First Data 2009 Annual Report Download - page 9

(1) Segment assets in the successor periods were impacted by purchase accounting for the merger. 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 Financial Services Segment Operations
Financial Services provides issuer card and network solutions for credit, retail and debit card processing,
debit network services (including the STAR network), output services to financial institutions and other
organizations offering credit, debit and retail cards to consumers and businesses to manage customer accounts.
Financial services also offers payment management solutions for recurring bill payment and services to improve
customer communications, billing, online banking and consumer bill payment. Revenue and profit growth in
these businesses is derived from retaining and growing the core business and improving the overall cost
structure. Growing the core business comes primarily from an increase in debit and credit card usage, growth
from existing clients and sales to new clients and the related account conversions.
The Company has relationships and many long-term customer contracts with card issuers providing credit
and retail card processing, output services for printing and embossing items, debit card processing services and
STAR Network services. These contracts generally require a notice period prior to the end of the contract if a
client chooses not to renew. Additionally, some contracts may allow for early termination upon the occurrence of
certain events such as a change in control. The termination fees paid upon the occurrence of such events are
designed primarily to cover balance sheet exposure related to items such as capitalized conversion costs or
signing bonuses associated with the contract and, in some cases, may cover a portion of lost future revenue and
profit. Although these contracts may be terminated upon certain occurrences, the contracts provide the segment
with a steady revenue stream since a vast majority of the contracts are honored through the contracted expiration
date.
Credit and retail card issuing and processing services
Credit and retail card issuing and processing services provide outsourcing services to financial institutions
and other issuers of cards, such as consumer finance companies and retailers. Financial Services clients include a
wide variety of banks, savings and loan associations, group service providers, retailers and credit unions.
Services provided include, among other things, account maintenance, transaction authorizing and posting, fraud
and risk management services and settlement.
The Company provides services throughout the period of each card’s use, starting from a card-issuing client
processing an application for a card. Services may include processing the card application, initiating service for
the cardholder, processing each card transaction for the issuing retailer or financial institution and accumulating
the card’s transactions. The Company’s fraud management services monitor the unauthorized use of cards which
have been reported to be lost, stolen, or which exceed credit limits. The Company’s fraud detection systems help
identify fraudulent transactions by monitoring each cardholder’s purchasing patterns and flagging unusual
purchases. Other services provided include customized communications to cardholders, information verification
associated with granting credit, debt collection, and customer service.
Revenues for credit and retail card issuing and processing services are derived from fees payable under
contracts that depend primarily on the number of cardholder accounts on file. More revenue is derived from
active accounts (those accounts on file that had a balance or any monetary posting or authorization activity
during the month) than inactive accounts.
Debit network and processing services
The Company provides STAR Network access, PIN-debit and signature debit card processing services and
ATM processing services, such as transaction routing, authorization, and settlement as well as ATM management
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