CASH 2018 Annual Report

73 Discover, MasterCard and Visa, as well as other electronic funds networks in which MPS operates, could change their rules. Pursuant to the agreements between MPS and Discover, MasterCard, Visa and other card networks, these third parties typically retain the right to prescribe certain business practices and procedures with respect to parties such as MPS. Such prescribed terms include, but are not limited to, a contracting party’s level of capital as well as other business requirements. Discover, MasterCard and Visa also retain the right in their agreements with industry participants such as MPS to unilaterally change the rules under which such transactions are processed with little or no advance warning. This power includes the power to prevent MPS from accessing their networks in order to process transactions as well as the power to revise, replace or alter existing card interchange rates and rules. Should any third party choose to invoke this right unilaterally, such changes could materially impact the operations of MPS and, if MPS is unable to comply with such rules, such third-party card networks could terminate their relationships with MPS. Our business is generally heavily dependent upon the Internet, and any negative disruptions to its operation could negatively impact our business, including MPS in particular. Much of our business, especially at the divisional level, depends upon transactions being processed through the Internet. Like nearly all other commercial enterprises, we rely upon others to provide the Internet so that commerce can be conducted. Were there to be a failure in the operation of the Internet or a significant impairment in our ability to move information on the Internet or our ability to do so in accordance with customer safeguard protocols, we would need to develop alternative processes during which time revenues and profitability may be lower, and there can be no assurance that we could develop or find such an alternative on terms acceptable to us or at all. Our ability to process transactions requires functioning communication and electricity lines. The nature of the banking industry in general, and the credit card and debit card industry in particular, is that it must be operational every day of the week and every hour of the day. Any disruption in the utilities utilized by the Bank or its divisions could have a negative effect on our operations, result in negative publicity, and have a material adverse effect on our financial condition and results of operations. Data encryption technology has not been perfected and vigilance in MPS’ information technology systems is costly. The Bank and its divisions hold sensitive business and personal information with respect to the products and services they offer. This information, which is generally digitally encrypted, is passed along various technology channels, including the Internet. Although we encrypt customer and other sensitive information and expend significant financial and personnel resources to maintain the integrity of our technology networks and the confidentiality of nonpublic customer information, because such information may travel on public technology and other non-secure channels, the confidential information is potentially susceptible to hacking and other illegal intrusions. Were such a security breach to occur, the provision of products and services to our customers would be impaired. In addition, were a breach to occur, we could incur significant fines from the electronic funds associations involved, or from federal and/or state regulators and could be subject to other prohibitions, as well as extensive litigation from commercial parties and consumers affected by such breach. Such actions would have a material adverse effect on our financial condition and results of operations. Unclaimed funds represented by unused value on the cards presents compliance and other risks. The concept of escheatment involves the reporting and delivery of property to states that is abandoned when its rightful owner cannot be readily located and/or identified. In the context of prepaid cards, the funds in connection with such cards can sometimes be “abandoned” or unused for the relevant period of time set forth in each applicable state’s abandoned property laws. MPS utilizes automated programs to ensure its operations are compliant with such applicable laws and regulations. There appears, however, to be a movement among some state regulators to more broadly interpret definitions in escheatment statutes and regulations than in the past. State regulators may choose to initiate collection or other litigation action against prepaid card issuers, like MPS, for unreported abandoned property, and such actions may seek to assess fines and penalties.