Visa 2010 Annual Report Download - page 32

Table of Contents
settlement failure, we may be unable to recover the amount of such payment. This could expose us to significant losses, materially and adversely affecting our
financial condition, results of operations and cash flow.
We estimate settlement at risk (or exposure) based on the sum of three inputs. The first is average daily volumes during the quarter multiplied by the
estimated number of days to settle plus a safety margin. The second is four months of rolling average chargebacks volume. The third is the total balance for
outstanding traveler's cheques. Additionally, from time to time, we review and revise our risk management methodology and inputs as necessary. See Note 13
—Settlement Guarantee Management to our consolidated financial statements included in Item 8 of this report.
Some of our clients are composed of groups of financial institutions. Some of these clients have elected to limit their responsibility for settlement losses
arising from the failure of their constituent financial institutions in exchange for managing their constituent financial institutions in accordance with our credit
risk policy. To the extent that any settlement failure resulting from a constituent financial institution exceeds the limits established by our credit risk policy,
we would have to absorb the cost of such settlement failure, which could materially and adversely affect our cash flow.
If our transaction processing systems are disrupted or we cannot process transactions efficiently, the perception of our brands and our revenues or
operating results could be materially and adversely affected.
Our transaction processing systems may experience service interruptions or degradation because of processing or other technology malfunction, fire,
natural disasters, power loss, disruptions in long distance or local telecommunications access, fraud, terrorism, climate change or accident. Our visibility in the
global payments industry may attract terrorists and hackers to conduct physical or computer-based attacks, leading to an interruption in service, increased
costs or the compromise of data security. Additionally, we rely on service providers for the timely transmission of information across our global data network.
If a service provider fails to provide the communications capacity or services we require because of a natural disaster, operational disruption, terrorism or any
other reason, the failure could interrupt our services, adversely affect the perception of our brands' reliability and materially reduce our revenues or
profitability.
If we cannot keep pace with rapid technological developments to provide new and innovative payment programs and services, the use of our cards
could decline, reducing our revenues and net income.
Rapid, significant technological changes are confronting the payments industry. These include developments in smart cards, eCommerce, mobile
commerce and radio frequency and proximity payment devices, such as contactless cards. 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 the payments industry will continue to emerge. These new services and technologies
may be superior to, or render obsolete, the technologies we currently use in our card products and services. In addition, our ability to adopt new services and
technologies that we develop may be inhibited by industry-wide standards, by resistance to change from clients or merchants or by third parties' intellectual
property rights. Our success will depend in part on our ability to develop new technologies and adapt to technological changes and evolving industry
standards.
Account data breaches involving card data stored by third parties or by us could adversely affect our reputation and revenues.
Our clients, merchants, others and we store cardholder account information in connection with our payment cards. In addition, our clients may use
third-party processors to process transactions
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