NetSpend 2011 Annual Report Download - page 6

Table of Contents
PART I
ITEM 1. BUSINESS
Overview
NetSpend Holdings, Inc. (collectively with our subsidiaries, "we," "us" or the "Company") was formed as a Delaware corporation on
February 18, 2004 in connection with the recapitalization of one our current subsidiaries, NetSpend Corporation, which was founded in 1999.
We operate in one reportable business segment to provide general purpose reloadable ("GPR") prepaid debit and payroll cards and alternative
financial service solutions to underbanked and other consumers in the United States. The products we manage provide underbanked consumers
with access to FDIC-insured depository accounts with a menu of pricing and features specifically tailored to their needs. We have an extensive
distribution and reload network comprised of financial service centers and other retail locations throughout the United States. Our common
stock trades on the NASDAQ stock exchange under the symbol "NTSP."
We are a program manager for the FDIC-insured depository institutions that issue the card products that we develop, promote and
distribute. We have agreements with, among others, Meta Payment Systems ("MetaBank"), a division of Meta Financial Group ("MFG"), Inter
National Bank ("INB"), U.S. Bank ("USB"), SunTrust Bank ("SunTrust"), Regions Bank ("Regions"), a large bank based in New England and
The Bancorp Bank ("Bancorp" and, collectively with MetaBank, INB, USB, Regions, SunTrust and our other bank, the "Issuing Banks")
whereby the Issuing Banks issue MasterCard International ("MasterCard") or Visa USA, Inc. ("Visa") branded cards to customers. Our
products may be used to purchase goods and services wherever MasterCard and Visa are accepted or to withdraw cash via automatic teller
machines ("ATMs").
We are a leading provider of GPR cards and related alternative financial services to underbanked consumers in the U.S. GPR cards
generally have the same functionality as traditional bank debit cards, serving as access devices to an FDIC-insured depository account with a
bank. We also offer some of our cardholders features, such as direct deposit, interest-bearing savings accounts, bill pay functionality, card-to-
card transfer capability, personal financial management tools and online and mobile phone card account access. Our strategy is to focus on
increasing the number of cards that receive direct deposits because cardholders who electronically deposit funds on their cards generate more
revenue for us than those who do not. In addition, consumers who receive direct deposits tend to remain in our programs longer than non-
direct
deposit cardholders. We had 865,000 and 719,000 direct deposit active cards as of December 31, 2011 and 2010, respectively. We had
approximately 2.1 million active (i.e. cards that had been loaded or used since October 1, 2011) cards as of December 31, 2011 and a gross
dollar volume of debit transactions and cash withdrawals of $11.2 billion for the twelve months ended December 31, 2011. We primarily focus
on the estimated 60 million underbanked consumers in the U.S. who do not have a traditional bank deposit account or who rely on alternative
financial services.
We market cards through multiple distribution channels, including retail distributors, direct-to-consumer and online marketing programs
and contractual relationships with corporate employers. We plan to substantially increase our distribution activities through traditional retailers
in 2012.
Market Opportunity
Prepaid Cards
The prepaid card market is one of the fastest growing segments of the payments industry in the U.S. This market has experienced
significant growth in recent years due to consumers and merchants embracing improved technology, greater convenience, more product choices
and greater flexibility. Prepaid debit cards have proven to be an attractive alternative to traditional bank accounts for certain
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