First Data 2008 Annual Report Download - page 6

that were recognized in All Other and Corporate. The exclusion of these costs from the calculation would decrease the Merchant Services operating
profit percentage shown above by approximately 19 percentage points for the predecessor period from January 1, 2007 through September 24, 2007.
(2) – Operating profit and assets were impacted by purchase accounting in the successor period from September 25, 2007 through December 31, 2007 and
for the year ended December 31, 2008. Assets at December 31, 2008 were additionally impacted by a goodwill impairment recorded in the fourth
quarter of 2008 as described in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-K.
Description of Merchant Services Segment Operations
In the Merchant Services segment, revenues are derived primarily from providing merchant acquiring and processing services. Merchant Services
businesses facilitate the acceptance of consumer transactions at the point of sale, whether it is a transaction at a physical merchant location or over the
internet. A brief explanation of the segment's service and product offerings is presented below.
Merchant acquiring and processing services
Merchant acquiring services facilitate the merchants' ability to accept credit, debit, stored-value and loyalty cards by authorizing, capturing and settling
the merchants' transactions. Acquiring services also provide POS devices and other equipment necessary to capture merchant transactions. A majority of these
services are offered to the merchants through joint ventures or contractual alliance arrangements primarily with financial institutions and relationships with
independent sales organizations and other referral/sales partners. The segment's processing services include authorization, transaction capture, settlement,
chargeback handling, and internet-based transaction processing. The vast majority of these services pertain to transactions in which consumer payments to
merchants are made through a card association (such as Visa or MasterCard), a debit network, or another payment network (such as Discover).
Revenues are generated from, among other things:
• Discount fees charged to a merchant, net of credit card interchange and assessment fees charged by the bankcard associations or payment
networks (Visa, MasterCard or Discover). The discount fee is typically either a percentage of the credit card transaction or the interchange fee
plus a fixed dollar amount;
• Processing fees charged to unconsolidated alliances discussed below;
• Processing fees charged to merchant acquirers who have outsourced their transaction processing to the Company;
• Equity earnings from unconsolidated alliances;
• Selling and leasing POS devices; and
• Debit network fees.
Merchant Services provides merchant acquiring and processing services to merchants operating in approximately 3.1 million merchant locations across
the U.S. Merchant Services provides full service merchant processing primarily on Visa and MasterCard transactions and PIN-debit at the point of sale.
Growth in the Merchant Services business is derived from entering into new merchant relationships, new and enhanced product and service offerings,
cross selling products and services into existing relationships, the shift of consumer spending to increased usage of electronic forms of payment and the
strength of FDC's alliances and relationships with banks and other entities. The Company's alliance structures take on different forms,
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