Green Dot 2013 Annual Report Download - page 25

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Changes in rules or standards set by the payment networks, such as Visa and MasterCard, or changes in
debit network fees or products or interchange rates, could adversely affect our business, financial position
and results of operations.
We are subject to 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 System Services, Inc. The termination of the card association registrations held by us 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, 2013, interchange revenues represented 29.9% of our total operating revenues, and we expect
interchange revenues to continue to represent a significant percentage of our total operating revenues. The amount
of interchange revenues that we earn is highly dependent on the interchange rates that the payment networks set and
adjust from time to time. The enactment of the Dodd-Frank Act required the Federal Reserve Board to implement
regulations that have substantially limited interchange fees for many issuers. On July 31, 2013, the U.S. District Court
in the District of Columbia overturned the Federal Reserve's rules regarding interchange fees and network exclusivity.
The Federal Reserve is appealing the ruling and final resolution is expected in the first half of 2014. The current debit
interchange cap and network exclusivity rules will remain in place until the Federal Reserve can replace the invalidated
portions of the rule.
While we believe the interchange rates that may be earned by us and our subsidiary bank are exempt from the
limitations imposed by the Dodd-Frank Act and will be unaffected by this ruling, there can be no assurance that future
regulation or changes by the payment networks in response to this ruling will not impact our interchange revenues
substantially. If interchange rates decline, whether due to actions by the payment networks or future regulation, we
would likely need to change our fee structure to offset the loss of interchange revenues. However, our ability to make
these changes is limited by the terms of our contracts and other commercial factors, such as price competition. 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, and we could suffer reputational damage and become subject
to greater regulatory scrutiny. We also might have to discontinue certain products or services. As a result, our total
operating revenues, operating results, prospects for future growth and overall business could be materially and
adversely affected.
Our actual operating results may differ significantly from our guidance.
From time to time, we may issue guidance in our quarterly results conference calls, or otherwise, regarding our
future performance that represents our management’s estimates as of the date of release. This guidance, which includes
forward-looking statements, is based on projections prepared by our management. These projections are not prepared
with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and
neither our independent registered public accounting firm nor any other independent expert or outside party compiles
or examines the projections. Accordingly, no such person expresses any opinion or any other form of assurance with
respect to those projections.
Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity,
are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of
which are beyond our control, and are based upon specific assumptions with respect to future business decisions,
some of which will change. We intend to state possible outcomes as high and low ranges that are intended to provide
a sensitivity analysis as variables are changed but we can provide no assurances that actual results will not fall outside
of the suggested ranges.
The principal reason that we release guidance is to provide a basis for our management to discuss our business
outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by
any of these persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying
the guidance furnished by us will prove to be incorrect or will vary significantly from actual results. Accordingly, our
guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will
vary from our guidance and the variations may be material. In light of the foregoing, investors are urged not to rely
upon our guidance in making an investment decision with respect to our Class A common stock.