Credit and debit card usage has grown at significant rates and is displacing cash and checks, the traditional forms of payment. Consumers are migrating to card-based forms of payment, motivated in part by the convenience, enhanced services and reward programs that cards offer. Corporations, small businesses and governments have also increased their usage of card-based forms of payment for travel, purchasing and fleet management in order to gain better transaction information; more efficiently manage their supply chains and reduce administrative costs. Other forms of electronic payments, including pre-paid cards, chip-based cards and mobile commerce, offer opportunities for further usage and growth.

Merchants of all sizes have increased their acceptance of electronic payments as a way to augment their sales and increase consumer convenience. Electronic forms of payment are gaining wider acceptance in corporate payment applications and in important merchant categories such as supermarkets, gas stations, convenience stores, utilities and fast-food restaurants. In addition, governments have begun accepting electronic payments in order to reduce their administrative costs. Payment cards and other electronic forms of payment continue to be the preferred method of payment in certain higher growth channels of commerce, such as the Internet.

The Company operates a system that links issuers and acquirers around the globe for transaction processing services and, through them, permits cardholders to use their cards at millions of merchants worldwide. A typical transaction processed over its system involves four participants in addition to the Company: issuers (the cardholders’ banks), acquirers (the merchants’ banks), merchants and cardholders. Consequently, the payment system the Company operates is often referred to as a “four-party” payment system.

The Company establishes multilateral interchange fees (“MIFs”) in certain circumstances as default fees that apply when there are no other interchange fee arrangements in place between an issuer and an acquirer. The Company administers the collection and remittance of MIFs through the settlement process; however, it generally does not earn revenues from them. The Company generates a significant amount of revenue from foreign currency conversion. On a global scale, the Company has the ability to process transactions denominated in more than 160 currencies.

The Company facilitates the authorization, clearing and settlement of the transactions and similar transactions through its proprietary, worldwide computer and telecommunications network. The Company’s network provides for the transmission of authorization requests and results among issuers, acquirers and other transaction processors or networks. Once transactions have been authorized and cleared, the Company provides services in connection with the settlement of the transactions—that is, the exchange of funds along with associated fees. Settlement is provided through the Company’s Settlement Account Management system.

The Company also operates the Debit Switch (“MDS”), which principally supports the processing of Cirrus and Maestro online debit transactions. The MDS switches financial messages, provides transaction and statistical reporting, and performs clearing and settlement between customers and other debit transaction processing networks. The Company provides transaction processing (authorization, clearing and settlement) services for customers in the Europe region through its subsidiary.

Authorization, settlement and switch revenues increased $60 million, or 14%, in the six months ended June 30, 2005 compared to the same period in 2004.

Currency conversion revenues increased $22 million, or 17%, in the six months ended June 30, 2005 compared to the same period in 2004.

Depreciation and amortization expenses decreased $6 million in the six months ending June 30, 2005 versus the comparable period in 2004.