Vistaprint 2010 Annual Report Download - page 36

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Our failure to protect our network and the confidential information of our customers against
security breaches and to address risks associated with credit card fraud could damage our
reputation and brand and substantially harm our business and results of operations.
A significant prerequisite to online commerce and communications is the secure transmission of
confidential information over public networks. Our failure to prevent security breaches of our network
could damage our reputation and brand and substantially harm our business and results of
operations. Currently, a majority of our sales are billed to our customers’ credit card accounts directly.
We retain the credit card information of all of our customers for a limited period of time for the
purpose of issuing refunds and of our subscription customers for a longer period of time for the
purpose of recurring billing. We rely on encryption and authentication technology licensed from third
parties to effect secure transmission of confidential information, including credit card numbers.
Advances in computer capabilities, new discoveries in the field of cryptography or other related
developments, among other factors, may result in a compromise or breach of our network or the
technology that we use to protect our network and our customer transaction data including credit card
information. Any such compromise of our network or our security could damage our reputation and
brand and expose us to a risk of loss or litigation and possible liability, which would substantially harm
our business and results of operations. In addition, anyone who is able to circumvent our security
measures could misappropriate proprietary information or cause interruptions in our operations. We
may need to expend significant resources to protect against security breaches or to address problems
caused by breaches.
In addition, under current credit card practices, we may be liable for fraudulent credit card
transactions conducted on our websites, such as through the use of stolen credit card numbers,
because we do not obtain a cardholder’s signature. To date, quarterly losses from credit card fraud
have not exceeded 1% of total revenues in any quarter, but we continue to face the risk of significant
losses from this type of fraud. Although we seek to maintain insurance to cover us against this risk,
we cannot be certain that our coverage will be adequate to cover liabilities actually incurred as a
result of such fraud or that insurance will continue to be available to us on economically reasonable
terms, or at all. Our failure to limit fraudulent credit card transactions could damage our reputation and
brand and substantially harm our business and results of operations.
We are subject to customer payment-related risks.
We accept payments for our products and services on our websites by a variety of methods,
including credit card, debit card and bank check. In most geographic regions, we rely on one or two
third party companies to provide payment processing services, including the processing of credit
cards, debit cards and electronic checks. If either of these companies became unwilling or unable to
provide these services to us, then we would need to find and engage replacement providers, which
we may not be able to do on terms that are acceptable to us or at all, or to process the payments
ourselves, which could be costly and time consuming, either of which scenarios could disrupt our
business.
As we offer new payment options to our customers, we may be subject to additional regulations,
compliance requirements and fraud risk. For certain payment methods, including credit and debit
cards, we pay interchange and other fees, which may increase over time and raise our operating
costs and lower our profit margins or require that we charge our customers more for our products. We
are also subject to payment card association and similar operating rules and requirements, which
could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply
with these rules and requirements, we may be subject to fines and higher transaction fees and lose
our ability to accept credit and debit card payments from our customers or facilitate other types of
online payments, and our business and operating results could be materially adversely affected.
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