Visa 2011 Annual Report Download - page 20

Table of Contents
transactions in the future. It could also materially increase the attractiveness of closed-loop payments systems-those with direct connections to both merchants
and consumers-and other forms of payment. In addition, issuers could begin to charge new or higher fees to consumers. This could make our card programs
less desirable and reduce our transaction volumes and profitability. Acquirers could elect to charge higher discount rates to merchants, regardless of the level
of Visa interchange, leading merchants not to accept cards for payment or to steer Visa cardholders to alternate payment systems. In addition, issuers and
acquirers could attempt to decrease the expense of their card programs by seeking incentives from us or a reduction in the fees that we charge. Any of the
foregoing could have a substantial, adverse impact on our financial condition, revenues, results of operations, prospects for future growth and overall
business.
Regulations that prohibit us from contracting with clients or requiring them to use only our network, or denying them the option of selecting only
our network, may decrease the number of transactions we process and materially and adversely affect our financial condition, revenues, results of
operations, prospects for future growth and overall business.
In order to ensure our cardholders have a consistent experience, we promote certain practices to ensure that Visa-branded cards are processed over our
network. We have agreements with some issuers under which they agree to issue certain payment cards that use only the Visa network or receive incentives if
they do so. In addition, certain issuers of some debit products choose to include only the Visa network. We refer to these various practices as network
exclusivity. In addition, certain network or issuer rules or practices may be interpreted as limiting the routing options of merchants when multiple debit
networks co-reside on Visa debit cards. For example, Visa's rules require that an acquirer must process authorizations for all international transactions through
VisaNet and that a member must clear international transactions through VisaNet.
The Reform Act already limits our and issuers' ability to impose rules for, or choose various forms of, network exclusivity and preferred routing in the
debit area. See—The Reform Act may have a material, adverse effect on our financial condition, revenues, results of operations, prospects for future growth
and overall business. These restrictions and future regulations like them in the United States and elsewhere could cause a material decrease in the number of
transactions we process. In order to retain that transaction volume, we might have to reduce the fees we charge to issuers or acquirers, or we might have to
increase the payments and other incentives we provide to issuers or acquirers or directly to merchants. Any of these eventualities could have a material,
adverse affect on our financial condition, revenues, results of operations, prospects for future growth and overall business.
The Reform Act may have a material, adverse effect on our financial condition, revenues, results of operations, prospects for future growth and
overall business.
As of October 1, 2011, in accordance with the Reform Act, the Federal Reserve capped the maximum U.S. debit interchange fee assessed for cards
issued by large financial institutions at twenty-one cents plus five basis points, before applying an interim fraud adjustment up to an additional one cent. This
amounted to a significant reduction from the average system-wide fees charged previously. The Federal Reserve has also promulgated regulations requiring
issuers to make at least two unaffiliated networks available for processing debit transactions on each debit card. The rules also prohibit us and issuers from
restricting a merchant's ability to direct the routing of electronic debit transactions over any of the networks that an issuer has enabled to process those
transactions.
We expect these regulations to adversely affect our U.S. debit business and associated revenues. They will likely create negative pressure on our
pricing, reduce the volume and number of U.S. debit payments we process, and diminish associated revenues.
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