First Data 2009 Annual Report Download - page 7

services, card issuance and customer service for over 200 national brands and several thousand small and
mid-tier merchants. The Company also provides program management and processing services for association-
branded, bank-issued, open loop, stored-value, reloadable and one time prepaid card products.
EFS Transportation Services provides payment processing, settlement and specialized reporting services for
transportation companies and owns and operates ATMs at truck stops. EFS Transportation Services is a closed
loop payment processing system for transportation companies in the U.S. and Canada. Its products offer truck
drivers a convenient way to purchase fuel, access cash and pay for repairs while on the road. Transportation
companies use the processing system to manage their business daily through the internet or real time via a direct
connection to a host.
Money Network offers prepaid products to address the needs of employers, employees, merchants and
unbanked individuals. Money Network provides electronic payroll distribution solutions that reduce or eliminate
an employer’s expense associated with traditional paper paychecks as well as other prepaid retail solutions.
Check verification, settlement and guarantee services
TeleCheck offers check verification, settlement and guarantee services using 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.
Retail and Alliance Services Segment Competition
The Company’s Retail and Alliance Services business competes with several service providers and financial
institutions that provide these services to their merchant customers. In many cases, the merchant alliances also
compete against each other for the same business. The check guarantee and verification products compete
principally with the products of two other national companies.
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