First Data 2011 Annual Report Download - page 37

Check processing revenue increased in 2010 versus 2009 due most significantly to new business in 2010, mostly national
merchants. Partially offsetting the increase were lower overall check volumes from existing customers and merchant attrition,
primarily regional merchants.
Prepaid revenue. Prepaid revenue increased in 2011 compared to 2010 due mostly to higher transaction volumes within
the open loop payroll distribution program related to new and existing customers. In addition, sales of gift cards increased in 2011
compared to the prior year related to a large sale to a national retailer associated with an incentive program as well as volume growth
from existing clients and new clients. These increases were partially offset by sales of promotional gift cards in 2010 driven by a
specific direct marketing campaign. Additionally, 2011 was impacted by a change in merchant mix resulting from increased card
shipments to merchants that generate less revenue per card.
Prepaid revenue increased in 2010 compared to 2009 most significantly due to higher transaction volumes within the payroll
distribution program as well as an increase in card shipments to existing clients.
Processing fees and other revenue from alliance partners. The increase in processing fees and other revenue from alliance
partners in 2011 compared to 2010 resulted from increased fees from the BAMS alliance due to the shift of processing as discussed
above in the "Banc of America Merchant Services, LLC" section as well as increased volumes within the Company's merchant
alliances. The impact of the shift in processing benefited the 2011 growth rate by approximately $18 million or 15 percentage points.
The increase in processing fees and other revenue from alliance partners in 2010 compared to 2009 resulted most significantly
from the processing fees related to the BAMS alliance as well as increased transactions and rate increases.
Product sales and other revenue. Product sales and other revenue increased in 2011 compared to 2010 primarily due to
increases in the leasing business resulting from new clients as well as increased fees from lease renewals. Equipment sales decreased
slightly in 2011 compared to 2010 resulting from higher terminal demand in the prior year due to new regulations and a shift in the
mix of terminals in 2011 to lower cost, proprietary models.
Product sales and other revenue increased in 2010 versus 2009 mainly resulting from increased volumes due in part to increased
demand for terminals as a result of new regulations, increased sales to existing clients and new business.
Segment EBITDA. The impact of the revenue items noted above contributed to the increase in Retail and Alliance Services
segment EBITDA in 2011 compared to 2010. The decrease in debit interchange rates positively impacted the segment EBITDA
growth rate in 2011 compared to 2010 by approximately $24 million or 2 percentage points. Expense reductions also benefited Retail
and Alliance Services segment EBITDA in 2011 compared to the prior year. Also contributing to the increase in segment EBITDA for
2011 compared to 2010 were decreased credit losses due to a lower level of merchant delinquencies which benefited the segment
EBITDA growth rate by 1 percentage point. The card association fee noted above negatively impacted the segment EBITDA growth
rate in 2011 compared to 2010 by 2 percentage points.
Retail and Alliance Services segment EBITDA in 2010 compared to 2009 was positively impacted by the revenue items noted
above in the revenue discussion. The card association fee increase discussed above benefited the segment EBITDA growth rate in
2010 versus 2009 by 2 percentage points. Also contributing to the increase in segment EBITDA in 2010 compared to 2009 were
decreased credit losses due to a lower level of merchant delinquencies as well as a decrease in net check warranty expense driven by
improvements in collection rates. Partially offsetting the increases were decreases due to higher operational and technology costs,
higher incentive compensation accruals and fees paid for processing transactions associated with merchants contributed to BAMS by
BofA. Higher incentive compensation impacted the segment EBITDA growth rate in 2010 by 1 percentage point.
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