proximity payment devices (such as contactless cards), e-commerce and mobile commerce, among others. We cannot predict
the effect of
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