First Data 2008 Annual Report Download - page 11

Check verification, settlement and guarantee services
Check verification, settlement and guarantee services use the Company's proprietary database system to assist merchants in deciding whether accepting
checks at the point-of-sale is a reasonable risk, or, further, to guarantee checks presented to merchants if they are approved. These services include risk
management services, which utilize software, information and analysis to assist the merchant in the decision process and include identity fraud prevention and
reduction. Revenues are earned primarily by charging merchant fees for check verification or guarantee services.
The majority of the Company's services involve providing check guarantee services for checks received by merchants. Under the guarantee service,
when a merchant receives a check in payment for goods and services, the transaction is submitted to and analyzed by the Company. The Company either
accepts or declines the check for warranty coverage under its guarantee service. If the Company approves the check for warranty coverage and the merchant
accepts the check, the merchant will either deposit the check in its bank account or process it for settlement through the Company's Electronic Check
Acceptance service. If the check is returned unpaid by the merchant's bank and the returned check meets the requirements for warranty coverage, the
Company is required to purchase the check from the merchant at its face value. The Company then owns the purchased check and pursues collection of the
check from the check writer. As a result, the Company bears the risk of loss if the Company is unable to collect the returned check from the check writer. The
Company earns a fee for each check it guarantees, which generally is determined as a percentage of the check amount.
The Company's Electronic Check Acceptance service, which converts a paper check written at the point of sale into an electronic item, enables funds to
be deposited electronically to the merchant's account and deducted electronically from the check writer's account.
Under the verification service, when a merchant receives a check in payment for goods or services, the transaction is submitted to and analyzed by the
Company, which will either recommend the merchant accept or decline the check. If the merchant accepts the check, the merchant will deposit the check in its
bank account. If the check is returned unpaid by the merchant's bank, the Company is not required to purchase the check from the merchant and the merchant
bears all risk of loss on the check. The Company earns a fee for each check submitted for verification, which is generally a fixed amount per check.
Other services
Other services consist of the Company's output services, remittance processing and government services. Output services consist of statement and letter
printing, card embossing and mailing services. Services are provided to organizations that process accounts on the Company's platform as described above
and for clients that process accounts on alternative platforms. The Company provides these services primarily through in-house facilities. Revenues for output
services are derived primarily on a per piece basis and consist of fees for the production and materials related to finished products. The mailing services drive
a majority of the segment's and the Company's postage revenue.
The remittance processing business processes mail-in payments for third party organizations. Revenues for remittance processing services are derived
primarily on a per transaction basis and consist of fees for processing consumer payments.
First Data Government Solutions ("FDGS") operates payment systems and related technologies in the government sector. For instance, FDGS provides
electronic tax payment processing services for the Electronic Federal Tax Payment System.
Financial Services Pipeline
During 2008, the Company converted approximately 15 million accounts to its system. The pipeline at December 31, 2008 was approximately
11 million accounts, which are primarily retail accounts. The Company expects to convert these accounts in 2009.
10