Western Union 2007 Annual Report Download - page 17

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Our Business
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Our Business
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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 over 335,000 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, 2007, approximately 75% of our locations had
experienced money transfer activity in the prior 12 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 fl exible and convenient
options for making one-time or recurring payments.
In 2007, we generated $4.9 billion in total consolidated rev-
enues and $857.3 million in consolidated net income. Total
revenue generated during 2007 consisted of $3,989.8 million of
transaction fees, $771.3 million related to foreign exchange
revenue derived from the difference between the exchange rate
set by Western Union to the consumer and the rate at which we
or our agents are able to acquire currency, and $139.1 million
related to commission and other revenues. We handled 167.7
million consumer-to-consumer money transfers in 2007, an
increase of 14% over 2006. Our 404.5 million consumer-to-
business transactions in 2007, including those from our acquired
business in Argentina, Pago Fácil, represented a 62% increase
over 2006.
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 fi nancial services.
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History and Development
Western Union was incorporated in Delaware as a wholly-owned
subsidiary of First Data on February 17, 2006 in anticipation of
the spin-off described in “The Separation of Western Union from
First Data”.
The Western Union Company has roots back to 1851. Western
Union stock was fi rst traded on the New York Stock Exchange in
1865. In 1884, the original Western Union was one of the 11
companies included on the first Dow Jones average listing.
Western Union has a long history of providing innovative services,
including creating the universal stock ticker and launching the
fi rst United States commercial communications satellite service.
Western Union introduced our consumer-to-consumer money
transfer service in 1871. Western Union began offering consumer-
to-business payment services in 1989 when we introduced
Western Union Quick Collect® or “Quick Collect,” providing con-
sumers 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 devel-
opment of a global remittance market. Today, we offer money
transfer services under the Western Union®, Orlandi Valuta®, and
Vigo
SM
brands in over 200 countries and territories, and various
bill payment services primarily in the United States under several
brands like Speedpay®, Equity Accelerator®, Just in Time EFT®,
Western Union Quick Collect, Western Union Convenience Pay®,
and in Argentina under our Pago FácilSM brand.
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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 payment 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 com-
mission 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 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 process electronic
and cash payments to a variety of organizations that receive
consumer payments, including utilities, auto fi nance companies,
mortgage servicers, fi nancial service providers and governmental
agencies, which we sometimes refer to as “billers.” We process
electronic payments using the consumer’s credit card, debit card
or bank account. We process cash payments much as we process
consumer-to-consumer transactions. Our consumers use our
Quick Collect service to send guaranteed funds, from over 50,000
Western Union agent locations primarily across the United States,
using cash and, in certain locations, a debit card. We believe our
billers benefi t from their relationship with Western Union as their
relationship with us provides them with real time or near real time
posting of their customer payments, reduced expenses that the
biller would have otherwise incurred for cash and check handling,
and in certain circumstances another source of income.