NetSpend 2010 Annual Report Download - page 45

Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical
consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to
these differences include those discussed below and elsewhere in this Form 10-K, particularly in "Risk Factors."
Overview
NetSpend is a leading provider of general-purpose reloadable prepaid debit cards, or GPR cards, and related alternative financial services
to underbanked consumers in the United States. We empower underbanked consumers by providing innovative and affordable financial
products and services tailored to meet their particular financial services needs and preferences in a manner that traditional banking institutions
have historically not met. In addition, our products and services provide our retail distributors an opportunity to enhance their customer
relationships and generate incremental, ongoing revenue streams.
We have built an extensive and diverse distribution and reload network in the U.S. to support the marketing and ongoing use of our GPR
cards. We market our cards through multiple channels, including retail distributors, direct-to-consumer and online marketing programs, and
corporate employers as an alternative method of wage payment for their employees. Beginning in 2008, we decided to focus primarily on
our GPR cards, and we ceased marketing gift cards entirely as of August 21, 2010.
We have developed a proprietary, fully-integrated operational and technology platform. Our in-house platform is end-to-end in that it
encompasses the critical functions required for us to acquire cardholders, process transactions, maintain account-level data, communicate with
cardholders, manage risk, ensure regulatory compliance and connect to our issuing banks and distributors. These integrated capabilities allow
us to customize our products and services for different markets, distribution channels and customer segments. Further, by processing
transactions on our own platform, we gain unique and extensive insight into the attitudes, characteristics and purchasing behavior of
underbanked consumers. Our processing platform is scalable, which will allow us to increase our profitability as our number of active cards
and the volume of the transactions we process increase.
We have agreements with FDIC-insured depository institutions that serve as the issuers of our GPR cards. Our cardholders may use
their GPR cards to make purchase transactions at any merchant that participates in the MasterCard, Visa or PULSE networks and to withdraw
funds from participating ATMs. MetaBank holds the majority of our cardholders funds. In January 2010, we acquired approximately 4.9% of
the outstanding equity interests in Meta Financial Group, Inc., MetaBank's holding company.
Our operating company and predecessor, NetSpend Corporation, was incorporated in Texas in 1999. In May 2004, Oak Investment
Partners acquired a controlling equity interest in our operating company through a recapitalization transaction pursuant to which we, as a
newly-formed holding company incorporated in Delaware, acquired all of the capital stock of NetSpend Corporation. In 2008 we acquired
Skylight Financial, Inc., or Skylight, a payroll card provider, in a stock-for-stock merger.
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