MoneyGram 2005 Annual Report Download - page 8

Table of Contents
to be initiated on our website using credit cards and bank account debits. During 2005, we introduced an enhancement that allows us to price our money
transfer services at the agent level. This new capability provides us with the ability to competitively price our service by specifically establishing both the
consumer fee and the foreign exchange rate at the location level. In 2005, we also developed an enhancement to allow a sender of a money transfer to choose
among currencies to be received by the beneficiary of the money transfer. The currencies available depend on the send and receive country. We began rolling
out this enhancement in February 2006. Finally, we developed an enhancement in 2005 to allow a sender to direct their money transfer (i) to a specific
address, (ii) onto an ATM/debit card or (iii) into a bank account. We commenced a beta test of this enhancement in July 2005, contracting with a Philippines
company, LBC Mundial Corp., to deliver money transfers to a beneficiary's home in the Philippines or to load a money transfer onto the beneficiary's LBC
branded ATM card. We plan to begin rolling out the functionality for directing transfers to a bank account in 2006.
New Products. We developed a prepaid debit card program that was introduced in 2005, the MoneyGram Prepaid MasterCard® card program. Customers can
load cash onto a card that can be used to make purchases and ATM withdrawals. We conducted a limited beta test of our prepaid debit card in August 2005,
selling the cards through company-owned locations in New York and Miami. In December of 2005 we commenced a full beta test, contracting with certain of
our agents in key markets to sell and reload the prepaid debit card. We plan the roll-out of the MoneyGram Prepaid MasterCard card program in 2006, with
the cards available for purchase and reload at designated MoneyGram agent locations in the US. In 2006, we will also begin the roll-out of the Pay-By-Suite
bill payment services that will provide consumers with ACH pay-by-telephone and pay-by-web options.
Competition
The various industries in which we operate are very competitive, and we face a variety of competitors across our businesses. New competitors or alliances
among established companies may emerge. Consolidation among payment services companies, and money transmitters in particular, has occurred and may
continue. We compete for agents and financial institution customers on the basis of value, service, quality, technical and operational differences, price and
financial incentives paid to agents once they have entered into an agreement. In turn, we compete for consumers on the basis of number and location of agent
locations, price, convenience and technology. Our primary competition comes from First Data Corporation and its subsidiaries, including Western Union,
which has substantially greater transaction volume than we do. First Data Corporation and its subsidiaries have a larger agent base, a more established brand
name and substantially greater financial and marketing resources than we do. First Data Corporation has announced that it will spin off Western Union in
2006. We cannot anticipate what, if any, effect the spin-off will have on our business or the money transfer industry.
The Global Funds Transfer segment of our business competes in a concentrated industry, with a small number of large competitors and a large number of
small, niche competitors. Our large competitors are other providers of money orders and money transfer services, including Western Union, other subsidiaries
of First Data Corporation and the U.S. Postal Service with respect to money orders. We also compete with banks and niche person-to-person money transfer
service providers that serve select send and receive corridors.
The Payment Systems segment of our business competes in a concentrated industry with a small number of large competitors. Our competitors in this segment
are Integrated Payment Systems, a subsidiary of First Data Corporation, and Federal Home Loan Banks. We also compete with financial institutions that have
developed internal processing capabilities or services similar to ours and do not outsource these services.
Regulation
Compliance with legal requirements and government regulations is an integral part of our operations. Financial transaction reporting and state banking
department regulations also affect our business.
As a money order issuer and a money transmitter, we must comply with a number of domestic and international regulatory requirements, including:
• state licensing laws;
• federal and state anti-money laundering and the federal government's Office of Foreign Assets Control ("OFAC") regulations;
• laws of various foreign countries regulating the ability to conduct a money transfer business and
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