Visa 2007 Annual Report Download - page 27

Table of Contents
The banking industry has undergone consolidation, and we expect this trend to continue. A major financial institution customer may be acquired by an
institution that has a strong relationship with a competitor, resulting in a substantial loss of business. Because continued consolidation in the banking industry
results in fewer financial institutions of increased size, the bargaining power of the remaining financial institutions increases.
Government Regulation
Government regulation impacts key aspects of our business. We are subject to government regulation of the payments industry in many countries in
which our cards are used. Our customers are also subject to numerous regulations applicable to banks and other financial institutions in the United States and
elsewhere, and as a consequence our business is affected by such regulations. In recent years our business has come under increasing regulatory scrutiny. In
particular, interchange fees associated with open-loop payments systems such as ours are being reviewed or challenged in various jurisdictions in which our
cards are used.
As the volume of card-based payments has increased in recent years, interchange fees, including our default interchange rates, have become subject to
increased regulatory scrutiny worldwide. We believe that regulators are increasingly adopting a similar approach to interchange fees, and, as a result,
developments in any one jurisdiction may influence regulatory approaches in other jurisdictions. Interchange fees have been the topic of recent committee
hearings in the U.S. House of Representatives and the U.S. Senate, as well as conferences held by a number of U.S. federal reserve banks. In addition, the
U.S. House of Representatives has passed a bill that would commission a study by the Federal Trade Commission of the role of interchange fees in alleged
price gouging at gas stations. Individual state legislatures in the United States are also reviewing interchange fees, and legislators in a number of states have
proposed bills that purport to limit interchange fees or merchant discount rates or to prohibit their application to portions of a transaction. In addition, the
Merchants Payments Coalition, a coalition of trade associations representing businesses that accept credit and debit cards, is mounting a challenge to
interchange fees in the United States by seeking legislative and regulatory intervention.
Interchange fees and related practices also have been or are being reviewed by regulatory authorities and/or central banks in a number of jurisdictions,
including the United States, European Union, Australia, Brazil, Colombia, Germany, Honduras, Hungary, Mexico, New Zealand, Norway, Poland, Portugal,
Romania, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom. In certain countries, such as Australia and Mexico, interchange
rates have been adjusted in anticipation of, or in response to, government regulation.
Most jurisdictions in which we and our customers operate have implemented, amended or have pending anti-money laundering regulations. In 2002, we
and our customers became subject to the provisions of the U.S.A. PATRIOT Act, which requires the creation and implementation of comprehensive anti-
money laundering programs. In general, this requires that we make certain efforts to prevent our payments system from being used to facilitate money
laundering and the financing of terrorist activities, including, for example, the designation of a compliance officer, training of employees, adoption of internal
policies and procedures to mitigate money laundering risks, and periodic audits.
We are subject to regulations imposed by OFAC. OFAC restricts financial dealings with Cuba, Iran, Myanmar and Sudan, as well as financial dealings
with certain restricted third parties, such as identified money laundering fronts for terrorists or narcotics traffickers. While we prohibit financial institutions
that are domiciled in those countries or are restricted parties from being Visa members, many Visa International members are non-U.S. financial institutions,
and thus are not subject to OFAC restrictions. Accordingly, our payments network may be used with respect to transactions in or involving countries or
parties subject to OFAC-administered sanctions.
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