MoneyGram 2005 Annual Report Download - page 12

Table of Contents
RISK FACTORS
If we lose key retail agents in our Global Funds Transfer segment, our business and results of operations could be adversely affected.
We may not be able to retain all of our current retail agents. The competition for chain retail agents is intense, and larger agents are increasingly demanding
financial concessions and more information technology customization. The development and equipment necessary to meet agent demands could require
substantial capital expenditures. If we were unable to meet these demands, we could lose agents and our volume of money transfers would be substantially
reduced and our revenues would decline.
A substantial portion of our transaction volume is generated by a limited number of key agents. During 2005 and 2004, our ten largest agents accounted for
31 percent and 27 percent, respectively, of our total revenue and 46 percent and 41 percent, respectively, of the revenue of our Global Funds Transfer
segment. Our largest agent, Wal-Mart Stores, Inc., accounted for 13 percent and 9 percent of our total revenue and 19 percent and 14 percent of the revenue of
our Global Funds Transfer segment in 2005 and 2004, respectively. If any of these key agents were not to renew their contracts with us, or if such agents were
to reduce the number of their locations, or cease doing business, we might not be able to replace the volume of business conducted through these agents, and
our business and results of operations would be adversely affected.
In addition, many of our high volume agents are in the check cashing industry. There are risks associated with the check cashing industry that could cause this
portion of our agent base to decline. Any regulatory action that adversely affects check cashers could also cause this portion of our agent base to decline.
If we lose large financial institution customers in our Payment Systems segment, our business and results of operation could be adversely affected.
During 2005 and 2004, our ten largest financial institution customers accounted for 13 percent and 14 percent, respectively, of our total revenue and
39 percent and 39 percent, respectively, of the revenue of our Payment Systems segment. Our largest financial institution customer generated 4 percent of our
total revenue in 2005 and 2004 and 11 percent and 10 percent of the revenue in our Payment Systems segment in 2005 and 2004, respectively. The loss of any
of our top financial institution customers could adversely affect our business and results of operations.
If we fail to successfully develop and timely introduce new and enhanced products and services, our business, prospects, financial condition and results of
operations could be adversely affected.
Our future growth will depend, in part, on our ability to continue to develop and successfully introduce new and enhanced methods of providing money
transfer, money order, official check, bill payment and related services that keep pace with competitive introductions, technological changes and the demands
and preferences of our agents, financial institution customers and consumers. Many of our competitors offer stored-value cards and other electronic payment
mechanisms, including various internet-based payment services, which we have only recently introduced, that could be substituted for traditional forms of
payment, such as the money orders, bill payment and money transfer services that we offer. If these alternative payment mechanisms become widely
substituted for our products and services, and we do not develop and ramp up similar alternative payment mechanisms successfully and on a timely basis, our
business and prospects could be adversely affected.
If we are unable to protect the intellectual property rights related to our existing and any new or enhanced products and services, our business, prospects,
financial condition and results of operations could be adversely affected.
We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license agreements to protect the intellectual
property rights related to our products and services. We also investigate the intellectual property rights of third parties to prevent infringement of those rights.
We may be subject to claims of third parties that we infringe or have misappropriated their proprietary rights. We may be required to spend resources to
defend any such claims and/or to protect and police our own rights. Some intellectual property rights may not be protected by intellectual property laws,
particularly in foreign jurisdictions. The loss of intellectual property protection, the inability to secure or enforce intellectual property protection or to
successfully defend against an intellectual property infringement action could harm our business and prospects.
Litigation or investigations which could result in material settlements, fines or penalties may adversely
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