Visa 2015 Annual Report Download - page 27

merchants not to accept Visa-branded cards or payment products or to steer account holders to
alternate payment systems or forms of payment. 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 rates may make Visa-branded cards and payment products less desirable,
reduce our overall transaction volumes, and harm our overall business.
We are subject to 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.
In order to provide account holders a consistent experience and transparency into VisaNet, 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 our network. We refer to these various practices as
network exclusivity.
In addition, certain network or issuer rules or practices may be viewed as limiting the routing
options of merchants when multiple debit networks co-reside on Visa debit cards. For example, the
Visa Rules require that all authorization, clearance and settlement of international transactions must be
done through VisaNet. These are commonly referred to as routing rules.
The Dodd-Frank Act already limits our and issuers’ ability to adopt network exclusivity and
preferred routing in the debit area. Additional legislation or regulations like the Dodd-Frank Act in the
U.S. and elsewhere could materially decrease the number of transactions we process. In order to
retain transaction volume, we may reduce the fees we charge to issuers or acquirers or increase the
payments and other incentives we provide to issuers, acquirers or merchants. Any of these outcomes
could harm our overall business.
The Dodd-Frank Act and other regulations and developments arising from the Dodd-Frank Act
may continue to harm our overall business.
As of October 1, 2011, in accordance with the Dodd-Frank Act, the Federal Reserve capped the
maximum U.S. debit interchange reimbursement rate charged by large financial institutions at twenty-
one cents plus five basis points, with a possible fraud adjustment up to an additional one cent. This
amounted to a significant reduction in the average system-wide fees previously charged. 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 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 October 2011 regulations, our business could continue to be affected, including if the
Federal Reserve issues new or revised regulations.
Negative pressures have arisen through various channels. Other debit networks may become
more aggressive in offering merchant cost reductions to win routing preference, which in turn puts
more pressure on the business terms offered by Visa. A number of our clients obtained fee reductions
or increased incentives from us to offset their own lost revenue. Some clients elected to issue fewer
cards enabled with Visa-affiliated networks or reduced the number of debit cards they issued and
investments they made in marketing and rewards programs, while others imposed new or higher fees
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