Green Dot 2013 Annual Report Download - page 22

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factors, which we believe is likely to, among other things, continue to adversely affect our new card activations from
legitimate customers for the foreseeable future. We also expect seasonal or other influences, including potential
fluctuations in stock-based retailer incentive compensation caused by variations in our stock price, to cause sequential
quarterly fluctuations and periodic declines in our operating revenues, operating income and net income. For example,
in recent years, our results for each of the first three quarters have been favorably affected by large numbers of
taxpayers electing to receive their tax refunds via direct deposit on our cards, which caused our operating revenues
to be typically higher in the first halves of those years than they were in the corresponding second halves of those
years.
Our ability to increase card usage and cardholder retention and to attract new long-term users of our products can
also have a significant effect on our operating revenues. We may be unable to generate increases in card usage,
cardholder retention or attract new long-term users of our products for a number of reasons, including our inability to
maintain our existing distribution channels, the failure of our cardholder retention and usage incentives to influence
cardholder behavior, our inability to predict accurately consumer preferences or industry changes and to modify our
products and services on a timely basis in response thereto, and our inability to produce new features and services
that appeal to existing and prospective cardholders. As a result, our operating results could vary materially from period
to period based on the degree to which we are successful in increasing card usage and cardholder attention and
attracting long-term users of our products.
Any of the above factors could have a material adverse impact on our business, operating results and financial
condition.
The industry in which we compete is highly competitive, which could adversely affect our operating results.
The prepaid financial services industry is highly competitive and includes a variety of financial and non-financial
services vendors. We expect competition to intensify as existing competitors and new market entrants are bringing to
market products and services that are substantially similar to ours or that may be perceived to be better than ours. For
example, Walmart, Walgreens and CVS began selling competitive American Express-branded products at their store
locations in 2012. Competition is expected to negatively impact our operating revenues, excluding stock-based retailer
incentive compensation, and could cause us to compete on the basis of price or increase our sales and marketing
expenses, any of which would likely seriously harm our business, operating results and financial condition. Our current
and potential competitors include:
• prepaid card program managers, such as American Express, First Data, Total Systems Services, AccountNow,
and other traditional banks, such as J.P. Morgan Chase, that have entered the prepaid card market;
• reload network providers, such as Visa, Western Union and MoneyGram; and
• prepaid card distributors, such as InComm and Blackhawk Network
Some of these vendors compete with us in more than one of the vendor categories described above, while others
are primarily focused in a single category. In addition, competitors in one category have worked or are working with
competitors in other categories to compete with us. A portion of our cash transfer revenues is derived from reloads to
cards managed by companies that compete with us as program managers. We also face actual and potential competition
from retail distributors or from other companies, such as PayPal and Visa that have decided or may in the future decide
to compete, or compete more aggressively, in the prepaid financial services industry.
We also compete with businesses outside of the prepaid financial services industry, including traditional providers
of financial services, such as banks that offer demand deposit accounts and card issuers that offer credit cards, private
label retail cards and gift cards. In particular, our recently-introduced GoBank product is designed to compete directly
with banks by providing products and services that they have traditionally provided. These and other competitors in
the larger electronic payments industry are introducing new and innovative products and services, such as those
involving radio frequency and proximity payment devices (such as contactless cards), e-commerce and mobile
commerce, that compete with ours. We expect that this competition will intensify as the prepaid financial services
industry and the larger banking and electronic payments industry continues to rapidly evolve.
Many existing and potential competitors have longer operating histories and greater name recognition than we do.
In addition, many of our existing and potential competitors are substantially larger than we are, may already have or
could develop substantially greater financial and other resources than we have, may offer, develop or introduce a wider
range of programs and services than we offer or may use more effective advertising and marketing strategies than we
do to achieve broader brand recognition, customer awareness and retail penetration. We could experience increased
price competition as we are facing increased competition with a greater number of offerings from existing competitors
and new market entrants at the stores of many of our retail distributors. If this happens, we expect that the purchase
and use of our products and services would decline in the near term and farther into the future. If price competition