Item 1A. Risk Factors
ITEM 1A—RISK FACTORS
The following risk factors are an update to our previously disclosed risk factors and should be considered in conjunction with the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2022 and any subsequent filings we make with the SEC.
Adverse developments that affect financial institutions, such as bank failures, or concerns or speculation about any similar events or risks, could affect our ability to access our cash or cash equivalents, lead to market-wide liquidity problems or adversely affect our merchant settlement activities, which in turn may cause third parties, including customers, to become unable to meet their obligations under various types of financial arrangements as well as general disruptions or instability in the financial markets.
Although we do not have exposure to and did not experience losses as a result of recent bank failures, we regularly maintain cash balances with financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. A disruption in financial markets could impair our banking partners, on which we rely for operating cash management and derivative programs, which could affect our ability to access our cash or cash equivalents. Furthermore, if our customers are negatively affected by these disruptions, such as being unable to access their existing cash to fulfill their payment obligations to us, our business may be negatively affected.
In addition, we rely on various financial institutions to provide clearing services in connection with our settlement activities. Under this model, our financial institution sponsors have possession of the merchant settlement funds until the merchant has been funded. If our sponsor financial institutions in any market should fail, we would need to find another financial institution to provide those services or we would need to obtain direct membership with Visa and Mastercard, either of which could prove to be difficult and expensive. We could also have liability to the merchants for the outstanding settlement funds. The occurrence of any of these events could harm our business, financial condition and results of operations.
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