MoneyGram 2005 Annual Report Download - page 6

Table of Contents
via our bill payment suite of services. Our contracted billers include credit card companies, mortgage companies, auto finance companies, sub-prime lenders,
cellular and long distance telephone companies and third-party bill collectors. We work closely with our agents to identify billers in their service areas to
target for our services.
Our ExpressPayment® bill payment service, which is offered through our money transfer agent locations in the United States, continues to grow as we add
new billers to our network. As of December 31, 2005, we provide our ExpressPayment bill payment services to over 1,500 billers. ExpressPayment bill
payment service generally provides customers with same-day credit to a biller. Our ExpressPayment bill payment service is also available for internet
transactions at www.emoneygram.com. Our FlashPay® and BuyPay® routine bill payment services are available at selected agent locations. These services
allow unbanked and underbanked consumers to pay routine bills with cash at a convenient location. We remit the payments by means of wire transfer or
check and the consumer's account is typically credited within one week. These routine bill payment services also afford utilities a method of complying with
regulatory requirements that they provide a given number of locations at which customers may pay their bills. Our acquisition of ACH Commerce in 2005
allows consumers to select one-time ACH, recurring ACH and credit and debit card payments to our contracted billers via the telephone. We released an ACH
"pay by web" service in February 2006 which allows consumers to pay our contracted billers over the internet. We generate revenue from transaction fees
charged to consumers per bill payment transaction completed.
Payment Systems Segment
Our Payment Systems segment provides financial institutions with payment processing services, primarily official check outsourcing services and money
orders for sale to their customers. Our customers are primarily comprised of financial institutions, thrifts and credit unions. As of December 31, 2005, we
provide official check services to over 15,000 branch locations of over 1,700 financial institutions. Customers include a broad array of financial institutions,
including large banks, regional banks and small community banks. 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.
We primarily derive revenues from our financial institution customers from the investment of funds underlying the official check or financial institution
money order. We invest funds representing customer items from the time the proceeds are remitted until they are cleared. We also derive revenue from fees
paid by our customers. In 2005, Payment Systems segment revenue was $321.6 million and operating income was $42.4 million. A significant portion of
Payment Systems segment revenue is generated by our official check outsourcing services. See Note 17 of the Notes to Consolidated Financial Statements for
revenue by product.
Official Check Outsourcing Services: We provide official check outsourcing services through our PrimeLink® service. Financial institutions provide official
checks, which include bank checks, cashier checks, teller checks and agent checks, to consumers for use in transactions when the payee requires a check
drawn on a bank or other third party. Official checks are commonly used in consumer loan closings, such as closings of home and car loans, and other critical
situations where the payee requires assurance of payment and funds availability. Financial institutions also use official checks to pay their own obligations.
Our PrimeLinkplus® product is an internet-based check issuance platform that allows financial institutions and other businesses with multiple locations to
securely print official checks at remote locations on a client-controlled basis, eliminating the need to overnight the checks from the main office or wire
transfer the funds. We provide these outsourcing services at a low cost to financial institutions and pay an agreed upon commission rate on the balance of
funds underlying the official checks pending clearing of the items. We clear the official check items pursuant to contracts with clearing banks as a service to
our official check customers.
Money Orders: The Payment Systems segment also offers money orders through financial institutions in a manner very similar to money orders offered
through our retail agents in our Global Funds Transfer segment. In 2005, approximately 18.3 million, or six percent, of our total money orders were sold
through financial institutions.
Controlled Disbursement Processing: We process WIC checks through our subsidiary, FSMC, Inc. WIC
3