Profile: The Western Union Company (WU)

The Western Union Company (Western Union), incorporated on February 17, 2006, is engaged in the business of global money transfer, providing people with convenient ways to send money worldwide. The Company’s services are available through a network of over 375,000 agent locations in more than 200 countries and territories. As of December 31, 2008, approximately 75% of Western Union’s locations had experienced money transfer activity in the prior 12 months. Its consumer-to-consumer money transfer service enables people to send money worldwide in minutes. Its consumer-to-business service provides consumers with options for making one-time or recurring bill payments. The Company offers money transfer services under the Western Union, Orlandi Valuta and Vigo brands in over 200 countries and territories, and various bill payment services, primarily in the United States, under several brands like Speedpay, Equity Accelerator, Just in Time EFT, Western Union Quick Collect and Western Union Convenience Pay. In February 2009, the Company completed the acquisition of the money transfer business of European-based FEXCO. In September 2009, the Company completed the acquisition of international business-to-business payments provider, Custom House. Custom House processes payments originating in seven countries for payout in 120 countries.

The Company’s revenue is principally generated by money transfer and payment transactions. It primarily derives its revenue from two sources. Most of its revenue comes from fees that consumers pay when they send money. In its consumer-to-consumer segment Western Union provides its third-party agents with its multi-currency, real-time money transfer processing systems used to originate and pay money transfers. The agents provide the physical infrastructure and staff required to complete the transfers. It generally pays its agents a commission based on a percentage of revenue.

In the Company’s consumer-to-business segment it processes electronic and cash payments to a variety of organizations that receive consumer payments, including utilities, auto finance companies, mortgage servicers, financial service providers and governmental agencies, which it sometimes refer to as billers. It processes electronic payments using the consumer’s credit card, debit card or bank account. It processes cash payments much like it processes consumer-to-consumer transactions.

More than 85% of Western Union’s agent locations are outside the United States. Its consumer-to-consumer services are available in almost every country or territory. It has offices in more than 50 countries. In the United States, Costa Rica, Russia, Mexico, Argentina and the Philippines, its offices include customer service centers, where its employees answer operational questions from agents and consumers and certain of these offices also provide data processing services. Its office in Englewood, Colorado serves as its corporate headquarters, and its office in Dublin, Ireland serves as its international headquarters. Other offices, including regional management offices in Sunrise, Florida, Vienna, Austria and Hong Kong, China, provide sales, marketing, and other services.

Western Union agents include large networks, such as post offices, banks and retailers. It has agreements with postal organizations in Argentina, Australia, China, France, Germany, India, New Zealand, Russia, Spain and elsewhere. Its services are offered through banks, such as Agricultural Bank of China and the State Bank of India. National and international retailers in the network include Kroger and Publix in the United States and Elektra and Travelex internationally. Many of its agents have multiple locations. The Company’s consumer-to-business services offer bill payment services primarily in the United States.

Consumer-to-Consumer Segment

Individual money transfers from one consumer to another are the core of the Company’s business, representing 85% of its total consolidated revenues during the year ended December 31, 2008. It offers consumers a variety of ways to send money. Although most remittances are sent in cash at one of its more than 375,000 agent locations worldwide, in some countries it offers the ability to send money over the Internet or the telephone, using a credit or debit card. Some agent locations accept debit cards to initiate a transaction. It also offers consumers several options to receive a money transfer. Its revenue is derived primarily from transaction fees charged to consumers to transfer money. Western Union offers money transfer services worldwide. In 2008, over 90% of its consumer-to-consumer transactions were cash money transfers involving its walk-in agent locations worldwide.

The majority of Western Union’s remittances constitute transactions, in which cash is collected by the agent and payment (usually cash) is available for pick-up at another agent location in the designated receive country, usually within minutes. In some United States outbound corridors and in select international corridors, it provides a Direct to Bank service, enabling a consumer to send a transaction from an agent location directly to a bank account in another country. In certain countries, its agents offer a bank deposit service, in which the paying agent provides the receiver the option to direct funds to a bank account or to a stored-value card. Also, under its Vigo brand, it offers Direct to Bank service in certain countries. It also provides a Cash to Card service that provides consumers an option to direct funds to a stored-value card in certain locations. The Next Day delivery option is a money transfer that is available for payment the morning after the money transfer is sent. This option is available in certain markets for domestic service within the United States, and in select United States outbound and international corridors, including Mexico.

The Company’s Money Transfer by Phone service is available in select agent locations in the United States. In a Money Transfer by Phone transaction, the consumer is able to use a telephone in the agent location to speak to a company representative in one of several languages. Its Internet Website, westernunion.com, allows consumers to send funds on-line, using a credit or debit card, for payment at most Western Union branded agent locations worldwide. As of December 31, 2008, Western Union was providing send service in 12 countries outside the United States. Its Telephone Money Transfer service allows Western Union consumers to send funds by telephone without visiting an agent location. Consumers call a toll-free number in the United States, Canada, Ireland or the United Kingdom and use a debit card or credit card to initiate a transaction. The money transfer is then available for pay-out at an agent location.

The Company offers its consumer-to-consumer service through its global network of third-party agents and the other initiation and payment methods discussed above. Western Union provides central operating functions, such as transaction processing, settlement, marketing support and customer relationship management to its agents. As of December 31, 2008, it had over 700 superagents located throughout the world. Its international agents often customize services as appropriate for their geographic markets. In some markets, individual agents are independently offering specific services, such as stored-value card payout options and Direct to Bank service.

The Gold Card offers consumers faster service at the point-of-sale and, in certain countries, other benefits, which could include reward points, service fee reductions on future Western Union branded transactions, discounts at retailers or a rechargeable prepaid phone card embedded within the Gold Card. As of December 31, 2008, the Gold Card program was available in 72 countries and had approximately 11 million active cards.

Consumer-to-Business Segment

Western Union provides a portfolio of electronic and cash payment options that provide consumers with ways to make one-time or recurring payments to billers. Revenues from this segment represented 14% of its revenue in 2008. The revenue in this segment is derived primarily from transaction fees paid by the consumer or the biller. Consumers use its Speedpay service principally in the United States to make payments to a variety of billers using credit cards, debit cards and automated clearing house (ACH). Payments are initiated over the telephone or the Internet.

The Company’s Equity Accelerator service is provided in the mortgage service industry, enabling consumers to make mortgage payments by ACH. It is marketed as a convenient way for homeowners to schedule additional recurring principal payments on their mortgages. Consumers use its Quick Collect service to send funds to businesses and government agencies across the United States and Canada, using cash and, in certain locations, a debit card. This service is also offered in other select international locations, and is referred to as Quick Pay in those locations. It also offers Quick Cash, a cash disbursement service used by businesses and government agencies to send money to employees or individuals with whom they have accounts or other business relationships. Consumers use its Convenience Pay service to send payments by cash or check from a smaller number of Convenience Pay agent locations primarily to utilities and telecommunication providers.

Western Union’s electronic payment services are available primarily through the telephone and the Internet, while its cash-based services are available through its agent networks. Billers market its services to consumers in a number of ways, and it markets its services directly to consumers using a variety of means, including advertising materials and promotional activities at its agent locations. Consumers can also participate in the Western Union Gold Card program when using its Quick Collect service to make cash payments to billers.

Other

The Company’s other segment includes money orders and prepaid services. It markets Western Union branded money orders, issued by a third-party, to consumers at non-bank retail locations primarily in the United States and Canada. On July 18, 2008, an agreement was executed with Integrated Payment Systems Inc. (IPS), a subsidiary of First Data, whereby it will assume the responsibility for issuing money orders effective October 1, 2009 (the Transition Date). Transition Date, money order revenue is generated through a combination of commissions collected from IPS and per item fees for money orders sold. In a money order transaction, a consumer purchases a money order from an agent. The agent selling the money order generally remits the funds collected from the consumer to IPS promptly following the sale date. IPS holds those funds to meet regulatory requirements and to pay money orders presented for payment. IPS holds the settlement assets related to its money order business.

Western Union also offers prepaid services consisting of a Western Union branded prepaid MasterCard card and Visa card and third-party top-up services in the United States and Argentina. The Western Union branded prepaid MasterCard card is sold through select agents in the United States and on the Internet, and its Western Union branded prepaid Visa card is also sold on the Internet. Its top-up services allow consumers to pre-pay for mobile phone or other services, and otherwise store value with service providers that can be accessed by the consumer in the future.