MoneyGram 2006 Annual Report Download - page 7

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Table of Contents
The walk-in payments category also includes a new utility bill payment service. Our FlashPay® and BuyPay® routine utility bill payment
services will be replaced with the new utility bill payment product, which commenced a limited beta test in November of 2006. This new
service allows customers to make in-person payments of non-urgent bills at a low cost for credit to a biller within two to three days. In
this instance we typically do not have a contract with the biller.
The electronic payment portion of our bill payment services when fully developed, will offer pay-by-phone, pay-by-IVR, pay by web,
ACH processing and check conversion. Consumers may select one-time or recurring ACH and credit and debit card payments to our
contracted billers.
Payment Systems Segment
Our Payment Systems segment primarily provides financial institutions with payment processing services, specifically official check
outsourcing services and money orders for sale to their customers as well as ACH processing services. Our customers are primarily
comprised of financial institutions, thrifts and credit unions. As of December 31, 2006, 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.
In 2006, Payment Systems segment revenue was $337.1 million and operating income was $41.6 million. A significant portion of
Payment Systems segment revenue is generated by our official check outsourcing services. During 2006, 2005 and 2004, our ten largest
financial institution customers accounted for 10 percent, 13 percent and 14 percent, respectively, of our total revenue and 36 percent,
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 2006, 2005 and 2004, and 12 percent, 11 percent and 10 percent of the revenue in our Payment
Systems segment in 2006, 2005 and 2004, respectively.
We primarily derive revenues in our Payment Systems segment from the investment of funds underlying the official check or financial
institution money order. We invest funds from the official checks and money orders sold from the time the proceeds are remitted until the
items are cleared. We also derive revenue from fees paid by our financial institution and corporate customers.
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 PrimeLink® and PrimeLinkplus® 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 the
way the services are offered through our retail agents in our Global Funds Transfer segment.
Check Processing: Through our subsidiary FSMC, Inc. ("FSMC"), we offer high volume check processing and controlled disbursement
processing. FSMC is a leading processor of promotional payments and rebates. Through FSMC, we also process checks issued under the
Special Supplemental Nutrition Program to Women, Infants and Children administered by the U.S. Department of Agriculture through
the various states. Our revenues from this area are primarily derived from fees.
Sales and Marketing
We market our products and services through a number of dedicated sales and marketing teams. In the United States, we have a dedicated
sales and marketing team that markets money transfer services, money orders and bill payment services on a regional basis to our three
principal distribution channels: large national agent accounts, smaller independent accounts and check cashing outlets. We also have
dedicated sales and marketing teams that
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