Visa 2012 Annual Report Download - page 23

Table of Contents
prospects for future growth to suffer.
The global payments industry is intensely competitive. Our payment programs compete against all forms of payment. These
include cash, checks, and electronic and mobile transactions. In addition, our payment programs compete against the card-based
payments systems of our competitors and private-label cards issued by merchants. The Dodd-Frank 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, products and services than we do, including more innovative ones. 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.
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 untraditional 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 Dodd-
Frank 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 of this report.
We expect there to be changes in the competitive landscape in the future. For example:
Our failure to compete effectively in light of any such developments could materially and adversely affect our business,
financial condition, revenues, results of operations and prospects for future growth.
Disintermediation from the payments value chain would harm our business.
Our position in the payments value chain underpins our business. Certain of our competitors, including American Express,
Discover, private-label card networks and certain alternative payments systems, operate closed-
loop payments systems, with direct
connections to both merchants and consumers and no intermediaries. These competitors seek to derive competitive advantages
from this business model. The Dodd-Frank Act and other regulatory actions have provided and may in the future provide them with
increased opportunity to do so. In addition, although they pursue the same or similar lines of business using the same or similar
business and commercial models, they have not attracted the same level of legal or regulatory scrutiny of their pricing and business
practices as operators of multi-party payments systems such as ours.
We also run the risk of disintermediation by virtue of increasing bilateral agreements between entities that would rather not use
a payment network for processing payments. For example, merchants could process
21
• competitors, clients and others may develop products that compete with or replace the value-added services we provide
to support our transaction processing;
•
parties that process our transactions in certain countries may try to eliminate our position in the payments value chain;
• participants in the payments industry may merge, form joint ventures or enter into other business combinations that
strengthen their existing business propositions or create new, competing payment services; or
• competition may increase from alternative types of payment services, such as mobile payments services, online
payment services and services that permit direct debit of consumer checking accounts or ACH payments.