Western Union 2015 Annual Report Download - page 163

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Operating expenses overview
Enhanced regulatory compliance
The financial services industry, including money services businesses, continues to be subject to increasingly strict legal and
regulatory requirements, and we regularly review our compliance programs. In connection with these reviews, and in light of
growing and rapidly evolving regulatory complexity and heightened attention of, and increased dialogue with, governmental and
regulatory authorities related to our compliance activities, we have made, and continue to make enhancements to our processes
and systems designed to detect and prevent money laundering, terrorist financing, and fraud and other illicit activity, along with
enhancements to improve consumer protection related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and
similar regulations outside the United States, and other matters. In coming periods we expect these enhancements will continue
to result in changes to certain of our business practices and increased costs. Some of these changes have had, and we believe will
continue to have, an adverse effect on our business, financial condition and results of operations.
Cost of services
Cost of services primarily consists of agent commissions, which represented more than 60% of total cost of services for the
year ended December 31, 2015. Cost of services decreased for the year ended December 31, 2015 compared to the prior year due
to variable costs that generally fluctuate with revenues, including agent commissions, and benefits from and lower costs related
to productivity and cost-savings initiatives, partially offset by increased technology expenses. For further discussion of our
productivity and cost-savings initiatives, see Note 3 to Part II, Item 8, Financial Statement and Supplementary Data.
Cost of services increased for the year ended December 31, 2014 compared to the prior year due to variable costs that generally
fluctuate with revenues and transactions, such as agent commissions and bank-related fees. Additionally, cost of services increased
due to higher bank-related fees in our Consumer-to-Business and Business Solutions segments and higher agent commission rates
in the walk-in services of our Consumer-to-Consumer segment, primarily from the renewal of certain strategic agent agreements.
These increases were partially offset by benefits from our productivity and cost-savings initiatives. Additionally, fluctuations in
the exchange rate between the United States dollar and other currencies resulted in a positive impact on the translation of our
expenses.
Selling, general and administrative
Selling, general and administrative expenses were flat for the year ended December 31, 2015 compared to the prior year and
were impacted by the Paymap Settlement Agreement, increased incentive compensation expenses, and increased compliance
program costs (see "Enhanced regulatory compliance"), partially offset by benefits from and lower costs related to productivity
and cost-savings initiatives. Additionally, the strengthening of the United States dollar compared to foreign currencies resulted in
a positive impact on the translation of our expenses.
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