Visa 2012 Annual Report Download - page 18

Table of Contents
and regulatory authorities and central banks in a number of jurisdictions have reviewed or are reviewing these rates. These
jurisdictions include Australia, Canada, Brazil and South Africa.
When we cannot set default interchange rates at optimal levels, issuers and acquirers find our payments system less
attractive. This lowers overall transaction volume and slows growth of transactions. It also may increase the attractiveness of
closed-loop payments systems—those with direct connections to both merchants and consumers—and other forms of payment. In
addition, we believe some issuers are charging new or higher fees to consumers. In some instances, this makes our card programs
less desirable and reduces our transaction volumes and profitability. Some acquirers elect to charge higher discount rates to
merchants, regardless of the level of Visa interchange, leading merchants not to accept cards for payment or to steer Visa
cardholders to alternate payment systems. In addition, some issuers and acquirers have obtained, and may continue to obtain,
incentives from us and reductions in the fees that we charge in an effort to reduce the expense of their card programs. For these
reasons, additional regulation of interchange reimbursement fees may have a material, adverse impact on our financial condition,
revenues, results of operations, prospects for future growth and overall business.
Additional regulations that prohibit us from contracting with clients or requiring them to use only our network, or that
deny them the option of selecting only our network, may decrease the number of transactions we process, materially and
adversely affecting our financial condition, revenues, results of operations, prospects for future growth and overall
business .
In order to give Visa-branded cardholders a consistent experience, we promote certain practices to ensure that Visa-branded
cards are processed over our network. We have historically had agreements with some issuers under which they agree to issue
certain payment cards that use only the Visa network or receive incentives if they do so. In addition, certain issuers of some
products have historically chosen to include only the Visa network. We refer to these various practices as network exclusivity.
In addition, certain network or issuer rules or practices may be interpreted as limiting the routing options of merchants when
multiple debit networks co-reside on Visa debit cards. For example, Visa's rules require that an acquirer must process
authorizations for all international transactions through VisaNet and that a member must clear international transactions through
VisaNet. These are commonly referred to as routing rules.
The Dodd-Frank Act already limits our and issuers' ability to impose rules for, or choose various forms of, network exclusivity
and preferred routing in the debit area. See — The Dodd-Frank Act may continue to have a material, adverse impact on our
financial condition, revenues, results of operations, prospects for future growth and overall business . Future regulations like the
Dodd-Frank Act in the United States and elsewhere could materially decrease the number of transactions we process. In order to
retain that transaction volume, we would have to reduce the fees we charge to issuers or acquirers or increase the payments and
other incentives we provide to issuers or acquirers or directly to merchants. Any of these eventualities could have a material,
adverse effect on our financial condition, revenues, results of operations, prospects for future growth and overall business.
The Dodd-Frank Act may continue to have a material, adverse impact on our financial condition, revenues, results of
operations, prospects for future growth and overall business .
As of October 1, 2011, in accordance with the Dodd-Frank Act, the Federal Reserve capped the maximum U.S. debit
interchange fee charged by large financial institutions at twenty-one cents plus five basis points, before applying an interim fraud
adjustment up to an additional one cent. This amounted to a significant reduction from the average system-wide fees charged
previously. The Federal Reserve also issued regulations requiring issuers to make at least two unaffiliated networks available for
processing debit transactions on each debit card. The rules also prohibit us and issuers from restricting a merchant's ability to direct
the routing of electronic debit transactions over any of the networks that an issuer has enabled to process those transactions.
These regulations have adversely affected our U.S. debit business and associated revenues. They created negative pressure
on our pricing, reduced the volume and number of U.S. debit payments we process, and diminished associated revenues, and,
although we believe we have now absorbed their principal impact, they could continue to do so.
These pressures have arisen through various channels. A number of our clients obtained fee reductions or increased
incentives from us to offset their own lost revenue. Some reduced the number of debit cards they issue and investments they make
in marketing and rewards programs. Some imposed new or higher fees on debit cards or demand deposit account relationships.
Some elected to issue fewer cards enabled with Visa-affiliated networks. Many merchants have used the routing regulations to
redirect transactions or steer cardholders to other networks
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