First Data 2009 Annual Report Download - page 60

FIRST DATA CORPORATION
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The Company received notification from a large financial institution that it will not renew its debit
processing agreement at the end of the contract term. The contract is scheduled to expire in December 2010 and a
portion of the business is expected to begin deconverting in late 2010 with minimal impact to revenue in 2010.
The Company has also received notification of termination from various other financial institutions that are less
significant individually, which are scheduled to deconvert throughout 2010. Including the large financial
institution, these agreements represented approximately 4% of the segment’s transaction and processing service
fees revenue for 2009.
Credit card, retail card and debit processing revenue was negatively impacted in 2008 by price compression
and net lost business but benefited from growth of existing clients as well as having a full year of results from the
Instant Cash Services®acquisition. The acquisition related to the debit card processing business occurred in the
first half of 2007. Credit card and retail card processing revenue and debit processing revenue both decreased in
2008 compared to pro forma 2007 due to the factors noted above. The acquisition noted above contributed 1
percentage point to the credit card, retail card and debit processing revenue growth rate.
Output services revenue
Output services revenue decreased in 2009 compared to 2008 due to lost business and decreases in print
mail and plastics volumes from existing customers as a result of the reduction in the number of accounts and
account activity due to adverse economic conditions. Partially offsetting these decreases were increases due to
additional print and plastics volumes as a result of new business. Most of the lost business relates to Washington
Mutual Bank, which represented 17% of output services revenue in 2008. The output services revenue growth
rate was negatively impacted by 9 percentage points for 2009 compared to 2008 as a result of the lost business
with Washington Mutual Bank.
Output services revenue benefited in 2008 from internal growth partially offset by net lost business. The lost
business related to statement production.
Other revenue
Other revenue consists mostly of revenue from remittance processing and online banking and bill payment
services. Other revenue decreased in 2009 compared to 2008 due to lost business and lower remittance and check
processing volumes due to adverse economic conditions and the shift from paper to electronic forms of payment.
The wind-down of an existing product also contributed to the decrease. These declines were partially offset by
the addition of a new client in the remittance business as well as growth in online banking and bill payment
revenue.
Other revenue for 2008 benefited from having a full year of results from the FundsXpress acquisition, an
on-line banking and bill payment service provider acquired in the first half of 2007, but was negatively impacted
by net lost business related to remittance processing and call volumes. The FundsXpress acquisition benefited the
2008 other revenue growth rate by 9 percentage points compared to pro forma 2007 and net lost business
negatively impacted the 2008 growth rate by 8 percentage points.
Product sales and other revenue
Product sales and other revenue increased in 2009 compared to 2008 due most significantly to the
recognition of contract termination fees in 2009 related to the termination of services with Washington Mutual
Bank.
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