Green Dot 2013 Annual Report Download - page 29

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and integrate and manage the personnel of the acquired operations. We also must effectively integrate the different
cultures of acquired business organizations into our own in a way that aligns various interests, and may need to enter
new markets in which we have no or limited experience and where competitors in such markets have stronger market
positions.
To the extent we pay the consideration for any future acquisitions or investments in cash, it would reduce the
amount of cash available to us for other purposes. Future acquisitions or investments could also result in dilutive
issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, or impairment
charges against goodwill on our balance sheet, any of which could harm our financial condition and negatively impact
our stockholders.
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
property rights of third parties. Our future success will depend, in part, on our ability to develop new technologies and
adapt to technological changes and evolving industry standards. These initiatives are inherently risky, and they may
not be successful or may have an adverse effect on our business, financial condition and results of operations.
We face settlement risks from our retail distributors, which may increase during an economic downturn.
The vast majority of our business is conducted through retail distributors that sell our products and services to
consumers at their store locations. Our retail distributors collect funds from the consumers who purchase our products
and services and then must remit these funds directly to accounts established for the benefit of these consumers at
the banks that issue our cards. The remittance of these funds by the retail distributor takes on average two business
days. If a retail distributor becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to remit proceeds
to the card issuing bank from the sales of our products and services, we are liable for any amounts owed to the card
issuing bank. As of December 31, 2013, we had assets subject to settlement risk of $37.0 million. Given the possibility
of recurring volatility in global financial markets, the approaches we use to assess and monitor the creditworthiness
of our retail distributors may be inadequate, and we may be unable to detect and take steps to mitigate an increased
credit risk in a timely manner.
Economic downturns could result in settlement losses, whether or not directly related to our business. We are not
insured against these risks. Significant settlement losses could have a material adverse effect on our business, results
of operations and financial condition.
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. If conditions in the United States 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, would materially harm our business, results
of operations and financial condition.