Visa 2007 Annual Report Download - page 39

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payments. In addition, our payment programs compete against the card-based payments systems of our competitors, such as MasterCard, American Express,
Discover and private-label cards issued by merchants.
Some of our competitors may develop substantially greater financial and other resources than we have, may offer a wider range of programs and
services than we offer, may use more effective advertising and marketing strategies to achieve broader brand recognition or merchant acceptance than we
have or may develop better security solutions or more favorable pricing arrangements. Our competitors may also introduce more innovative programs and
services than ours.
Certain of our competitors, including American Express, Discover, private-label card networks and certain alternative payments systems, operate
closed-loop payments systems with direct connections to both merchants and consumers, without involving intermediaries. These competitors seek to derive
competitive advantages from their business models. For example, operators of closed-loop payments systems tend to have greater control over consumer and
merchant customer service than operators of open-loop multi-party payments systems such as ours, in which we must rely on our issuing and acquiring
financial institution customers. In addition, these competitors have not attracted the same level of legal or regulatory scrutiny of their pricing and business
practices as have operators of open-loop multi-party payments systems such as ours.
We also expect that there may be changes in the competitive landscape in the future, including:
• Competitors, customers and other industry participants may develop products that compete with or replace value-added services we currently
provide to support our transaction processing. For example, in recent years some of our competitors and members have begun to compete with
our currency conversion services by providing dynamic currency conversion services. Dynamic currency conversion is a service offered or
facilitated by a merchant or processor that allows a cardholder to choose to have a transaction converted from the merchant's currency into the
cardholder's billing currency at the point of sale in real-time, thereby bypassing our currency conversion processes. Dynamic currency conversion
services could, if significant numbers of cardholders choose to use them, replace our own currency conversion processing services or could force
us to change our pricing or practices for these services. If we process fewer transactions or are forced to change our pricing or practices for our
currency conversion processing because of competing dynamic currency conversion services or otherwise, our revenues may be materially and
adversely affected.
• Parties that process our transactions in certain countries may try to eliminate our position in the payments value chain. For example, merchants
could process transactions directly with issuers, or processors could process transactions directly between issuers and acquirers.
• Participants in the payments industry may merge, create joint ventures or form other business combinations that may strengthen their existing
business propositions or create new payment services that compete with our services.
• Competition from alternative types of payment services, such as online payment services and services that permit direct debit of consumer
checking accounts or automatic clearing house, or ACH, payments, may increase.
Our failure to compete effectively against any of the foregoing competitive threats, could materially and adversely affect our revenues, operating
results, prospects for future growth and overall business.
Our operating revenues would decline significantly if we lost one or more of our largest customers, which could have a material adverse impact on
our business.
A significant portion of our operating revenues are concentrated among our largest customers. Our pro forma operating revenues from our five largest
customers represented approximately $1.2 billion, or 23%, and $938 million, or 24%, of our total pro forma operating revenues for fiscal 2007 and fiscal
2006, respectively. In
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