Visa 2010 Annual Report Download - page 28

Table of Contents
Our failure to compete effectively against any of these threats could materially and adversely affect our business, financial condition, revenues, results
of operations, prospects for future growth and overall business.
Disintermediation from the payments value chain would harm our business.
Our position in the payments value chain underpins our business. 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 and no
intermediaries. These competitors seek to derive competitive advantages from this business model. In addition, they have not attracted the same level of legal
or regulatory scrutiny of their pricing and business practices as operators of multi-party payments systems such as ours.
We also run the risk of disintermediation by virtue of increasing bilateral agreements between entities that would rather not use a payment network for
processing payments. For example, merchants could process transactions directly with issuers, or processors could process transactions directly between
issuers and acquirers.
Additional consolidation in the banking industry could result in our losing business and create pressure on the fees we charge our clients, materially
and adversely affecting our revenues and profitability.
The banking industry has recently undergone substantial, accelerated consolidation, which could continue. Significant ongoing consolidation in the
banking industry may result in the acquisition of one or more of our largest clients by an institution with a strong relationship with one of our competitors.
This could result in the acquired bank's Visa business shifting to that competitor, resulting in a substantial loss of business to us. In addition, one or more of
our clients could merge with or acquire one of our competitors, shifting its payments volume to that competitor. Any such transaction could have a material
adverse effect on our business and prospects.
Continued consolidation in the banking industry would also reduce the overall number of our clients and potential clients and could increase the
negotiating power of our remaining clients and potential clients. This consolidation could lead financial institutions to seek greater pricing discounts or other
incentives with us. In addition, consolidation could prompt our existing clients to seek to renegotiate their pricing agreements with us to obtain more favorable
terms. We may also be adversely affected by price compression should one of our clients absorb another financial institution and qualify for higher volume-
based discounts on the combined volumes of the merged businesses. Pressure on the fees we charge our clients caused by such consolidation could materially
and adversely affect our revenues, results of operations, prospects for future growth and overall business. In addition, the current economic environment could
lead some clients to curtail or postpone near-term investments in growing their card portfolios, limit credit lines or take other actions that affect adversely the
growth of our volume and revenue streams from these clients.
Merchants' continued focus on the costs associated with payment card acceptance may result in more litigation, regulation, regulatory enforcement
and incentive arrangements.
We rely in part on merchants and their relationships with our clients to maintain and expand the acceptance of our payment cards. Consolidation in the
retail industry is producing a group of larger merchants that is having a significant impact on all participants in the global payments industry. Some merchants
are seeking to reduce their costs associated with payment card acceptance by lobbying for new legislation and regulatory enforcement and by bringing
litigation. If they continue, these efforts could materially and adversely affect our revenues, results of operations, prospects for future growth and overall
business.
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