Commercial Services provides a vast portfolio of point-of-sale products and services that merchants of all sizes and types need to be successful in today’s competitive marketplace. This includes merchant acquiring and processing; debit processing and debit network access through the STAR® Network for merchants; electronic check acceptance, check verification and guarantee services; point of sale terminal solutions; and the rapidly growing area of prepaid cards.

Serving 3.5 million domestic merchant locations, Commercial Services is focused on enabling merchants to meet the ever-increasing consumer demand for speed, choice and convenience when paying for goods and services. At the same time, we are providing merchants with the reliability, security and back-office services that are critical to their business success.

A renewed client focus and enhanced commitment to product innovation enabled Commercial Services to meet or exceed its financial targets in 2006. Our diversified sales channels will continue to deliver strong growth with more than 85 financial institution partners, over 200 non-bank referral partners, 115 independent sales organizations and over 5,000 sales people.

Momentum in the Commercial Services segment is very strong entering 2007. The stable and predictable revenue streams will continue to grow as Commercial Services is poised to leverage the shift to electronic payments.

• Signed more than 600,000 new domestic merchant locations – an increase of 22 percent over 2005.
• Increased total transaction dollar volume by 16 percent to $1.3 trillion.
• Grew total domestic merchant transactions by 13 percent to 25.5 billion.
• Loaded $13.2 billion in prepaid cards, a 14 percent increase.
• Introduced a unique merchant-branded open-loop gift card.
• Guaranteed checks totaling $25.4 billion, up 12 percent.
• Successfully launched the feature-rich FD-100 proprietary terminal.

Financial Institution Services provides a number of mission-critical services to financial institutions and retailers, as well as healthcare and utility providers.

With unparalleled capabilities in high-volume, high-value transaction processing and account management, Financial Institution Services provides the core processing infrastructure for credit, debit and retail private-label card issuers. This segment also provides debit network access through the STAR® Network for card issuers. In addition, we provide a variety of ancillary products and services, including plastic card production, statement and letter printing, and remittance processing services.

2006 was a year of great progress for Financial Institution Services. We defined a clear set of objectives for the business and delivered against them. Through a combination of strengthening our core business, focusing on product innovation, entering into adjacent markets and aggressively improving overall costs, Financial Institution Services is establishing new pathways to profits. With unmatched operational precision and industry expertise, we are leveraging our core competencies and establishing innovative ways to successfully drive the business into the future. We will continue to build on the solid foundation in place and are well on the way to reaching our long-term growth objectives.

• Renewed more than 425 contracts with over $125 million in annualized revenue.
• Converted more than 100 million accounts onto our systems, including the flawless completion of the single largest conversion in industry history.
• Grew domestic card accounts on file to 557 million, an increase of 34 percent.
• Increased domestic debit issuer transactions 19 percent to 9.4 billion.
• Acquired Peace Software, a Customer Information System product company that develops advanced software for managing utility billing and customer care.
• Successfully grew our healthcare card payments business.

Capitalizing on the worldwide shift to a cashless society, First Data International’s (FDI) story is one of incredible growth and opportunity, bringing all of the products and services First Data has to offer to new and emerging markets outside of the United States. These include credit, debit and prepaid card processing; merchant acquiring and processing; ATM and point-of-sale processing, driving, acquiring and switching services; and card processing software.

First Data International has established itself as a thought leader, gaining worldwide recognition as a payments processing expert. Our brand and scheme neutrality, combined with being an internationally recognized provider with deep local knowledge and resources, positions us perfectly for long-term growth and success.

We increased our international sales force by 39% over 2005 to nearly 800 sales employees. FDI’s sales and channel strategy reinforces our market leading position as a worldwide payment processing company who truly delivers locally.

First Data International will move quickly to capitalize on opportunities that are created as the global payments industry grows and consolidates. We will extend our service portfolio and enter new markets, especially in growing economies, to maintain our leadership position and shape the payments market around the world.

• Achieved exceptional geographic expansion, entering eight new countries and growing to approximately 7,900 FDI colleagues.
• Formed Merchant Solutions Pte Ltd. with Standard Chartered PLC with the potential to reach markets that represent 40 percent of the world’s total population.
• Increased point-of-sale locations by 39 percent to a total of 1.6 million locations.
• Expanded card accounts on file by 60 percent to 72 million.
• Grew transactions by 63 percent to a total of 4.6 billion.
• Closed on two pivotal acquisitions expanding First Data’s presence in Germany and South America.