Green Dot 2011 Annual Report Download - page 32

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charges against goodwill on our balance sheet, any of which could harm our financial condition and negatively impact
our stockholders.
Economic, political and other conditions may adversely affect trends in consumer spending.
The electronic payments industry, including the prepaid financial services segment within that industry, depends
heavily upon the overall level of consumer spending. The United States is currently facing challenging economic
conditions and if these conditions remain uncertain or deteriorate further, we may experience a reduction in the number
of our cards that are purchased or reloaded, the number of transactions involving our cards and the use of our reload
network and related services. A sustained reduction in the use of our products and related services, either as a result
of a general reduction in consumer spending or as a result of a disproportionate reduction in the use of card-based
payment systems, our business, results of operations and financial condition would be materially harmed.
Our business is dependent on the efficient and uninterrupted operation of computer network systems and
data centers.
Our ability to provide reliable service to cardholders and other network participants depends on the efficient and
uninterrupted operation of our computer network systems and data centers as well as those of our retail distributors,
network acceptance members and third-party processors. Our business involves movement of large sums of money,
processing of large numbers of transactions and management of the data necessary to do both. Our success depends
upon the efficient and error-free handling of the money that is collected by our retail distributors and remitted to network
acceptance members or the banks that issue our cards. We rely on the ability of our employees, systems and processes
and those of the banks that issue our cards, our retail distributors, our network acceptance members and third-party
processors to process and facilitate these transactions in an efficient, uninterrupted and error-free manner.
In the event of a breakdown, a catastrophic event (such as fire, natural disaster, power loss, telecommunications
failure or physical break-in), a security breach or malicious attack, an improper operation or any other event impacting
our systems or processes, or those of our vendors, or an improper action by our employees, agents or third-party
vendors, we could suffer financial loss, loss of customers, regulatory sanctions and damage to our reputation. The
measures we have taken, including the implementation of disaster recovery plans and redundant computer systems,
may not be successful, and we may experience other problems unrelated to system failures. We may also experience
software defects, development delays and installation difficulties, any of which could harm our business and reputation
and expose us to potential liability and increased operating expenses. Some of our contracts with retail distributors,
including our contract with Walmart, contain service level standards pertaining to the operation of our systems, and
provide the retail distributor with the right to collect damages and potentially to terminate its contract with us for system
downtime exceeding stated limits. If we face system interruptions or failures, our business interruption insurance may
not be adequate to cover the losses or damages that we incur.
We must be able to operate and scale our technology effectively to match our business growth.
Our ability to continue to provide our products and services to a growing number of network participants, as well
as to enhance our existing products and services and offer new products and services, is dependent on our information
technology systems. If we are unable to manage the technology associated with our business effectively, we could
experience increased costs, reductions in system availability and losses of our network participants. Any failure of our
systems in scalability and functionality would adversely impact our business, financial condition and results of
operations.
If we are unable to keep pace with the rapid technological developments in our industry and the larger
electronic payments industry necessary to continue providing our network acceptance members and
cardholders with new and innovative products and services, the use of our cards and other products and
services could decline.
The electronic payments industry is subject to rapid and significant technological changes, including continuing
advancements in the areas of radio frequency and proximity payment devices (such as contactless cards), e-commerce
and mobile commerce, among others. We cannot predict the effect of technological changes on our business. We rely
in part on third parties, including some of our competitors and potential competitors, for the development of, and access
to, new technologies. We expect that new services and technologies applicable to our industry will continue to emerge,
and these new services and technologies may be superior to, or render obsolete, the technologies we currently utilize
in our products and services. Additionally, we may make future investments in, or enter into strategic alliances to
develop, new technologies and services or to implement infrastructure change to further our strategic objectives,
strengthen our existing businesses and remain competitive. However, our ability to transition to new services and
technologies that we develop may be inhibited by a lack of industry-wide standards, by resistance from our retail
distributors, network acceptance members, third-party processors or consumers to these changes, or by the intellectual