Green Dot 2013 Annual Report Download - page 28

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We are exposed to losses from cardholder accounts.
Fraudulent activity involving our products may lead to cardholder disputed transactions, for which we may be liable
under banking regulations and payment network rules. Our fraud detection and risk control mechanisms may not
prevent all fraudulent or illegal activity. To the extent we incur losses from disputed transactions, our business, results
of operations and financial condition could be materially and adversely affected.
Additionally, our cardholders can incur charges in excess of the funds available in their accounts, and we may
become liable for these overdrafts. While we decline authorization attempts for amounts that exceed the available
balance in a cardholder’s account, the application of card association rules, the timing of the settlement of transactions
and the assessment of the card’s monthly maintenance fee, among other things, can result in overdrawn accounts.
Maintenance fee assessments accounted for approximately 96% of aggregate overdrawn account balances in the
year ended December 31, 2013, as compared to approximately 94% in the year ended December 31, 2012.
Maintenance fee assessment overdrafts occur as a result of our charging a cardholder, pursuant to the card’s terms
and conditions, the monthly maintenance fee at a time when he or she does not have sufficient funds in his or her
account.
Our remaining overdraft exposure arises primarily from late-posting. A late-post occurs when a merchant posts a
transaction within a payment network-permitted timeframe but subsequent to our release of the authorization for that
transaction, as permitted by card association rules. Under card association rules, we may be liable for the amount of
the transaction even if the cardholder has made additional purchases in the intervening period and funds are no longer
available on the card at the time the transaction is posted.
Overdrawn account balances are funded on our behalf by the bank that issued the overdrawn card. We are
responsible to this card issuing bank for any losses associated with these overdrafts. Overdrawn account balances
are therefore deemed to be our receivables due from cardholders. We maintain reserves to cover the risk that we may
not recover these receivables due from our cardholders, but our exposure may increase above these reserves for a
variety of reasons, including our failure to predict the actual recovery rate accurately. To the extent we incur losses
from overdrafts above our reserves or we determine that it is necessary to increase our reserves substantially, our
business, results of operations and financial condition could be materially and adversely affected.
Acquisitions or investments could disrupt our business and harm our financial condition.
We have in the past acquired, and we expect to acquire in the future, other businesses and technologies. The
process of integrating an acquired business, product, service or technology can create unforeseen operating difficulties,
expenditures and other challenges such as:
• increased regulatory and compliance requirements;
• regulatory restrictions on revenue streams of acquired businesses;
• implementation or remediation of controls, procedures and policies at the acquired company;
• diversion of management time and focus from operation of our then-existing business to acquisition integration
challenges;
• coordination of product, sales, marketing and program, and systems management functions;
• transition of the acquired company’s users and customers onto our systems;
• retention of employees from the acquired company;
• integration of employees from the acquired company into our organization;
• integration of the acquired company’s accounting, information management, human resource and other
administrative systems and operations generally with ours;
• liability for activities of the acquired company prior to the acquisition, including violations of law, commercial
disputes, and tax and other known and unknown liabilities; and
• increased litigation or other claims in connection with the acquired company, including claims brought by
terminated employees, customers, former stockholders or other third parties.
If we are unable to successfully integrate an acquired business or technology or otherwise address these difficulties
and challenges or other problems encountered in connection with an acquisition, we might not realize the anticipated
benefits of that acquisition, we might incur unanticipated liabilities or we might otherwise suffer harm to our business
generally. To integrate acquired businesses, we must implement our technology systems in the acquired operations