Thursday, July 28, 2011

New Internet PIN Debit Player...PAYD

Now you can shop online with your PIN-Based bank card!
eCommerce service provider, MTN Mobile Money, has launched a mobile payment mechanism, which will enable users to purchase products online using a PIN Debit card. MTN Mobile Money says the mechanism, called payD

On the consumer side, only three percent of our population has credit cards, and this is generally the only way to transact online. On the merchant side, transaction costs for credit cards cut deep into margins and this reduces the range of products that e-tailers are able to offer online.
”The ability to purchase online using debit cards, takes the percentage of potential South African online customers from 3% to 60 percent of the population.  MTN Mobile Money claims that the increase in uptake will also result in a drastic cut in online transactional costs.

payD uses the Authenticated Mobile Transaction (AMT) technology developed by MTN Mobile Money, which uses SIM and PIN technology to transform any mobile phone into a secure, encrypted point-of-sale terminal.  First customer?  1Time Airlines:  More info:

Low-cost airline 1Time and 79 others have the service.

JOHANNESBURG - MTN (JSE:MTN) mobile money has launched a new online payment method which will allow you to make online transactions with your debit cards.
payD will allow consumers who don’t have or qualify for a credit card to be able to make online transactions using their debit cards, and using their phones as a “key pad” with which to enter their pin. It enables customers to use pin-based bank cards to make online payments using their cellphone, card number and ATM pin in a highly encrypted authenticated mobile transaction (AMT).
1time Airlines, one of the country’s low-cost airlines has embraced the move, and partnered up with payD, making it the first airline on the continent to allow passengers to flight tickets online using a debit card – a move aimed at increasing its market share.
1time Airlines CEO Rodney James (pictured above) says that the introduction of payD is aligned to the airlines core customer objectives. “We are consistently aware of the need to offer our customers innovative options that are more convenient, safer and user friendly, and thus, we are proud to be one of the first airlines to offer this service. The use of payD broadens the options available to customers on our website, protects them against possible fraud, and further simplifies the process of purchasing tickets online,” said James.
How the system works, users will select the payD payment method on the 1time website. First time users will have to register using their cellphone numbers and entering their debit card details – namely you debit number and expiry date -should it be requested. After registration, debit card details will no longer be required; your cellphone number is all that’s required to identify you as a payD user. A SMS will then come through to the passenger’s cellphone requesting them to authorise the transaction and type in their pin code on the cellphone. The outcome of the transaction will then appear on the company website – either approved or declined, should you not have sufficient funds or added in the incorrect information.
All normal bank transactional costs apply – there are no additional fees to registering or making use of the system. In addition to 1time, there are some 80 other online merchants through which payD will be able to make purchases.
Douglas Henderson, MasterCard’s vice president of advanced payments for the Middle East and Africa, says that the payD system is one that helps to facilitate and already existing and efficient banking and payments system. Dave Parratt (pictured above), head of new business development at MTN Mobile Money allayed fears of security concerns that might exist with regards to the payD product. “A critical element to payD’s security, apart from the high levels of hardware-based encryption, is that the service will only work for the registered user via their personal mobile phone. So there needs to be three elements simultaneously in place for the service to work: the debit card, the registered phone and the ATM PIN,” says Parratt.
Is the system flawed?
According to Parratt, e-commerce has only contributed about 0.36% of the country’s total revenues. He explains that the reason for this is that “only 3% of the country’s population has credit cards and this is generally the only way to transact online. On the merchant side, transaction costs for credit cards cut deep into margins and this reduces the range of products that e-tailers are able to offer online”, said Parrat.
Currently, Standard Bank (JSE:SBK) and Nedbank (JSE:NED) PIN-based debit cardholders on the MTN and Vodacom networks can use payD, with more banks coming on board within a year. In the meantime if you’re an Absa (JSE:ASA), FNB, 8-ta, Cell C or Virgin mobile user- you won’t be able to make use of the payD service as theses providers’ have yet to join the project.  Considering the fact that over 60% of South African’s have debit cards its surprising that some of the banking stakeholders  have been reluctant to allow their clients to make use of the payD service. Henderson explains that there is a question of some of the “other banks could are still be in the process of testing the offering.”
Should more mobile operators, banks and merchants jump on board, it’s likely to see the number of debit card online transactions sky rocket.

Analyst Views on Visa's new "Network Participation Fee"

By IB Times Staff Reporter | July 28, 2011 9:58 AM EDTVisa Inc. (NYSE: V) will implement a new fixed acquirer fee called the "Network Participation Fee" that will apply to both credit and debit cards, in order to help the company win routing business and maintain debit volumes. Visa will also lower variable processing fees and the actions are designed to lower merchant fees and essentially let the retailer capture more of the scale benefit. Visa is the first company to reveal its Durbin migration strategies.

RBC Capital Markets said in a note to clients.

"We believe more pricing competition between Visa, MasterCard, and other PIN networks will accelerate. Given Visa’s overall unit cost advantage relative to the competition; however, we believe they will be able to retain a significant portion of its debit volume," said Daniel Perlin, an analyst at RBC Capital Markets. Perlin believes Visa is also porting the fixed cost leverage, typically fully enjoyed by Visa, to the merchants, which should help drive routing.  
read more analysts views on Visa's fixed acquirer fee 

Newly Released Security Guidelines for Successful Online Banking Programs

Includes State of Online Banking Infographic

Gemalto Educates Banks on Stronger Security to Meet FFIEC Guidance

AUSTIN, TX--(Marketwire - Jul 28, 2011) - The Federal Financial Institutions Examination Council (FFIEC) has released new guidance for banks regarding online customer authentication. Commerce Secretary Gary Locke was also recently quoted1 as saying "...the Internet is again at a crossroads. Protecting security of consumers, businesses and the Internet infrastructure has never been more difficult. Cyber-attacks on Internet commerce, vital business sectors and government agencies have grown exponentially."
In an effort to support banks, Gemalto has recently published an eBanking Security Guidebook2and a series of infographics3 to help bankers better understand security next steps and options to allocate the resources and time needed to succeed in this market. At a time when 73% of online bankers prefer to interact with their bank online than visit a branch and online transactions can cost banks 25% of one conducted offline, Gemalto believes that education will be the key to security compliance and customer safety.
The Gemalto secure eBanking infographic highlights the eBanking market through pictures, including:
  • The current state of eBanking, growth and trends;
  • The financial benefits of secure eBanking;
  • Top five reasons banks should consider using digital security devices to ensure safer eBanking practices;
  • Common security attacks to know and possible countermeasures to consider; and
  • An 11-step guide to implement a successful eBanking security solution at your bank.
To order a copy of the eBanking Security Guidebook, including an 11-step guide to implementing a successful security program at your bank, please visit
For more information on Gemalto, visit the Gemalto blog or follow Gemalto on Twitter.
(1) Mobiledia; Regulators Ask Banks to Beef Up Security
(2) The e-Banking Security Guide from Gemalto
(3) Gemalto Secure eBanking Infographics
Relevant Links
About Gemalto Gemalto (EURONEXT PARISGTO) is the world leader in digital security with 2010 annual revenues of EUR 1.9 billion and over 10,000 employees operating out of 87 offices and 13 Research & Development centers in 45 countries. Gemalto is at the heart of our evolving digital society. Billions of people worldwide increasingly want the freedom to communicate, travel, shop, bank, entertain, and work -- anytime, anywhere, in ways that are convenient, enjoyable and secure. Gemalto delivers on the growing demands for personal mobile services, identity protection, payment security, authenticated online services, cloud computing access, modern transportation, ehealthcare and egovernment services. Gemalto does this by providing secure software, a wide range of secure personal devices, and managed services to wireless operators, banks, enterprises and government agencies. Gemalto is the world leader for electronic passports and identity cards, two factor authentication devices for online protection, smart credit/debit and contactless payment cards, as well as subscriber identification modules (SIM) and universal integrated circuit cards (UICC) in mobile phones. Also, in the emerging machine to machine applications Gemalto is a leading supplier of wireless modules and machine identification modules (MIM). To operate these solutions and remotely manage the software and confidential data contained in the secure devices Gemalto also provides server platforms, consulting, training, and managed services to help its customers achieve their goals. As the use of Gemalto's software and secure devices increases with the number of people interacting in the digital and wireless world, the Company is poised to thrive over the coming years. For more information visit, or follow @gemalto on Twitter.

Alternet Systems, Inc. (ALYI) Releases Letter to Shareholders, Update on YTD Business

July 28, 2011 10:12 ET

MIAMI, FL--(Marketwire - Jul 28, 2011) - Alternet Systems, Inc. (OTCQBALYI) (PINKSHEETS:ALYI), a leading enabler of mobile commerce, mobile financial services and mobile and digital security applications, today issued the following letter to shareholders. In the letter, Alternet CEO Henryk Dabrowski summarizes 2011 YTD performance.

Dear Fellow Shareholders,
2011 continues to be an exciting year at Alternet. Opportunities abound in mobile commerce and digital and mobile security, as evidenced by the launch of multiple initiatives by public and private entities in our hemisphere. Both our operating subsidiaries, Utiba Americas and International Mobile Security (IMS), have achieved significant success in expanding their reach in the mobile commerce and mobile security markets.
Mobile Commerce - Utiba AmericasMobile Commerce is here to stay! No longer a dream, the service went mainstream when in late May, Google rocked the mobile commerce and payments industries with the launch of Google Wallet. You know you are in the right business when Google announces its entrance into your industry! Google has launched an impressive initiative to bring mobile-enabled commerce to smart phone toting consumers in the United States, bringing together its growing base of Android devices, the recently acquired Groupon for consumer advertising and retailer "pull," and the widely accepted debit and credit card brand, MasterCard, whose experience in Near Field Communications (NFC) will help Google push the adoption of this technology. This is exciting news for the payments industry in North America.
Alternet, through its subsidiary Utiba Americas, has focused initially on providing mobile financial services platforms to Mobile Network Operators (MNOs), Banks, and Payment Service Providers (PSPs) in markets with significant "unbanked" populations. To date successful implementations of mobile financial services worldwide have been confined to developing countries where a large portion of the population is without access to financial services, where the most basic, voice and text only, cellular phone has proven an effective mechanism for delivering financial services.
Since Utiba Americas' launch in early 2010 we have grown the company's regional footprint, and created a position of leadership in mobile commerce in the hemisphere, which can be seen in the following achievements:
  • Launch of four commercial mobile financial service platforms in 2011, to be announced in the third quarter, subject to client approval.
  • Execution of five contracts, with more than twenty opportunities in negotiation and more than twenty qualified prospects throughout the region
  • Utiba Americas and its partner, Utiba Pte, Ltd., are in advance negotiations, with announcements expected soon, to enter into global strategic partnerships with industry giants, enhancing the company's presence and market participation
We are on track to play a leading role in this expanding multi-billion dollar industry and reap double digit sales growth over the next 5 years.
Digital and Mobile Security - IMS As the world becomes increasingly dependent on mobile devices, the threat they pose to our business and personal data looms larger. In late 2010 there was a growing proliferation of malware (ZeuS, Plankton) targeting mobile communication devices which are rapidly morphing into unprotected personal computing devices. By 2015 the desktop and mobile client security markets are expected to reach $7 billion, according to a report released by Infonetics in April of this year.
Alternet's digital and mobile security subsidiary, International Mobile Security (IMS), fortified its position in the beginning of the year by completing the acquisition of intellectual property. The company has then focused on the following accomplishments for the second quarter:
  • Expanded global sales efforts in the government sector, marketing proven law enforcement and intelligence applications in Africa and Asia
  • Articulation of product strategies for the consumer and corporate markets
In the third and fourth quarters, IMS will continue to expand its product portfolio through acquisitions and reseller agreements with third party companies, seek patent protection on five products, and expand support and service staff.
Alternet Accomplishments With the initial financing of approximately $700,000 secured earlier this year, Alternet has expanded key staffing of both Utiba Americas and IMS. As of the end of July we have a full time staff of 13, which will increase in the coming months. To accommodate this larger staff, we are moving to new offices at the end of August.
Alternet continues to negotiate strategic private placements as investor demand in the mobile commerce and mobile security industry segment is strong. Additional capital is needed to deliver on current and anticipated customer commitments providing mobile financial services platforms in the Central and South American market and to roll out digital and mobile security products for the consumer and corporate market segments.
Shortly, we will engage an Investor Relations firm to better inform our growing investor base of developments and further disseminate the company's message. In the meantime we welcome your emails and calls at the contact information listed below.
About Alternet Systems Inc.
Alternet Systems Inc. (OTCQBALYI) (PINKSHEETSALYI), a US corporation headquartered in Miami, Florida, is a leading enabler of Secure Mobile Commerce and Communications in the Americas and Caribbean. Alternet has regional presences in 17 countries throughout the region through a network of fulfillment partners and agents. Alternet's subsidiaries provide a comprehensive suite of hosted and Software as a Service (SaaS) applications for the Utility, Transportation, Financial, and Telecommunication, and Retail industries. Alternet subsidiaries include Utiba Americas, a joint venture with Utiba Pte Ltd., a leading provider of mobile payment and financial transaction software, and International Mobile Security (IMS) a newly formed provider of mobile communications security products and services.

Visa Outlines New Fee Structure To Defend Its Debit Business

From Digital Transactions
"As Visa Inc. moves into the post Durbin-era, the debit card market leader plans to offer a fixed network participation fee and reduce its variable processing fee for Visa debit products in the United States. Executives expect the new fee structure will make Visa a more viable alternative to competing PIN-debit networks, which stand to pick up new business from current Visa card issuers as merchants take advantage of network-affiliation and transaction-routing provisions in the Federal Reserve's new debit card regulations."We expect the lower fees to help us win debit routing volume and to effectively compete on the issuing side of the business," chairman and chief executive Joseph W. Saunders said"  read more  

New Annual Subscription “Mobile Commerce 360” Now Available at

LONDON--(BUSINESS WIRE)--Mobile commerce is witnessing a real boost with applications and services that can be attributed to the emerging technologies, application cases, and business models. M-commerce differs greatly from traditional e-commerce as the ecosystem and value chain work in a more dynamic way and are developing in a different manner than e-commerce as a whole.
New annual subscription Mobile Commerce 360” produced by Mind Commerce Publishing LLC offers a 360-degree view of mobile commerce. The subscription provides research, analysis, and advisory services that cover a wide range of issues within mobile commerce including advertising, payments, search and discovery, security, emerging technologies, technology transfer, etc. The service includes a number of research reports featuring various aspects of mobile commerce (and related areas such as value-added services, mobile search, and others) as well as customized reports, and consultation.
Report Details:
The Subscription Encompasses:
  • Mobile Commerce 2011
  • Mobile Local Search 2011 Location-based Search Market
  • Mobile Value Added Service (VAS): Markets, Applications, and Opportunities
  • Near Field Communications (NFC) Markets: Challenges, Opportunities, and Market Forecast to 2016
  • M-Banking Markets and Opportunities
  • Mobile Proximity and Location Based Advertising within Reach
  • Mobile Wallet: Location-based Commerce and Peer-to-Peer Payments
  • Mobile Marketing & Advertising: Challenges and Opportunities
  • Commerce on the Go: Mobile Payment Systems and Solutions
  • Digital Signatures in Mobile Commerce
  • Local Search Meets Social Search
To order the report or ask for free sample pages, please contact

Alibaba Cloud Computing Unveils Mobile Cloud Operating System

BEIJING--(BUSINESS WIRE)--Alibaba Cloud Computing ("AliCloud"), developer of advanced data-centric cloud computing services and a subsidiary of Alibaba Group, has unveiled its internally developed cloud-based mobile device operating system, "Aliyun OS." The K-Touch Cloud-Smart Phone W700, the first mobile phone powered by the cloud OS, was also unveiled here today and will be introduced to the Chinese market at the end of July. AliCloud also plans to integrate the OS with other devices including mobile phones with larger screens and tablet computers in the coming months.“Mobile users want a more open and convenient mobile OS, one that allows them to truly enjoy all that the Internet has to offer right in the palm of their hand, and the cloud OS, with its use of cloud-based applications, will provide that”
"Mobile users want a more open and convenient mobile OS, one that allows them to truly enjoy all that the Internet has to offer right in the palm of their hand, and the cloud OS, with its use of cloud-based applications, will provide that,” said Wang Jian, president of Alibaba Cloud Computing. "Introducing cloud apps to mobile devices not only brings a whole new user experience, but also greater ease for third-party mobile software developers who will be able to use Internet technology such as HTML5 and JavaScript to reduce the complexity in the app development process."
The cloud OS will feature cloud services including e-mail, Internet search, weather updates and mapping & GPS navigation tools. A distinguishing feature of the cloud OS is its support for web-based apps. These offer users an Internet-like experience and do not require the user to download or install application software on their mobile devices. Cloud OS users can seamlessly synchronize, store and back-up data such as contact information, call logs, text messages, notes and photos to AliCloud's remote data center, and can also access and update this data across all their PC and mobile devices. AliCloud will provide each cloud OS user with a total of 100 gigabytes of data storage initially, with plans to expand according to user needs.
Third-party developers can opt to either develop cloud apps over their own servers or choose to use AliCloud’s infrastructure and open platform services at a low cost and quickly develop their businesses. The cloud OS is the result of three years of development and uses AliCloud's self-developed distributed file system and virtual machine; the cloud OS is also fully compatible with Android-based applications.
According to latest statistics from the Ministry of Industry and Information Technology, the number of 3G mobile users in China now exceeds 80 million, or 9.5 percent of all mobile users nationwide. Sales of smartphones reached 62 million in 2010 and 19.07 million handsets were sold in Q1 2011; sales of smartphones accounted for approximately 30 percent of all mobile phone sales, up from 19.2 percent in Q1 2010 according to research firm Analysys International.
About Alibaba Cloud Computing
Alibaba Cloud Computing was established in September 2009 with the mission of building an advanced data-centric cloud computing service platform. The company is committed to supporting the growth of Alibaba Group and the whole e-commerce ecosystem by providing a comprehensive suite of Internet-based computing services, which include e-commerce data mining, high-speed massive e-commerce data processing, and data customization. Alibaba Cloud Computing is wholly owned by Alibaba Group.
About Alibaba Group
Alibaba Group is a global e-commerce leader and the largest e-commerce company in China. Since it was founded in 1999, Alibaba Group has grown to include the following core businesses: (HKSE:1688; 1688.HK), Alibaba Group's flagship company and the world's leading B2B e-commerce company; Taobao Marketplace, China's primary C2C online shopping destination; Taobao Mall, China's leading B2C online marketplace for quality, brand name goods; eTao, China’s most comprehensive shopping search engine; Alibaba Cloud Computing, a developer of advanced data-centric cloud computing services; and China Yahoo!, one of China's leading Internet portals. Alipay, China's largest third-party online payment service, is an affiliate of Alibaba Group.


Alibaba Group
John W. Spelich, +852 9017 7444
Florence Shih, +852 9869 2096 / +86 156 2607 3025

MoneyGram International Reports Second Quarter 2011 Financial Results

Money transfer fee and other revenue increases a strong 11 percent on a constant currency basis driven by money transfer transaction volume growth of 15 percent
DALLAS--(BUSINESS WIRE)--MoneyGram International, Inc. (NYSE:MGI), a leading global payment services company, today reported financial results for the second quarter of 2011.
“As a key objective of our turn-around plan for MoneyGram, we have taken concrete action in recent years to step-up our regulatory compliance programs and bolster the anti-fraud protection we provide to our agents and customers”
  • Money transfer transaction volume increased 15 percent with strong performance in both U.S.-to-U.S. sends of 18 percent and non-U.S. originated sends of 16 percent in the second quarter of 2011 versus prior year.
  • Money transfer fee and other revenue continued to accelerate, increasing 11 percent on a constant currency basis and 15 percent on a reported basis in the second quarter of 2011 versus prior year.
  • Global agent locations increased 20 percent over the prior year second quarter to 244,000.
  • Total revenue in the second quarter increased 9 percent to $310.0 million, compared with $283.9 million in the second quarter of 2010. Total fee and other revenue increased 10 percent to $304.1 million, from $277.6 million in the second quarter of 2010.
  • Net income for the quarter was $26.4 million, up from $6.8 million in the prior year quarter, and EBITDA was $72.2 million, up from $55.4 million in the second quarter of last year.
    • Both net income and EBITDA were negatively impacted in the second quarter of 2011 by:
      • $7.9 million of restructuring and reorganization costs;
      • $5.2 million of debt extinguishment loss in connection with the modification of the senior facility related to the 2011 recapitalization;
      • $4.0 million in costs associated with the recapitalization;
      • $3.2 million of stock-based compensation;
      • $2.6 million for certain legal accruals; and
      • $1.8 million of asset impairment charges.
    • Both net income and EBITDA benefited in the second quarter of 2011 from:
      • $32.8 million of net securities gains related to the receipt of a $19.2 million and a $13.6 million settlement equal to all of the outstanding principal from two securities classified in “other asset-backed securities.” These securities had previously been written down to a nominal fair value, resulting in net securities gains in the quarter.
  • Adjusted EBITDA for the second quarter was $64.2 million versus $65.0 million in the prior year. Adjusted EBITDA margin was 20.7 percent in the second quarter of 2011, compared with 22.9 percent in the same period last year. Adjusted EBITDA and Adjusted EBITDA margin were negatively impacted by increased marketing spend over prior year of $5.3 million.
  • MoneyGram prepaid $50.0 million on its Term Loan under its new Senior Facility.
“With the recapitalization behind us, the highlight for the second quarter is clearly our double-digit growth in money transfer revenue, transactions and locations, all of which accelerated from the first quarter. I’ve said that our focus needed to be on improving top-line growth and we are achieving our expectations in this area,” said Pamela H. Patsley, MoneyGram chairman and chief executive officer. “Yet, to more competitively position us for future growth we’ve also been re-investing in our core business. These investments are focused on increasing the strength of our global brand and enhancing our core infrastructure and global operations. While we are far from finished, the investments we are making in our business are beginning to take hold and we are heading in the right direction.”
Recapitalization Activities
During the quarter, MoneyGram completed its 2011 recapitalization transaction under which affiliates and co-investors of Thomas H. Lee Partners, L.P. and Goldman, Sachs & Co. converted MoneyGram’s Series B and Series B-1 preferred shares into common stock or Series D preferred stock (a common stock equivalent) and received additional shares of common stock or Series D preferred stock and a cash payment.
At the close of the quarter, MoneyGram now has 571.8 million shares of common stock and common stock equivalents outstanding.
Also in the quarter, MoneyGram closed on its new senior secured credit facility. The new $540 million senior secured credit facility consists of a $150 million, 5-year revolving credit facility and a $390 million, 6.5-year term loan. The new term loan bears interest at LIBOR plus 3.25% (with a LIBOR floor of 1.25%) and extends the senior debt maturities to 2017 from 2013.
Balance Sheet Items
In June, MoneyGram prepaid $50.0 million on its Term Loan under its new Senior Facility and ended the quarter with $840.0 million in outstanding debt principal. MoneyGram ended the quarter with assets in excess of payment service obligations of $233.1 million, which reflects $32.8 million of securities settlements and the debt prepayment of $50.0 million.
Market Development
The Company continued its focus on enhancing its product offerings and expanding its agent network. MoneyGram recently:
  • Launched service with Bharti Walmart and Bharti Retail in India making MoneyGram the first money transfer brand introduced in chain retail locations in the country, adding 138 locations with convenient hours and frequent shoppers;
  • Successfully renewed its agreement with Canada Post, the largest retail network in the country, and added bill payment services to its suite of product offerings. MoneyGram will continue to provide money transfer services at over 6,200 post office and postal outlet locations throughout Canada;
  • Re-opened nearly 350 network locations in Ivory Coast following temporary closures due to the political issues within the country. Business has resumed with strong transaction volume from France leading the way;
  • Announced the addition of Al Barid Bank in Morocco, now MoneyGram’s largest agent in the country with 1,800 locations;
  • Opened offices in Casablanca and Manila to support the growth in these important remittance markets;
  • Announced new strategic U.S. expansions with the addition of two premier financial service center agents – Friendly Check Cashing and RiteCheck. These agents added key locations in New York City, Virginia and North Carolina;
  • Added four new agents in France – Ingenico Group, Logicartes, Panini and Suncard Group – bringing the total number of locations to 1,000, which is up from 102 locations in the second quarter of last year;
  • Continued its network expansion in China with Bank of China adding services in provinces in Northeast China. Bank of China now has more than 7,000 active locations and MoneyGram’s country network now reaches 25 provinces.
Global Funds Transfer Segment Results
Total revenue for the Global Funds Transfer segment increased 12 percent to $283.8 million in the second quarter of 2011 compared with $253.7 million in the second quarter of 2010. The segment reported operating income of $25.9 million and an operating margin of 9.1 percent in the second quarter of 2011. Adjusted operating margin was 11.9 percent in the quarter, down from 14.2 percent in the prior year quarter. Consistent with the first quarter, segment margin was negatively impacted by increased marketing spend, lower operating income from the bill payment business and increased commission expense, which resulted from revenue growth, changes in corridor mix and a contractual increase in commissions at a significant agent.
During the second quarter of 2011, money transfer transaction volume increased 15 percent, with fee and other revenue also increasing 15 percent to $256.2 million compared with $222.6 million in the second quarter of 2010. On a constant currency basis, money transfer fee and other revenue improved a very strong 11 percent. The difference between transaction growth and constant currency revenue growth is primarily due to corridor mix.
In the U.S., the money transfer business continued to deliver solid results driven by 18 percent growth in U.S.-to-U.S. transaction volume. U.S. outbound transaction volume increased 10 percent over prior year. U.S. to Mexico transaction volume increased a strong 12 percent. U.S. to Mexico continues to be an important corridor within the U.S. outbound business.
Non-U.S.-originated money transfer transactions had a very strong quarter. Transaction volume increased 16 percent over the prior year as MoneyGram’s focus on agent expansion, corridor alignment and re-investments in marketing more than offset the many geo-political issues across Africa and the Middle East which impacted various corridors during the quarter.
Bill payment transaction volume decreased 8 percent, while fee and other revenue decreased 11 percent to $27.6 million in the second quarter of 2011 from $31.0 million in the second quarter of 2010. The decline in both transaction volume and revenue continues to be related to transaction mix where secular and economic declines in the traditional consumer credit verticals is occurring at a faster rate than business in new emerging verticals is being added.
Financial Paper Products Segment Results
Total revenue in the Financial Paper Products segment was $25.6 million in the second quarter, down from $29.2 million in the second quarter of 2010. Operating income was $9.3 million in the second quarter of 2011 down from $11.6 million in the second quarter of 2010. Operating margin in the second quarter of 2011 was 36.4 percent. Adjusted operating margin was 40.8 percent in the quarter down from 42.7 percent in the same period last year. Segment margin continues to be negatively impacted by declining investment revenue.
Other Matters
During the quarter, the company benefited from $32.8 million of net securities gains related to the receipt of a $19.2 million and a $13.6 million settlement equal to all of the outstanding principal from two securities classified in “other asset-backed securities.” These securities had previously been written down to a nominal fair value, and the receipt of the cash resulted in net securities gains in the quarter. Importantly, MoneyGram has been and continues to pursue every possible effort to recover principal from other securities.
As previously disclosed, MoneyGram was served with subpoenas to produce documents and testify before a federal grand jury in the U.S. District Court for the Middle District of Pennsylvania. MoneyGram has provided information requested pursuant to the subpoenas and, in November 2010, met with representatives from the U.S. Department of Justice (US DOJ) to discuss the investigation. MoneyGram has since participated in discussions with various representatives of the federal government, including the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice (US DOJ), relating to, among other things, certain activities occurring between 2004 and early 2009 involving its U.S. and Canadian agents and its consumer anti-fraud program. During these discussions, MoneyGram was informed that it is being investigated by the federal grand jury in connection with these matters as well as MoneyGram’s anti-money laundering program during that period. MoneyGram is cooperating with the US DOJ in connection with this investigation. The investigation is continuing and no conclusions can be drawn at this time as to its outcome.
“As a key objective of our turn-around plan for MoneyGram, we have taken concrete action in recent years to step-up our regulatory compliance programs and bolster the anti-fraud protection we provide to our agents and customers," Patsley added. "These actions include significant enhancements to staffing, processes and technology geared toward preventing consumer fraud and ensuring that we meet the highest standards of regulatory compliance. We are committed to utilizing all necessary resources to resolve the Company’s remaining legacy issues and drive the new MoneyGram to continued success.”

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