Visa 2011 Annual Report Download - page 26

Table of Contents
revenues, our prospects for future growth and our overall business. This pressure may make the provision of certain products and services less profitable, or
unprofitable, and materially and adversely affect our operating revenues and profitability.
Pressure on client pricing also poses indirect risks, presenting the potential for the same adverse effects. If we continue to increase incentives to our
clients, we will need to find ways to offset the financial impact by increasing payments volume, the amount of fee-based services we provide or both. We may
not succeed in doing so, particularly in the current regulatory environment. In addition, we benefit from long-term contracts with certain clients, including
those that are large contributors to our revenue. Continued pressure on our fees could prevent us from entering into such agreements in the future on favorable
terms. We may also have to modify existing agreements in order to maintain relationships or comply with regulations. Finally, increased pricing pressure
enhances the importance of cost containment and productivity initiatives in areas other than those surrounding client incentives, and we may not succeed in
these efforts.
Our business, financial condition and results of operations may suffer because of intense competition in our industry.
The global payments industry is intensely competitive. Our payment programs compete against all forms of payment. These include cash, checks and
electronic transactions, such as wire transfers and automatic clearinghouse payments. In addition, our payment programs compete against the card-based
payments systems of our competitors and private-label cards issued by merchants. The Reform Act has increased this competitive pressure.
Some of our competitors may develop substantially greater financial and other resources than we have. They may offer a wider range of programs and
services than we do. They may use advertising and marketing strategies that are more effective than ours, achieving broader brand recognition and merchant
acceptance than we do. They may develop better security solutions or more favorable pricing arrangements than we have. They may also introduce more
innovative programs and services than we provide.
Certain of our competitors operate with different business models, have different cost structures or participate selectively in different market segments.
These include domestic networks in the United States, China, Canada, Australia, and other countries and regions. They may ultimately prove more successful
or more adaptable to new regulatory, technological and other developments. In many cases, these competitors have the support of government mandates that
prohibit, limit or otherwise hinder our ability to compete for or otherwise secure transactions within those countries and regions.
Traditional or non-traditional competitors may put us at a competitive disadvantage by leveraging services or products in areas in which we do not
directly compete to win business in areas where we do compete. Our clients can reassess their commitments to us at any time or develop their own
competitive services. The risk to maintaining or securing our clients' long-term commitments to our products has increased with the Reform Act's restrictions
on network exclusivity in the debit sector. Most of our larger client relationships are not exclusive. These include those with our largest clients: JPMorgan
Chase and Bank of America. In certain circumstances, our clients may terminate these relationships, sometimes on relatively short notice, and in many cases
subject to significant early termination fees. Because a significant portion of our operating revenues is concentrated among our largest clients, our operating
revenues would decline significantly if we lost one or more of them. This could have a material adverse impact on our business, financial condition and results
of operations. See Note 14—Enterprise-wide Disclosures and Concentration of Business to our consolidated financial statements included in Item 8 in this
report.
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