Western Union 2006 Annual Report Download - page 36

WESTERN UNION 2006 Annual Report 34
|| Overview
Western Union is a leader in global money transfer, providing
people with fast, reliable and convenient ways to send
money around the world, pay bills and purchase money
orders. The Western Union
®
brand is globally recognized.
Our services are available through a network of nearly
300,000 agent locations in more than 200 countries
and territories. Each location in our agent network is
capable of providing one or more of our services. As of
December 31, 2006, approximately 75% of our locations
had experienced money transfer activity in the prior twelve
months. Our consumer-to-consumer money transfer service
enables people to send money around the world in minutes.
Our consumer-to-business service provides consumers
with flexible and convenient options for making one-time
or recurring payments.
In 2006, we generated $4.5 billion in total consolidated
revenues and $914.0 million in consolidated net income.
We handled 147 million consumer-to-consumer money
transfers in 2006, an increase of 24% over 2005. Our
249 million consumer-to-business transactions in 2006
represented a 16% increase over 2005.
We believe that brand strength, size and reach of our
global network, and convenience and reliability for our
consumers have been key to the growth of our business.
As we continue to meet the needs of our consumers for
fast, reliable and convenient money transfer services, we
are also working to enhance our existing services and
provide our consumers with access to an expanding portfolio
of payment and other financial services.
|| History and Development
Western Union has roots back to 1851. It first traded on
the New York Stock Exchange in 1865. In 1884, Western
Union was one of the original 11 companies included on
the first Dow Jones average listing. We have a long history
of providing innovative services, including creating the
universal stock ticker and launching the first United States
commercial communications satellite service. We introduced
our consumer-to-consumer money transfer service in 1871.
We began offering consumer-to-business payment services
in 1989 when we introduced Western Union Quick Collect
®
or “Quick Collect,” providing consumers in the United
States with the ability to conveniently pay bills in cash
through our agent network.
Over the past decade, we have become a leader in
the development of a formal global remittance market.
Today, we offer money transfer and bill payment services
under the Western Union,
®
Orlandi Valuta,
®
Vigo
SM
and Pago
FácilSM brands in over 200 countries and territories.
The Western Union Company was incorporated in
Delaware as a wholly owned subsidiary of First Data on
February 17, 2006 in anticipation of the planned spin-off
described below.
|| The Western Union Business
Our revenue is principally generated by money transfer
and payment transactions. We derive our revenue primarily
from two sources. Most of our revenue comes from fees
that consumers pay when they send money. In certain
consumer money transfer transactions involving different
send and receive currencies, we generate revenue based
on the difference between the exchange rate set by us to
the consumer and the rate at which we or our agents are
able to acquire currency.
In our consumer-to-consumer segment we provide
our third-party agents with our multi-currency, real-time
money transfer processing systems used to originate and
pay money transfers. Our agents provide the physical
infrastructure and staff required to complete the transfers.
We generally pay our agents a commission based on a
percentage of revenue. The commission is shared between
the agent that initiated the transaction, the “send agent,”
and the agent that paid out the transaction, the “receive
agent.” For most agents, the costs of providing the physical
infrastructure and staff are typically covered by the agent’s
primary business (e.g., postal services, banking, check
cashing, travel and retail businesses), making the economics
of being a Western Union agent attractive to our agents.
Western Union’s global reach and loyal consumer base
allow us to attract agents we believe to be of high quality.
In our consumer-to-business segment we offer
consumers options to make payments electronically over
the telephone or the Internet, and to make cash payments
in person at an agent location. We process electronic
payments using the consumer’s credit card, debit card or
bank account. We process cash payments much like we
process consumer-to-consumer transactions.
|| Our Segments
We manage our business around the consumers we serve
and the type of services we offer. Each segment addresses
a different combination of consumer needs, distribution
networks and services.
|| CONSUMER-TO-CONSUMER — provides money transfer
services between consumers, primarily through a global
network of third-party agents using our multi-currency,
real-time money transfer processing systems.
|| CONSUMER-TO-BUSINESS — focuses on payments from
consumers to billers through our networks of third-
party agents and various electronic channels. While
we continue to pursue international expansion of our
offerings in selected markets, as demonstrated by our
December 2006 acquisition of Servicio Electrónico de
Pago S.A. and related entities (“SEPSA”), substantially
all of the segment’s 2006 revenue was generated in the
United States.