Green Dot 2011 Annual Report Download - page 29

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continue to rely upon this vendor for some portion of our card processing for an extended period of time. It would be
difficult to replace some of our third-party vendors, particularly Total System Services, Inc., in a timely manner if they
were unwilling or unable to provide us with these services during the term of their agreements with us or if we are
unable to successfully develop our in-house processing solution, and our business and operations could be adversely
affected.
Our business could suffer if there is a decline in the use of prepaid cards as a payment mechanism or
there are adverse developments with respect to the prepaid financial services industry in general.
As the prepaid financial services industry evolves, consumers may find prepaid financial services to be less
attractive than traditional or other financial services. Consumers might not use prepaid financial services for any number
of reasons, including the general perception of our industry. For example, negative publicity surrounding other prepaid
financial service providers could impact our business and prospects for growth to the extent it adversely impacts the
perception of prepaid financial services among consumers. If consumers do not continue or increase their usage of
prepaid cards, our operating revenues may remain at current levels or decline. Predictions by industry analysts and
others concerning the growth of prepaid financial services as an electronic payment mechanism may overstate the
growth of an industry, segment or category, and you should not rely upon them. The projected growth may not occur
or may occur more slowly than estimated. If consumer acceptance of prepaid financial services does not continue to
develop or develops more slowly than expected or if there is a shift in the mix of payment forms, such as cash, credit
cards, traditional debit cards and prepaid cards, away from our products and services, it could have a material adverse
effect on our financial position and results of operations.
Fraudulent and other illegal activity involving our products and services could lead to reputational damage
to us and reduce the use and acceptance of our cards and reload network.
Criminals are using increasingly sophisticated methods to engage in illegal activities involving our cards or
cardholder information, such as counterfeiting, fraudulent payment or refund schemes and identity theft. We rely upon
third parties for some transaction processing services, which subjects us and our cardholders to risks related to the
vulnerabilities of those third parties. A single significant incident of fraud, or increases in the overall level of fraud,
involving our cards and other products and services, could result in reputational damage to us, which could reduce
the use and acceptance of our cards and other products and services, cause retail distributors or network acceptance
members to cease doing business with us or lead to greater regulation that would increase our compliance costs.
Furthermore, in an effort to counteract fraud involving our products and services, we may implement risk control
mechanisms that could make it more difficult for legitimate customers to obtain and use our products and services,
which would negatively impact our operating results.
A data security breach could expose us to liability and protracted and costly litigation, and could adversely
affect our reputation and operating revenues.
We, the banks that issue our cards and our retail distributors, network acceptance members and third-party
processors receive, transmit and store confidential customer and other information in connection with the sale and
use of our prepaid financial services. Our encryption software and the other technologies we use to provide security
for storage, processing and transmission of confidential customer and other information may not be effective to protect
against data security breaches by third parties. The risk of unauthorized circumvention of our security measures has
been heightened by advances in computer capabilities and the increasing sophistication of hackers. The banks that
issue our cards and our retail distributors, network acceptance members and third-party processors also may
experience similar security breaches involving the receipt, transmission and storage of our confidential customer and
other information. Improper access to our or these third parties’ systems or databases could result in the theft,
publication, deletion or modification of confidential customer and other information.
A data security breach of the systems on which sensitive cardholder data and account information are stored could
lead to fraudulent activity involving our products and services, reputational damage and claims or regulatory actions
against us. If we are sued in connection with any data security breach, we could be involved in protracted and costly
litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business
practices or pricing structure, any of which could have a material adverse effect on our operating revenues and
profitability. We would also likely have to pay (or indemnify the banks that issue our cards for) fines, penalties and/or
other assessments imposed by Visa or MasterCard as a result of any data security breach. Further, a significant data
security breach could lead to additional regulation, which could impose new and costly compliance obligations. In
addition, a data security breach at one of the banks that issue our cards or at our retail distributors, network acceptance
members or third-party processors could result in significant reputational harm to us and cause the use and acceptance
of our cards to decline, either of which could have a significant adverse impact on our operating revenues and future
growth prospects.