Green Dot 2010 Annual Report Download - page 29

Changes in credit card association or other network rules or standards set by Visa and
MasterCard, or changes in card association and debit network fees or products or inter-
change rates, could adversely affect our business, financial position and results of
operations.
We and the banks that issue our cards are subject to Visa and MasterCard association rules that could
subject us to a variety of fines or penalties that may be levied by the card associations or networks for acts
or omissions by us or businesses that work with us, including card processors, such as Total Systems
Services, Inc. The termination of the card association registrations held by us or any of the banks that issue
our cards or any changes in card association or other debit network rules or standards, including
interpretation and implementation of existing rules or standards, that increase the cost of doing business
or limit our ability to provide our products and services could have an adverse effect on our business,
operating results and financial condition. In addition, from time to time, card associations increase the
organization and/or processing fees that they charge, which could increase our operating expenses,
reduce our profit margin and adversely affect our business, operating results and financial condition.
Furthermore, a substantial portion of our operating revenues is derived from interchange fees. For the
year ended December 31, 2010, interchange revenues represented 29.8% of our total operating revenues,
and we expect interchange revenues to continue to represent a significant percentage of our total
operating revenues in the near term. The amount of interchange revenues that we earn is highly
dependent on the interchange rates that Visa and MasterCard set and adjust from time to time. There
is a substantial likelihood that interchange rates for certain products and certain issuing banks will decline
significantly in the future as a result of the implementation of the Dodd-Frank Act, which requires the
Federal Reserve Board to implement regulations that will likely substantially limit interchange fees for
many issuers. While the interchange rates that may be earned by us and the bank we propose to acquire
will be unaffected by this new law, there can be no assurance that future legislation or regulation will not
impact our interchange revenues substantially. If interchange rates decline, whether due to actions by Visa
or MasterCard or future legislation or regulation, we would likely need to change our fee structure to
compensate for lost interchange revenues. To the extent we increase the pricing of our products and
services, we might find it more difficult to acquire consumers and to maintain or grow card usage and
customer retention. We also might have to discontinue certain products or services. As a result, our
operating revenues, operating results, prospects for future growth and overall business could be materially
and adversely affected.
Changes in laws and regulations to which we are subject, or to which we may become
subject, may increase our costs of operation, decrease our operating revenues and disrupt
our business.
Changes in laws and regulations may occur that could increase our compliance and other costs of
doing business, require significant systems redevelopment, or render our products or services less
profitable or obsolete, any of which could have an adverse effect on our results of operations. We could
face more stringent anti-money laundering rules and regulations, as well as more stringent licensing rules
and regulations, compliance with which could be expensive and time consuming.
Changes in laws and regulations governing the way our products and services are sold could
adversely affect our ability to distribute our products and services and the cost of providing those products
and services. If onerous regulatory requirements were imposed on the sale of our products and services,
the requirements could lead to a loss of retail distributors, which, in turn, could materially and adversely
impact our operations. For example, in June 2010, the FinCEN published for comment proposed new rules
regarding, among other things, the applicability of the Bank Secrecy Act’s anti-money laundering pro-
visions to prepaid products such as ours. If adopted as proposed, these new rules would establish a more
comprehensive regulatory framework for access to prepaid financial services. As currently drafted, the
proposed rules would significantly change the way customer data, including identification information, is
collected for certain prepaid products (including our cards) by shifting the point of collection from us to our
retail distributors. We believe that, if the rules are adopted as currently proposed, we and our retail
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