First Data 2014 Annual Report Download - page 17


All of our businesses function at the intersection of rapidly changing technological, social, economic, and regulatory developments that requires a wide
ranging set of expertise and intellectual capital. For us to successfully compete and grow, we must retain, recruit, and develop the necessary personnel who
can provide the needed expertise across the entire spectrum of our intellectual capital needs. In addition, we must develop our personnel to provide
succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified
personnel is competitive and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with
qualified or effective successors. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect
our profitability. We cannot assure that key personnel, including executive officers, will continue to be employed or that we will be able to attract and retain
qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on us.


The global electronic payments industry depends heavily upon the overall level of consumer, business, and government spending. A sustained deterioration
in the general economic conditions, particularly in the United States or Europe, or increases in interest rates in key countries in which we operate may
adversely affect our financial performance by reducing the number or average purchase amount of transactions involving payment cards. A reduction in the
amount of consumer spending could result in a decrease of our revenue and profits.
A weakening in the economy could also force some retailers to close, resulting in exposure to potential credit losses and transaction declines and us earning
less on transactions due also to a potential shift to large discount merchants. Additionally, credit card issuers may reduce credit limits and be more selective
with regard to which they issue credit cards. Changes in economic conditions could adversely impact our future revenues and profits and result in a
downgrade of our debt ratings which may lead to termination or modification of certain contracts and make it more difficult for us to obtain new business.

We are subject to the credit risk of our merchants being unable to satisfy obligations for which we may also be liable. For example, our merchant acquiring
alliances along with us are contingently liable for transactions originally acquired by us that are disputed by the cardholder and charged back to the
merchants. If we or the alliance is unable to collect this amount from the merchant, due to the merchant’s insolvency or other reasons, we or the alliance will
bear the loss for the amount of the refund paid to the cardholder. We have an active program to manage our credit risk and often mitigate our risk by
obtaining collateral. However, it is possible that a default on such obligations by one or more of our merchants could have a material adverse effect on our
business.

We have potential liability for fraudulent electronic payment transactions or credits initiated by merchants or others. Examples of merchant fraud include
when a merchant or other party knowingly uses a stolen or counterfeit credit, debit or prepaid card, card number or other credentials to record a false sales
transaction, processes an invalid card, or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction. Criminals are using
increasingly sophisticated methods to engage in illegal activities such as counterfeiting and fraud. It is possible that incidents of fraud could increase in the
future. Failure to effectively manage risk and prevent fraud would increase our chargeback liability or other liability. Increases in chargebacks or other
liability could have a material adverse effect on our business, financial condition, and results of operations.

Our core business depends heavily on the reliability of our processing systems. A system outage could have a material adverse effect on our business,
financial condition, and results of operations. Not only would we suffer damage to our reputation in the event of a system outage, but we may also be liable to
third parties. Many of our contractual agreements with financial institutions require us to pay penalties if our systems do not meet certain operating standards.
To successfully operate our business, we must be able to protect our processing and other systems from interruption, including from events that may be
beyond our control. Events that could cause system interruptions include, but are not limited to, fire, natural disaster,
17