Visa 2011 Annual Report Download - page 33

Table of Contents
profitability. In addition, any reputational damage resulting from an account data breach could decrease the use and acceptance of our cards, which could have
a material adverse effect on our payments volume, revenues and future growth prospects. Finally, any data security breach could result in additional
regulation, which could materially increase our costs.
An increase in fraudulent and other illegal activity involving our cards could lead to reputational damage to our brands and reduce the use and
acceptance of our cards.
Criminals are using increasingly sophisticated methods to capture cardholder account information. They use the information to conduct fraudulent
transactions. Outsourcing and specialization of functions within the payments system are increasing. As a result, more third parties are involved in processing
transactions using our cards. A rise in fraud levels involving our cards, or in misconduct by third parties processing transactions using our cards, could lead to
reputational damage to our brands. This could reduce the use and acceptance of our cards or lead to greater regulation, which could increase our compliance
costs.
Failure to maintain interoperability between Visa Inc.'s and Visa Europe's authorization and clearing and settlement systems could damage the
business and global perception of the Visa brands.
Before our reorganization in October 2007, Visa Europe and we shared authorization, clearing, and settlement systems. Visa Europe completed and
substantially deployed its own systems in the 2010 fiscal year. As a result, Visa Europe and we will have to ensure that the two systems can process every
transaction involving both of our territories, regardless of where it originates. Visa Europe's newly independent system operations could present challenges to
our business due to the heightened difficulty of maintaining the interoperability of our respective systems as they diverge over time. Failure to authorize or
clear and settle inter-territory transactions quickly and accurately could impair the global perception of the Visa brands.
Risks Related to our Structure and Organization
We have little ability to control Visa Europe's operations and limited recourse if it breaches its obligations to us.
Visa Europe has very broad rights to operate the Visa business in its region under the agreement that governs our relationship. If we want to change a
global rule or require Visa Europe to implement certain changes that would not have a positive return for Visa Europe and its members, then Visa Europe is
not required to implement that rule or change unless we agree to pay for the implementation costs and expenses that Visa Europe and its members will incur
as a consequence of the implementation.
If Visa Europe fails to meet its obligations, our remedies under this agreement are limited. We cannot terminate the agreement even upon Visa Europe's
material, uncured breach. Although we have a call right to acquire Visa Europe, we can exercise that right under only extremely limited circumstances.
These and other features of the licenses granted under the agreement may also raise issues concerning the characterization of the licenses for purposes
of tax treatment of entry into the licenses and payments received thereunder.
In some instances, as in the case of CyberSource and PlaySpan, Visa Europe may have the right to control the activities of newly acquired entities
within Visa Europe's territory. In any event, Visa
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