Visa 2013 Annual Report Download - page 23

In July 2013, a federal court invalidated these rules, finding that the Federal Reserve improperly
considered certain costs in setting a cap on the maximum U.S. debit interchange reimbursement rate
and that issuers must make at least two unaffiliated networks available for processing each electronic
debit transaction, regardless of authorization method. The Federal Reserve has appealed that ruling.
These regulations have adversely affected our U.S. debit business and associated revenues by
creating negative pressure on our pricing, reduced the volume and number of U.S. debit payments we
process, and diminished associated revenues. Although we believe we have absorbed the principal
impact of the regulations as issued in October 2011, our business could continue to be affected,
including if the Federal Reserve must issue new regulations.
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 issued and investments they made 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 account holders to other networks based on lowest cost or
other factors. Other clients and merchants are likely to take similar actions in the future.
The Dodd-Frank Act created an independent Consumer Financial Protection Bureau, with
responsibility for most federal consumer protection laws in the area of financial services and new
authority with respect to consumer protection issues, including those pertaining to us to some extent.
These actions may make payment card transactions less attractive to issuers, consumers and
merchants by further regulating disclosures, payment card practices, fees, routing and other matters
with respect to credit, debit and prepaid cards.
Some elements of the Dodd-Frank Act lack definition and create the potential for networks to
pursue different strategies subject to their interpretation of the rules. Our interpretation may result in a
pursuit of strategies that may be less effective than those of our competitors. Overall, the regulations
and developments arising from the Dodd-Frank Act could continue to have a material, adverse effect
on our financial condition, revenues, results of operations, prospects for future growth and overall
business.
New laws or regulations in one jurisdiction or of one product offering may lead to new laws or
regulations in other jurisdictions or of other product offerings.
Regulators around the world increasingly note each other’s approaches to the regulation of the
payments industry. Consequently, a development in one country, state or region may influence
regulatory approaches in another. The Dodd-Frank Act and the European Union Commission’s draft
interchange regulation are developments with such potential. Similarly, new laws and regulations
involving one product offering may cause lawmakers there to extend the regulations to other product
offerings. For example, regulations affecting debit payments could eventually spread to credit
payments.
The risks created by a new law or regulation have the potential to be replicated and to negatively
affect our business in another region or in other product offerings. As a result, we may face differing
rules and regulations in matters like interchange reimbursement rates, network exclusivity, preferred
routing, dynamic currency conversion, point of sale transaction rules and practices, and operating
regulations that may differ from country to country or by product offering.
If widely varying regulations come into existence worldwide, we may have difficulty rapidly
adjusting our product offerings, services and fees, and other important aspects of our business in the
various regions. In addition, adverse developments, regulations and litigation with respect to our
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