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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-K


[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.
      Commission file number 0-30791.

                               eFUNDS CORPORATION

             (Exact name of registrant as specified in its charter)


          Delaware                                               39-1506286
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


Gainey Center II
8501 N. Scottsdale Road, Suite 300                                 85253
Scottsdale, Arizona                                              (Zip Code)
(Address of principal executive offices)


Registrant's telephone number, including area code:  (480) 629-7700

Securities registered pursuant to Section 12(b) of the Act:   None

<TABLE>
<S>                                                           <C>
Securities registered pursuant to Section 12(g) of the Act:   Common Stock, par value $.01 per share
                                                              Preferred Stock Purchase Rights
                                                              (Title of Class)
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  x  Yes     No
                                   ---     ---

The aggregate market value of the voting stock held by non-affiliates of the
registrant is $757,517,722 based on the last sales price of the registrant's
common stock on the National Association of Securities Dealers Automated
Quotation System on March 27, 2002. The number of outstanding shares of the
registrant's common stock as of March 27, 2002 was 46,519,365 and the last sales
price of the registrant's common stock on that date was $16.40.

Documents Incorporated by Reference: Portions of the registrant's proxy
statement for its 2002 Annual Meeting of Stockholders, which will be filed with
the Securities Exchange Commission on or before April 30, 2002, is incorporated
by reference in Part III.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]


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                                     PART I

ITEM 1.     BUSINESS

INFORMATION ABOUT US

      Our Company was incorporated in Delaware in December 1984 and historically
operated our transaction processing and government services businesses under the
names Deluxe Electronic Payment Systems, Inc. and Deluxe Government Services.
Prior to our initial public offering (the "IPO") in June 2000, we were a wholly
owned subsidiary of Deluxe Corporation, a Minnesota corporation ("Deluxe").
Deluxe is the largest check printer in the world. The shares of Deluxe are
publicly traded on the New York Stock Exchange under the symbol "DLX."

      In April 1999, we began the process of combining four of Deluxe's other
former operating units into an integrated electronic payments and risk
management business. The operations combined were DebitBureau, Chex Systems,
Inc., Deposit Payment Protection Services, Inc. and an electronic check
conversion company that Deluxe acquired in February 1999. In September 1999, we
changed the name of our Company to eFunds Corporation. In January 2000, we
decided to combine Deluxe's professional services business, eFunds IT Solutions
Group, Inc. and eFunds International India Private Limited, with our electronic
payments and risk management businesses. In June 2000, we sold 5,500,000 shares
of our common stock to the public at a price of $13.00 per share. After the IPO,
Deluxe continued to own about 87.9% of the outstanding shares of our common
stock. In December 2000, Deluxe distributed all of the shares of our common
stock owned by it to its shareholders through a tax-free spin-off (the
"Spin-Off") in which each of its shareholders received approximately .5514 of a
share of our common stock for each Deluxe share owned by them. Following the
Spin-Off, Deluxe ceased to own any shares of our common stock.

      In March 2000, we paid cash of $20.0 million for an approximate 24%
interest in Access Cash International, L.L.C. ("ACI"), a limited liability
company that provides automated teller machines ("ATM") services. ACI was the
second largest independent provider of ATM services in the United States. In
September 2000, we entered into an ATM deployment and management agreement with
ACI under which we received fees paid by customers utilizing ATMs deployed by us
and interchange fees from their banks. ACI managed this network of ATMs in
exchange for a management fee determined by reference to the number of ATMs
under management. Effective October 1, 2001, we acquired (the "Acquisition") the
remaining approximately 76% of the equity interests in ACI for approximately
$44.6 million, of which approximately $40.3 million was paid in cash on the
closing date of the Acquisition. Payment of the $4.3 million balance of the
purchase price is subject to the satisfaction of certain post-closing
conditions. We entered into the ATM deployment and management agreement and
ultimately acquired ACI as part of our strategy to increase our transaction
processing revenues through the acquisition and control of ATM transactions at
the point of origination. At the time of the Acquisition, ACI managed a network
of approximately 8,500 ATMs throughout the U.S. and Canada.

      ACI had been operating at a loss in periods prior to the Acquisition. A
major objective of the Acquisition was to improve its financial performance in
2002 and beyond. We expect improvement in the ACI business to come from four
major sources: (i) reduced operating costs through the integration of sales,
marketing, operations and facilities, (ii) the elimination of processing fees
for more than 6,000 of ACI's ATMs that were being paid by ACI to third party
processors by migrating the processing of all of ACI's transactions to our data
centers, (iii) the redeployment of under-performing or idle ATMs and (iv) higher
branding revenues from existing and new branding customers. We currently expect
that the Acquisition will be accretive in 2002.

      On January 31, 2002, we purchased substantially all of the U.S.
ATM-related assets of Hanco Systems, Inc., an independent ATM deployment and
management company ("Hanco"). We paid approximately $11.4 million in cash, plus
an additional amount for outstanding accounts receivable of Hanco and the
assumption of certain of its liabilities. Hanco managed a network of
approximately 2,500 ATMs in 30 states. We are actively pursuing the acquisition
of the ATM portfolios of other independent ATM deployment and management
companies.

      Our principal executive offices are located at Gainey Center II, 8501 N.
Scottsdale Road, Suite 300, Scottsdale, Arizona 85253 and our telephone number
is 480-629-7700. Our Internet address is www.efunds.com. The information
contained on our web site is not a part of this document.

OUR BUSINESS

      We provide electronic transaction processing, ATM outsourcing and decision
support and risk management services to financial institutions, retailers,
electronic funds transfer networks, e-commerce providers and government
agencies. We also offer business process outsourcing services to complement our
payments business. Our services enable our clients to reduce their transaction
and infrastructure costs, detect potential fraud and enhance their relationships
with their customers. We operate two principal businesses:

      -     Payment systems and services; and


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      -     Government services.

      PAYMENT SYSTEMS AND SERVICES

      Our payments systems and services segment provides transaction processing
and ATM deployment and outsourcing services, decision support and risk
management products as well as related information technology consulting and
business process management services. Our payment systems and services segment
had net revenues of $468.7 million in 2001, which represented approximately 91%
of our total net revenues in 2001.

      Transaction Processing

      We process transactions for regional automated teller machine, or ATM,
networks in the United States. We also provide transaction processing for retail
point-of-sale terminals that accept payments from debit cards and paper checks
that have been converted into electronic transactions. Transaction processing
involves electronically transferring money from a person's checking or savings
account according to his or her instructions. For example, when a cardholder
inserts his or her debit card into an ATM machine and enters his or her PIN and
the type and amount of the transaction, the device contacts our systems and
transmits the request. We identify the institution that issued the card and work
through the necessary validation and authorization routines, such as ensuring
that the cardholder has entered the correct PIN, that the transaction is within
the cardholder's limits on withdrawals and that there are sufficient funds in
the cardholder's account. If all the routines are executed successfully, we
signal the ATM or point of sale device to complete the transaction.

      To carry out the tasks required, each ATM or point-of-sale device is
typically connected to several computer networks. These networks include private
networks that connect the devices of a single owner, shared networks that serve
several device owners in a region and national shared networks that provide
access to devices across regions. Each shared network has numerous financial
institution members. For example, the COOP network, for which we provide
processing services, has over 800 credit union members. As part of our
transaction processing services, we, and other gateway service providers like
us, provide cardholders with access across these multiple networks.

      Our subsidiary ACI is also an independent provider of ATMs. As part of
this service, we place ATMs with convenience, grocery, general merchandise and
drug stores, as well as gas stations, located throughout the United States and
Canada. We are the largest independent provider of ATM services in the United
States and we currently manage an active network of approximately 11,000 ATMs.
We are migrating the processing of the ATM transactions generated at these
machines to our networks as ACI's existing processing agreements with third
party processors expire. Currently, we provide the processing for approximately
4,600 of the ATM machines in our network and we expect to complete the
transition of the processing for our remaining 6,400 ATMs by the end of the
year. We own or lease approximately 20% of the ATMs placed at the merchant
locations and the remaining ATMs are owned or leased by our merchant customers.
We collect both ATM surcharge fees from consumers using ATMs deployed by us and
interchange fees from their banks. We share a greater or lesser portion of these
fees with the merchant, depending on whether we or the merchant owns or leases
the ATM at which the transaction originated. We also have approximately 250
machines in inventory that are available for deployment. We expect to expand our
network through the placement of additional ATMs and the acquisition of
additional independent ATM providers. We will also seek to generate additional
revenues from the sale of branding slots on the deployed machines. These branded
machines enable customers of the sponsoring institution to use the branded ATM
without paying a surcharge fee. We are also seeking to provide financial
institutions with ATM management services.

      We drive or operate more than 10,000 bank-owned ATMs in addition to those
included in our Access Cash network and more than 72,000 point-of-sale
terminals. These terminals include approximately 40,000 electronic benefits
terminals, 19,000 Medicaid benefits terminals and 13,000 bank-owned retail
terminals. We process virtually all types of debit-based transactions, including
cash withdrawals, cash deposits, balance inquiries, purchases, purchases with
cash back and purchase returns. In 2001, we processed approximately eight
billion transactions, with 99.99% system availability. In addition, we authorize
cash advances and purchases initiated with credit cards at ATM or point-of-sale
locations. We also provide 24 hour a day, 7 day a week monitoring of ATMs for
system irregularities.

      We license our electronic funds transfer software, the same software that
drives our electronic funds transfer processing business, to in-house processors
and regional networks in 23 foreign countries and in the United States. In 2001,
our licensees processed over 13 billion transactions around the world using our
electronic funds transfer software. Our electronic funds transfer software runs
on IBM and Tandem computing platforms. We also provide software maintenance and
support services.

      In 2001, Concord EFS acquired the STAR debit network, formerly our largest
transaction processing customer, and notified us that it intended to terminate
STAR's processing agreement with us and perform the processing for this network
at its own data centers. As part of the transition of this activity, Concord EFS
licensed our EFT software and contracted for the long-term maintenance thereof
and for professional services to assist in the migration effort. The license to
Concord EFS represented our largest software licensing transaction to date. The
transition of the processing for the STAR network to Concord EFS is currently


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scheduled to be completed by the fourth quarter of 2002. Concord EFS will pay us
fixed monthly fees for processing we perform for the STAR network during the
transition period and we expect to see the revenues from our relationship with
STAR decline substantially from historical levels in future periods. Including
software license and maintenance fees and fees for processing transactions for
STAR, Concord EFS accounted for approximately $56.2 million of net revenue
during the year ended December 31, 2001, or approximately 10.9% of our total net
revenues in that year. We do not expect that the fees we received from Concord
EFS in 2001 will recur at comparable levels in future periods and we currently
estimate that the total net revenues we will recognize from our relationship
with Concord EFS in 2002 will approximate $25 million. Approximately 40% of this
amount is expected to be recognized in the first quarter of 2002 and
substantially all of the remaining balance is expected to occur ratably in the
second and third quarters.

      During 2001, we provided processing services to the American Clearing
House Association, a private sector automated clearinghouse service, or ACH,
provider. The ACH network is an electronic payment delivery system used
primarily to process repetitive payments, such as mortgage payments, payroll,
social security payments and utility payments. The ACH network routes electronic
funds transfers between financial institutions on behalf of their customers. The
Federal Reserve is the largest ACH service provider. As a result of fee
reductions instituted by the Federal Reserve that do not apply to third party
ACH providers like ourselves, we have now determined to exit this business. This
business accounted for $0.8 million in net revenues in 2001.

      Decision Support and Risk Management

      We offer products that help financial institutions, retailers and other
businesses that open debit accounts or accept checks and other forms of debit
payments to:

      -     determine the likelihood of account fraud and identity manipulation;

      -     assess the overall risks involved in opening new accounts or
            accepting payment transactions; and

      -     make better predictions about other products their customers are
            likely to purchase.

      Our decision support and risk management products are based on or enhanced
by our DebitBureau(R) database. DebitBureau contains over three billion records
and includes data from our ChexSystems(SM) and SCAN(SM) databases and other
sources. We use the data in DebitBureau to screen for potentially incorrect,
inconsistent or fraudulent social security numbers, home addresses, telephone
numbers, driver license information and other indicators of possible identity
manipulation. Using our data, we can perform various tests to validate a
consumer's identity, assess and rank the risk of fraud and match customers with
targeted product offerings.

      Our SCAN, or Shared Check Authorization Network, helps retailers reduce
the risk of write-offs for dishonored checks due to insufficient funds and other
forms of account fraud or identity manipulation. When a check is presented as
payment at the point-of-sale, SCAN members run the check through a scanner. The
information on the check is then compared to the SCAN database to determine
whether there have been previous payment problems with the check writer or his
or her account. SCAN then reports any issues to the retailer and the merchant
decides whether or not to accept the check. SCAN serves 13 of the 20 largest
retailers in the United States based on recent market data. More than 77,000
retail locations report returned check activity to the SCAN network. Our larger
retail customers host our SCAN database on their own computers. Others access
the database through our SCAN Online Offering. Merchants pay a service fee for
SCAN based on the aggregate dollar value of checks authorized by them, if they
host the SCAN file themselves, or by the number of inquiries submitted, if they
use SCAN Online. Additional fees apply for inquiries by the retailers or
consumers to our call centers.

      To help retailers manage their check acceptance programs, we offer
collection services to some SCAN members. We tailor our collection strategies to
specific retailer needs. The services generally involve sending letters and
follow-up telephone calls to consumers whose checks have been returned. In the
past, we occasionally extended a portfolio purchase option to SCAN members.
Under this program, we purchased returned checks from the retailer at a mutually
agreed upon discount from the face amount and assumed the collection risk on the
returned items. We have discontinued this product offering. In 2001, we began a
limited market introduction of our SecureFunds check guarantee product pursuant
to which we purchase approved checks at a discount and assume the risk of
collection. The widespread introduction of this service remains under
consideration.

      Our ChexSystems business is a provider of new account applicant
verification services for financial institutions. ChexSystems provides access
to more than 18 million closed-for-cause account histories and 52 million
records of new account inquiries through our FraudFinder product. An account is
considered closed-for-cause when, for example, a consumer refuses to pay the
account fee and the bank closes the account. ChexSystems helps financial
institutions assess the risks involved in opening an account for a new customer
by enabling them to make inquiries against our database when a consumer applies
for a new account. ChexSystems also helps financial institutions make decisions
about offering additional financial products to new customers. The ChexSystems
service is used by more than 88,000 financial institution locations. Financial
institutions may access the service online or by telephone. We also are
developing an Internet-based new account verification service. Financial
institutions pay a service fee for our new account verification services based
on the number of inquiries they send to us. During 2002, we plan on introducing
a new set of customer acquisition and account management products and services
for financial institutions that will utilize our DebitBureau data for decision
support purposes.


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      As a separate service, we also provide collection services to financial
institution clients of ChexSystems. We do not assume any collection risk for
these services. We contract with a third party for extended collection activity.

      ChexSystems also offers DebitReport, a service pursuant to which our
DebitBureau data is made available to credit grantors, directly and through
credit bureaus, to supplement their credit decisioning processes and for use in
making pre-approved offers of credit.

      Professional Services

      To complement and support our electronic payments business, we provide our
clients with information technology and business process outsourcing services.
Our business process management and outsourcing services focus on both
back-office and customer support business processes, such as accounting
operations, help desk, account management, transaction processing and call
center operations. Our business process outsourcing services are provided
primarily at our shared services facility in Gurgaon, India and at our call
center sites in Mumbai, India. Our offshore business processing capabilities
allow our clients to focus on their core processes, reduce their direct
personnel costs, avoid non-core capital investments and improve the quality of
their outsourced operations.

      Our information technology services include the installation of our
electronic payment products and the integration of these products within the
customer's existing information technology infrastructure. We also customize our
standard products and develop new applications for clients who want additional
features and functionality and help clients test and refine our products in
their information technology environments. In addition, we provide on-site user
training on our products and solutions for the information technology,
operations and management staff of clients. We build long-term continuing
relationships with our clients by providing on-going maintenance and support of
our software products.

      Our former parent company, Deluxe, is the principal customer for our
professional services offerings. In 2001, sales to Deluxe were $47.6 million.
Sales to Deluxe for the year ended December 31, 2001 include fees related to
services provided pursuant to a five-year software development and business
process outsourcing agreement that we signed with Deluxe in 2000. If Deluxe
fails to spend a minimum of $43 million for software development services under
this agreement in any year, it will be obligated to make payments to us based on
a schedule in the contract that is reflective of our estimates of our lost
profits. For the year ended December 31, 2001, Deluxe's spending attributable to
the software development component of this agreement was $41.1 million, which
did not meet the minimum-spending target. Accordingly, additional fees of $0.3
million were accrued. This agreement also calls for us to provide business
process management services, including accounts receivable, accounts payable and
other general accounting and data entry services to Deluxe. Deluxe's annual
minimum spending target for business process management services ranges from
$8.1 million in 2000 to $4.2 million in 2004. Revenue from Deluxe for business
process outsourcing services was $6.2 million for the year ended December 31,
2001. The provision of services by us under the software development and
business process outsourcing agreement is non-exclusive, and Deluxe may contract
with any third party for the provision of professional services.

      GOVERNMENT SERVICES

      Our government services business was started in response to federal
mandates that require state and local governmental agencies to convert to
electronic payment methods for the distribution of benefits under entitlement
programs, primarily food stamps and Transitional Aid to Needy Families (formerly
Aid to Families with Dependant Children). Our electronic benefits transfer
processing system manages, supports and controls the electronic payment and
distribution of cash benefits to program participants through ATMs and
point-of-sale networks. Our services reduce operating costs and fraud for the
government agency administering the benefits program, eliminate the food stamp
stigma for recipients through the use of a plastic ATM-like card and make
benefits more readily available to recipients at retail point-of-sale terminals
and ATMs.

      In 1993, we rolled out our first statewide system to electronically
deliver these benefits using our electronic funds transfer capabilities. From
1994 through 1996 we bid on contracts that secured business as a prime or
subcontractor with over 30 states and local governments, including three
subcontracts with coalitions of states. We were providing services for 30 state
and local governments at the end of 2001. All of our government services
contracts relate to government entitlement programs.

      We also offer a Medicaid eligibility verification processing service that
performs online verification of a person's eligibility for Medicaid services.
Our system provides authorization services, drug utilization review and
electronic claims capture and transmission for pharmacies and managed care
firms. Currently, we provide this service for the State of New York's Medicaid
program. Our contract with New York provided us with $11.9 million in revenue in
2001 and was previously scheduled to expire at the end of October 2001. New York
has extended this contract through October 2002. It is possible that we may be
offered further extensions, but no assurances can be given that our contract
will in fact be further extended.

      All of our government contracts are for scheduled service periods of five
to seven years, although all of our government services contracts are terminable
by the contracting governmental entity at any time. The contracts are based on a
fixed price per recipient, variable volume model. For the three contracts with
coalitions of states, we serve as a subcontractor for Citibank. An integral part
of these arrangements was an exclusive switching services agreement with
Citibank pursuant to which we provided services that allowed


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benefit recipients to use their benefit cards to purchase goods from merchants
located in a state other than their state of residence and from merchants who
were not members of our network.

      Prior to 2001, our government services segment experienced a history of
losses that resulted in special charges for loss contracts, asset
impairments and legal proceedings totaling approximately $90 million.
Although our government services business realized $16.8 million of operating
income in 2001 (including a net special credit of $2.5 million resulting from
the reduction of previous loss contract accruals), it contributed operating
losses of $106,000 in 2000 and $6.6 million in 1999, including special charges
for loss contracts incurred in these years. Deluxe has agreed to indemnify us
against future losses on government services contracts that were in a loss
position at the time of our IPO to the extent the projected future losses on
these contracts exceed the loss contract reserve we had established as of April
30, 2000. Deluxe has also agreed to indemnify us against future losses related
to any litigation related to this business based on any facts or circumstances
arising prior to the completion of our IPO. The indemnification obligations of
Deluxe do not apply to losses contemplated by our pre-IPO loss contract reserves
and are subject to a $14.6 million limit. If Deluxe were to make any
indemnification payments for any litigation, Deluxe's loss contract
indemnification obligations would be correspondingly reduced. In addition,
Deluxe's indemnification does not apply to any contract that was not in a loss
position on April 30, 2000 and so if any of our contracts that were then
projected to be profitable were to become unprofitable or if we enter into a new
contract that became unprofitable, no indemnification would be available. We had
an additional loss contract accrual of $1.3 million in 2001 relating to a
revised estimate for a contract that was previously expected to be profitable.
This new accrual is not subject to Deluxe's indemnification obligations.

      We had previously announced that we intended to exit the government
services business when our then-current contractual commitments expired in 2006.
We have revised this position and we now intend to continue to pursue additional
contracts for this business without regard to their expiration date. We also
intend to continue to take steps to further improve the profitability of this
business. We have recently been informed that we have been awarded the prime EBT
contracts for the States of Alabama and Missouri. The contract with Alabama will
commence in June 2002 and we believe the Missouri agreement will commence in
January 2003. When fully operational, these relationships are expected to
generate an aggregate of approximately $4.5 million in annual incremental
revenues over the amounts we received from these States in 2001 by reason of our
subcontract with Citibank.


      Our government services segment had net revenues of $44.9 million in 2001,
which represented 9% of our total net revenues. Net revenues for our government
services business are primarily derived from monthly fees paid by the
participating governmental agencies that are based on the number of benefit
recipients.

      Sales and Marketing

      We market our electronic products and services through a direct sales
force and indirect sales channels, such as distributors, resellers and
alliances. We organize our direct sales force in four tiers determined by
customer size. We work collaboratively with our customers and prospective
customers to help them identify and solve their business challenges through the
application of new solutions based on our products and services. Because many of
our customers use a combination of our products and services, our direct sales
force primarily targets larger existing and new customers to capture
cross-selling opportunities. Our international sales force is focused on the
sale of our transaction processing software to large financial institutions
throughout the world.

      Most of our direct sales personnel are deployed across the country and
generally operate out of their homes or on our customers' premises. We also have
some direct sales personnel who work out of our offices in Milwaukee, Wisconsin;
Shoreview, Minnesota; Scottsdale, Arizona; and Dallas, Texas. Our international
sales offices are located in Sydney and Melbourne, Australia; Mumbai, India; and
Runcorn, England. We build awareness of our products and services and the eFunds
corporate name through targeted advertising, public relations, participating in
trade shows and conferences and providing product information through our web
site.

      Customer Support, Technology and Infrastructure

      Customer Support. We provide customer support services through our
customer contact centers located in Bloomington, Minnesota; Dallas, Texas;
Gurgaon and Mumbai, India; Milwaukee, Wisconsin; and Phoenix, Arizona. Most of
our contact centers are open 24 hours a day, 7 days a week and provide access to
website, e-mail and telephone support. We also provide technical and operational
support for our customers in our data centers. In addition to user questions and
technical issues, in accordance with the Fair Credit Reporting Act we respond to
inquiries from consumers who have been denied check authorization or rejected
for a new banking account. We also provide on-site customer support services in
connection with our other products and services, and charge a separate fee for
these services based on an hourly rate.

      Technology. Our products are configured to run on operating systems widely
adopted by the electronic debit payment industry. These include the Tandem, IBM,
UNIX and Windows operating environments. Our software is developed using C, C++,
Cobol, HTML, TAL, Java and other programming languages. Our software products
are interoperable with a wide range of terminal types and computer networks and
support a variety of communications protocols, such as TCP/IP as well as other
protocols.


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      Data Centers. We operate two highly secure, fault-tolerant data centers in
New Berlin, Wisconsin and Phoenix, Arizona. Our data centers have been
engineered to ensure minimal exposure to system failures and unauthorized
access. Each of our data centers contains multiple separate computer rooms to
provide containment and isolation. Physical security is maintained through
restricted card key access and closed circuit T.V. cameras. We use redundant
uninterruptible power supplies with battery backup and redundant generators to
ensure continuous flow of power to each data center in the event of any
component failure or power outage. The facilities have dual-entrance, fiber
optic SONET service for telecom redundancy.

Competition

      We face intense competition from a number of companies. We expect that
competition will intensify as consolidation efforts within the electronic
payments industry continue. Many of our competitors have significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than we do.

      In the electronic payments market, our principal competitors include:

      -     third-party network and credit card processors, including First
            Data, Equifax, Total System Services, EDS, Concord EFS and Alliance
            Data Systems;

      -     financial institutions that have developed in-house processing
            capabilities or services similar to ours, including Bank of America,
            M&I Bank and Fifth Third National Bank;

      -     electronic data interchange and cash management providers, including
            Fiserv, CheckFree, Metavante, EDS and Fundtech;

      -     electronic bill payment providers, including CheckFree, EDS,
            MasterCard, Spectrum and Visa;

      -     electronic funds transfer software providers, including Transaction
            System Architects, SLMsoft, Oasis, Mosaic and PaySys; and

      -     national information database companies, including Equifax, Experian
            and TransUnion.

      In the market for electronic transaction processing and government
services, the principal factors on which we compete are price and service
levels.  Competition for our decision support and risk management products is
based primarily on the quantity and quality of the data available to us for this
purpose and, to a somewhat lesser degree, price. Our business process
outsourcing and professional services offerings compete primarily on the basis
of the quality of service levels and, to some degree, price. We believe that we
have competed effectively to date. Our continued ability to do so will require
us to effectively manage our costs, respond promptly and effectively to changes
in the marketplace and innovations by our competitors and to efficiently
introduce new products and services and combinations of our new and existing
products and services that are reflective of the current needs of our customers.

Government Regulation

      Various aspects of our businesses are subject to federal and state
regulation. Our failure to comply with any applicable laws and regulations could
result in restrictions on our ability to provide our products and services, as
well as the imposition of civil fines and criminal penalties.

      As a provider of electronic data processing services to financial
institutions, we are subject to regulatory oversight and examination by the
Federal Financial Institutions Examination Council, an interagency body
comprised of the various federal bank and thrift regulators and the National
Credit Union Association. In addition, we may be subject to possible review by
state agencies that regulate banks in each state where we conduct our electronic
processing activities.

      Because we collect and disclose debit data and other personal information
about consumers, we are subject to the federal Fair Credit Reporting Act and any
state laws providing greater consumer protections. The Fair Credit Reporting Act
provides that consumers have the right to know the contents of the records
pertaining to them which are maintained at our consumer reporting agencies, to
challenge the accuracy of that information and to have their information
verified, updated or removed if it is incorrect. To comply with these
requirements, we maintain consumer relations call centers for each of our
consumer reporting businesses. We are also required to maintain a high level of
security for the computer systems in which consumer data files reside.

      Our consumer reporting agencies and collection agencies are also subject
to regulation by the Federal Trade Commission. In addition, our debt collection
services are subject to the Fair Debt Collection Practices Act and state
collections statutes and licensing requirements.

      Financial institutions are now subject to the requirements of the federal
financial modernization law known as the Gramm-Leach-Bliley Act. Regulations
implementing the privacy provisions of this law went into effect in July 2001.
The Act imposes significant requirements on any entity engaged in the business
of providing financial services, including entities that provide services to
financial institutions. The privacy provisions of the Act impose on each entity
subject to the new requirements an affirmative obligation to develop and
implement policies to protect the security and confidentiality of consumers'
nonpublic personal information and to disclose those policies to consumers
before a customer relationship is established and annually

                                       7
<PAGE>
thereafter. The banking regulators and the Federal Trade Commission have issued
regulations which will implement the privacy portions of the Act. We believe
that these regulations permit banks to provide debit data and other nonpublic
personal information to us.


Intellectual Property Rights

      We rely on a combination of trademark, copyright, trade secret law and
confidentiality or license agreements to protect our trademarks, software and
know-how. We also have applied for patent protection on some of the features of
our newer products. With regard to our information technology services, our
business consists of software applications development. Ownership of this
software is generally assigned to the client. We also develop software
components that can be reused in software application development and software
toolsets, most of which remains our property.


Employees

      We had approximately 4,350 full and part-time employees as of March 1,
2002. We have a number of employee benefit plans, including a 401(k) plan, stock
option and stock purchase plans, profit sharing plans and medical and
hospitalization plans. We have never experienced a work stoppage or strike and
consider our employee relations to be good.

Financial Information About Industry Segment; Financial Information About
Domestic Operations and Export Sales

      Information about these matters appears in "Note 11. Business Segment
Information" to the financial statements included in Part II of this Annual
Report on Form 10-K.

Executive Officers

      The executive officers of the Company are elected by the Board of
Directors each year. The term of office of each executive officer will expire at
the annual meeting of the Board of Directors that will be held after the regular
shareholders meeting on May 30, 2002. The principal occupation of each executive
officer is with the Company, and their positions are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
NAME                        POSITION                            AGE      EXECUTIVE OFFICER SINCE
------------------------------------------------------------------------------------------------
<S>                         <C>                                 <C>      <C>
John A. Blanchard III       Chairman of the Board, President    59       2000
                            and Chief Executive Officer
------------------------------------------------------------------------------------------------
Dr. Nikhil Sinha            Executive Vice President, Global    41       2000
                            Sales, Marketing and Product
                            Management
------------------------------------------------------------------------------------------------
Paul H. Bristow             Executive Vice President and        59       2000
                            Chief Financial Officer
------------------------------------------------------------------------------------------------
Paul W. Finch               Executive Vice President, Systems   38       2001
                            & Operations
------------------------------------------------------------------------------------------------
Steven F. Coleman           Senior Vice President, General      43       2000
                            Counsel and Secretary
------------------------------------------------------------------------------------------------
Colleen McKeown Adstedt     Senior Vice President of Human      39       2001
                            Resources and Administration
------------------------------------------------------------------------------------------------
</TABLE>

      John A. Blanchard III has served as Chief Executive Officer of the Company
since March 1, 2000. Mr. Blanchard also serves as the Chairman of our Board of
Directors. Mr. Blanchard served as President and Chief Executive Officer of
Deluxe, our former parent company, from May 1, 1995 until our Spin-Off from
Deluxe in December 2000. Between May 1996 and the Spin-Off, Mr. Blanchard also
served as Chairman of Deluxe's Board of Directors. From January 1994 to April
1995, Mr. Blanchard was executive vice president of General Instrument
Corporation, a supplier of systems and equipment to the cable and satellite
television industry. From 1991 to 1993, Mr. Blanchard was chairman and chief
executive officer of Harbridge Merchant Services, a national credit card
processing company. Previously, Mr. Blanchard was employed by American Telephone
& Telegraph Company for 25 years, most recently as senior vice president
responsible for national business sales. Mr. Blanchard also serves as a director
of Wells Fargo and Company and ADC Telecommunications, Inc. ("ADC").

      Dr. Nikhil Sinha has served as an Executive Vice President of our Company
since March 1, 2000. Previously, Dr. Sinha served as President and Chief
Executive Officer of our professional services companies from June 1999 to
February 2000. He


                                       8
<PAGE>
was a director of the Telecommunications and Information Policy Institute at the
University of Texas at Austin from September 1997 to May 1999 and associate
professor of International Communication from 1991 to 1997. Dr. Sinha has worked
as a consultant to the Informatics and Telecommunications Division for the World
Bank and as an advisor to the Indian Telecom Commission and the Indian Planning
Commission. Dr. Sinha also serves on the advisory committee of the Indo-US
Sub-Commission on Education and Culture. He is co-founder and director of Sinha
& Lariviere, Ltd., a consulting firm providing strategic and investment advisory
services to U.S. companies doing business in South Asia.

      Paul H. Bristow has served as Executive Vice President and Chief Financial
Officer since March 2000. From 1993 until joining our Company, Mr. Bristow
served as Executive Vice President-Finance Administration and Chief Financial
Officer of Galileo International, a computer reservation system company for the
travel industry. Previously, Mr. Bristow held various finance, accounting and
auditing positions with London International Group, plc, ITT Europe, ITT Canada,
Phillip Morris and Arthur Andersen.

      Paul W. Finch has served as Executive Vice President, Systems and
Operations since August 2001. Mr. Finch's group provides for the technical
development, delivery and on-going support of all of our products and services.
From May 2000 until August 2001, Mr. Finch served as our Senior Vice President,
Global Operations and Customer Care, where he managed all of our customer
support operations. Previously, Mr. Finch served as vice president and general
manager of our ACH clearing systems and services unit. Mr. Finch joined the
Deluxe group of companies in 1989 when Deluxe acquired ACH Systems, Inc., of
which Mr. Finch was the president and founder.

      Steven F. Coleman has served as Senior Vice President, General Counsel and
Secretary since March 2000. From 1996 until joining our Company, Coleman worked
as a Senior Attorney for Deluxe. Prior to joining Deluxe, Mr. Coleman was
associated with Dorsey & Whitney, a law firm located in Minneapolis, Minnesota,
and Fried, Frank, Harris, Shriver & Jacobson, a law firm located in New York,
New York.

      Colleen McKeown Adstedt has served as our Senior Vice President of Human
Resources and Administration since March 1, 2000. Previously, she served as
Chief Administrative Officer for our professional services companies from May
1999 to February 2000. From March 1998 until April 1999, Ms. McKeown Adstedt
served as a Director of Human Resources for Deluxe and from May 1996 to March
1998 as Director of Labor Relations, Chief Negotiator, Ground Operations for
Northwest Airlines. Ms. McKeown Adstedt's prior work experience included a
variety of senior level positions in sales, human resources, and labor relations
with Northwest Airlines, Pepsico and Ford Motor Company.

Recent Developments

      On January 31, 2002, we purchased substantially all of the U.S.
ATM-related assets of Hanco Systems, Inc., an independent ATM deployment and
management company ("Hanco"). We paid approximately $11.4 million in cash, plus
an additional amount for outstanding accounts receivable of Hanco and the
assumption of certain of its liabilities. Hanco managed a network of
approximately 2,500 ATMs in 30 states.

Transactions with Deluxe

      Purchase and sale transactions between us and Deluxe are executed at
either current market pricing or agreed-upon transfer prices. Purchases from
Deluxe were approximately $0.2 million in 2000 and approximately $2.9 million in
1999. Sales to Deluxe were $47.6 million, $59.3 million and $9.8 million for the
years ended December 31, 2001, 2000 and 1999, respectively.

      Deluxe allocated to us $16.4 million and $25.6 million of expenses for the
years ended December 31, 2000 and 1999, respectively, for the cost of corporate
services provided. Prior to 2000, these allocations, which were calculated based
on a percentage of our revenue to total Deluxe revenue, number of employees and
transaction processing costs, included expenses for various support functions
such as human resources, information services and finance. These common costs to
us and Deluxe were allocated because specific identification of the actual costs
incurred was not practicable. We and Deluxe believed that this allocation method
was reasonable. During 2000, certain of the costs for these support functions
were incurred directly by us. The remaining corporate services provided by
Deluxe were allocated to us based on estimates of the costs that have been
incurred by us if we were a stand-alone, independent company. The allocation of
costs to us by Deluxe ceased at the Spin-Off.

      Prior to March 31, 2000, Deluxe also charged us for interest expense or
credited us for interest income based on the cash we had borrowed from or
provided to Deluxe. We were charged or credited net interest (expense) income
from Deluxe of $(0.9) million and $2.8 million for the years ended December 31,
2000 and 1999, respectively. The average interest rates used to calculate these
amounts were 6.7% and 5.1% for the years ended December 31, 2000 and 1999,
respectively. The interest rate for net receivables from Deluxe was based on the
average 30-day commercial paper composite rate. The interest rate for net
payables


                                       9
<PAGE>
was based on the average 30-day commercial paper composite rate plus 2%. At
December 31, 1999 and March 31, 2000, Deluxe forgave the net outstanding debt
that we owed it. Subsequent to March 31, 2000, we and Deluxe have repaid any net
amounts owed to each other in cash. The interest rates applied subsequent to
March 31, 2000, were based on the one-month LIBOR rate plus 0.25%.


Agreements with Deluxe

      In connection with the IPO and the Spin-Off, we and Deluxe entered into
various agreements that addressed the allocation of assets and liabilities
between us and that defined our relationship after the separation. The
agreements related to matters such as consummation of the IPO and the
distribution of our stock by Deluxe, registration rights for Deluxe,
intercompany loans, information technology consulting, business process
management services, indemnification, data sharing, real estate matters, tax
sharing and transition services. For transition services, we and Deluxe
compensated each other for providing services. The transition period varied
depending on the agreement, but most transition services terminated following
the Spin-Off.

      The following is a summary description of the remaining relevant
agreements between our Company and Deluxe. This description, which summarizes
the material terms of the agreements, is not complete. Interested parties should
read the full text of the agreements, which have been filed with the Securities
and Exchange Commission.

Tax-Sharing Agreement

      In general, we were included in Deluxe's consolidated group for federal
income tax purposes for so long as Deluxe beneficially owned at least 80% of the
total voting power and value of our outstanding stock. Each member of a
consolidated group is jointly and severally liable for the federal income tax
liability of each other member of the group. We entered into a tax-sharing
agreement with Deluxe which allocates tax liabilities between us and Deluxe
during the periods in which we were included in Deluxe's consolidated group. We
could, however, be liable in the event that any federal tax liability is
incurred, but not discharged, by other members of Deluxe's consolidated group.

      We and Deluxe will make payments to each other such that the amount of
taxes to be paid by us will generally be determined as though we had filed
separate federal, state and local income tax returns. We will be responsible for
any taxes with respect to tax returns that include us and our subsidiaries. In
determining the amount of our tax-sharing payments, Deluxe will prepare for us
pro forma returns with respect to federal and applicable state and local income
taxes. We reconcile whether we owe Deluxe or Deluxe owes us money in respect of
tax liabilities on a rolling basis under this agreement as returns are filed and
audits completed.

      Prior to the Spin-Off, Deluxe continued to have all the rights as our
parent for purposes of federal, state and local tax law. Deluxe will be the sole
and exclusive agent for us in any and all matters relating to our income,
franchise and similar tax liabilities during these periods. Deluxe will have
sole and exclusive responsibility for the preparation and filing of consolidated
federal and consolidated or combined or unitary state income tax returns or
amended returns. Deluxe will have the power, in its sole discretion, to contest,
compromise or settle any asserted tax adjustment or deficiency and to file,
litigate or compromise any claim for a refund on our behalf. In addition, Deluxe
had agreed to undertake to provide services with respect to our separate state
and local tax returns and our foreign tax returns. We paid Deluxe approximately
$310,000 in 2001 for tax services provided to us by Deluxe. We no longer obtain
these services from Deluxe.

      The tax-sharing agreement also provides that we will indemnify Deluxe for
any taxes due from Deluxe if the Spin-Off or some of the related transactions
fail to qualify as tax-free as a result of our actions or inactions. We are
required under the tax sharing agreement to comply with the representations made
to the Internal Revenue Service in connection with the private letter ruling
request regarding the tax-free nature of the Spin-Off. In addition, we have
agreed to indemnify Deluxe for a portion of any taxes due from Deluxe if the
Spin-Off or some of the related transactions fail to qualify as tax-free as a
result of a retroactive change of law or other reason unrelated to the action or
inaction of either us or Deluxe. No amounts have been paid to date under these
indemnification provisions.

Real Estate Agreements

      In 2000, we purchased real property and a data center located in Phoenix,
Arizona and personal property from a subsidiary of Deluxe at its then net book
value of approximately $10 million. We and Deluxe also entered into several
agreements under which Deluxe or its subsidiaries agreed to:

      -     sublease a portion of a building in Shoreview, Minnesota to us at
            approximately $57,445 per month (we will be leaving this facility
            later in 2002 and subleasing our space to a third party);


                                       10
<PAGE>
      -     lease a portion of a data center in Phoenix, Arizona from us at
            approximately $106,000 per month; and

      -     assign their rights as tenant under various leases to us.


Professional Services Agreement

      We have entered into a master agreement with Deluxe under which we will
provide Deluxe with:

      -     software development and maintenance services for information
            technology applications;

      -     financial shared services including accounts receivable, accounts
            payable and general accounting transaction processing; and

      -     data entry services.

      This agreement will expire on March 31, 2005, and will automatically renew
each year thereafter for an additional one year term unless terminated by either
party. In addition, this agreement may be terminated by Deluxe at its option if
we are acquired, whether by merger or the sale of all or substantially all of
our assets, by a third party. During the term of the agreement, Deluxe will be
obligated to spend $43 million per year for software development and maintenance
services for information technology applications. The actual amounts to be paid
to us by Deluxe will be based on the actual number of hours of information
technology services that we provide to Deluxe. If Deluxe fails to reach the $43
million spending target per year, it will be obligated to make compensatory
payments for a portion of our fees based on our estimates of lost margins. If
Deluxe exceeds the $43 million spending target per year, Deluxe will be entitled
to receive reduced rates. We also will provide Deluxe with business process
management services, including accounts receivable, accounts payable and other
general accounting services and data entry services. Deluxe's annual minimum
spending target for these business process management services will range from
$8.1 million in 2000 to $4.2 million in 2004. The agreement also provides for
credits to Deluxe for unsatisfactory performance by us and bonuses for superior
performance, as is typical for information technology professional services. The
provision of services by us under the agreement is non-exclusive, and Deluxe may
contract with any third party for the provision of information technology and
business process management services. We recorded total revenue of $47.6 million
under this agreement in 2001.

Third Party Indemnification Agreements

      Under a third party indemnification agreement, we agreed to indemnify
Deluxe in connection with any liabilities incurred by Deluxe after the Spin-Off
as a result of:

      -     Deluxe's purchase or lease of property or services for our benefit
            under any master agreement; or

      -     any guaranties under which Deluxe guaranteed our performance of
            agreements with third parties.

      We are obligated to indemnify Deluxe for any liability to the extent such
liability primarily relates to the past, present or future operation of our
business or operations. No amounts have been paid to Deluxe under this
agreement.

      We also entered into an indemnification agreement with Deluxe pursuant to
which Deluxe agreed to indemnify us against any liabilities incurred by us
related to the sale by Deluxe of certain businesses that were formerly conducted
by Deluxe in the United Kingdom through one of our UK subsidiaries. No payments
have been made to us pursuant to this agreement.

      We and Deluxe also entered into a Cross-Indemnification Agreement pursuant
to which we each agreed to indemnify each other against any liabilities arising
out of the underwriting agreement related to our IPO, except insofar as any such
liability arises out of a breach of such agreement by the party seeking
indemnification. No payments have been made pursuant to this agreement.

Network Access Agreement

      Historically, some ChexSystems customers have elected to use the online
ordering connectivity provided by Deluxe's check printing operations to receive
services provided by ChexSystems. Deluxe provided us a license to use these
connections to its check printing customers in order to allow us to continue to
provide our ChexSystems products to financial institutions who wish to receive
these products through the Deluxe network. In exchange for access to this
product delivery channel, we paid Deluxe its cost of providing these services
during 2000 and we paid cost plus 10% in 2001. Deluxe charged us approximately
$3.0 million for these


                                       11
<PAGE>
services in 2001. Deluxe maintains ownership of all rights in its network,
except that we own the interface between the network security layer and our
back-end systems. This agreement was originally scheduled to expire on December
31, 2001, but has now been extended until December 31, 2005.

      Under the extended agreement, we pay Deluxe a per-transaction fee for each
electronic submission sent through its network by ChexSystems. The
per-transaction fee varies depending on the number of transactions submitted
during any given month, subject to a minimum monthly fee of $183,333 per month
during 2002, $175,000 per month during 2003, $158,333 per month during 2004 and
$150,000 per month during 2005. We also pay Deluxe an hourly rate for
development and electronic delivery support and a fee of $4,000 per month for
standard data contribution transmissions.

Data and Related Agreements

      We and Deluxe had also entered into several agreements which governed the
transfer of data between us. Under a data contribution agreement, Deluxe
provided us, at no cost, with consumer account records pertaining to its direct
to consumer check printing business. We agreed to only use this information for
purposes that are consistent with applicable federal, state and local laws,
including the Fair Credit Reporting Act. Customers of Deluxe had the ability to
request that their information not be provided to us. This agreement ended on
July 1, 2001.

      Under a processing agreement, we provide Deluxe with bank routing numbers
to enable us to obtain check order history files from Deluxe as long as we have
obtained a consent from the applicable financial institution to receive this
data. Deluxe may only use the bank routing numbers for the purpose of performing
the processing requested by us. We estimate the cost of these processing
services to be approximately $100,000 per year. Either party may terminate this
agreement upon 30 days' prior written notice.

Government Services Indemnification Agreement

      Deluxe has agreed to indemnify us for any losses on identified government
services loss contracts in excess of our $29.2 million loss contract reserve as
of April 30, 2000. We are required to calculate any charges for loss contracts
in a manner consistent with Deluxe's prior loss accrual practices. Deluxe will
also indemnify us against any liabilities, losses or expenses arising from
litigation and claims asserted against us in connection with the operation of
our government services business prior to the completion of our IPO. Deluxe's
indemnification obligations do not apply to losses contemplated by existing
reserves and are limited to a maximum amount equal to $14.6 million. In
addition, Deluxe's indemnification does not apply to any contract that was not
in a loss position as of April 30, 2000 and so if any of our profitable
contracts were to become unprofitable, no indemnification would be available. We
have agreed to indemnify Deluxe for all other claims related to the operation of
our government services business that occur after the completion of the IPO. No
amounts have been paid or accrued under this agreement.

Conversion Options

      Prior to the Spin-Off, all of Deluxe's outstanding stock options were
converted into new options to purchase Deluxe's common stock and options to
purchase our common stock pursuant to our Stock Incentive Plan for Deluxe
Conversion awards. The purpose of this plan was to allow employees of Deluxe and
the Company to maintain the same relative equity interest in the two separate
companies as they held in the combined enterprise. The stock options issued by
us under this plan generally have the same terms and conditions as the Deluxe
options to which they relate. Options to purchase 2,918,435 shares of our common
stock at a weighted average exercise price of $13.75 were issued on December 11,
2000 under this program. The closing price of our common stock on this date was
$10.25.


                                       12
<PAGE>
ITEM 2.  PROPERTIES

      The following table sets forth a description of our principal facilities:

<TABLE>
<CAPTION>
                             Approximate    Owned or Lease
Location                     Square Feet    Expiration Date     Function
---------                    -----------    -----------------   --------
<S>                          <C>            <C>                 <C>
Scottsdale, Arizona               47,550    February 2012       Corporate Headquarters
Phoenix, Arizona*                 92,650    Owned               Data center
Milwaukee, Wisconsin             171,250    Owned               Marketing, development and
                                                                administration
New Berlin, Wisconsin             82,600    Owned               Data center
Chennai, India                    18,600    January/June 2008   Software development center
Chennai, India                    38,750    September 2002      Software development center
Mumbai, India                     52,450    October 2004        Customer call center
                                  28,000    October 2009        Customer call center
Gurgaon, India                    62,200    January 2003/       Shared services center
                                            October 2004/
                                            January 2005
Bloomington, Minnesota**          43,975    June 2002           Customer contact center
Little Canada, Minnesota          32,000    September 2005      ATM management
Shoreview, Minnesota**            45,950    September 2002      DebitBureau and
                                                                professional services
Woodbury, Minnesota               79,400    September 2012      Customer contact center, DebitBureau
                                                                and professional services
Bothell, Washington               32,300    August 2004         Vacant
Bothell, Washington               24,700    September 2006      Vacant
Dallas, Texas                     31,650    January 2004        Customer contact center
</TABLE>

*     Approximately 45,750 square feet of this facility is leased to Deluxe.

**    The Bloomington and Shoreview, Minnesota sites are going to be
      consolidated into our new facility in Woodbury, Minnesota.

      We believe that our current facilities are adequate to meet our
anticipated space requirements. We believe that additional space will be
available at a reasonable cost to meet our future needs.

ITEM 3. LEGAL PROCEEDINGS

      On March 8, 2002, we received a letter from a Staff Accountant at the
Central Regional Office of the Securities and Exchange Commission (the "SEC")
stating that the SEC is conducting an inquiry of us and requesting our voluntary
assistance in connection with the provision of certain documents relating to our
2001 financial results and certain transactions between us and ACI, among other
things. The letter from the SEC states that the inquiry is non-public and that
it should not be construed as an indication that the SEC believes any violation
of law has occurred. We intend to cooperate fully with the SEC in resolving this
matter. We may, however, be the subject of additional inquiries or become
subject to a fine or other liabilities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            Not applicable.


                                       13
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Market Information

      The shares of our Company are listed on the Nasdaq National Market under
the symbol "EFDS." The following table sets forth the high and low prices of our
common stock, as reported by the Nasdaq National Market, for the calendar
quarters indicated and the last sales price of our shares at the close of each
such quarter.

<TABLE>
<CAPTION>
    2001                         High                Low                  Close
--------------------------------------------------------------------------------
<S>                             <C>                 <C>                  <C>
First Quarter                   $19.25               $7.75               $19.25
Second Quarter                  $26.20              $17.00               $18.60
Third Quarter                   $23.74              $12.33               $16.65
Fourth Quarter                  $20.59              $12.69               $13.75
</TABLE>

<TABLE>
<CAPTION>
    2000                         High                Low                  Close
--------------------------------------------------------------------------------
<S>                             <C>                 <C>                  <C>
Second Quarter                  $14.00              $10.88               $11.63
Third Quarter                   $11.69               $7.19                $7.38
Fourth Quarter                  $11.13               $6.00                $9.19
</TABLE>

      The closing price of our shares on March 27, 2002 was $16.40. As of March
27, 2002, we had approximately 10,620 record holders of our common stock. We
have never paid a dividend on our common stock and do not anticipate doing so in
the foreseeable future.

Annual meeting

      The annual meeting of our stockholders will be held at 12:30 p.m. EDT on
May 30, 2002, at the Boston Harbor Hotel, in Boston, Massachusetts.

Report of Offering of Securities and Use of Proceeds Therefrom

      The Registration Statement on Form S-1 (Registration No. 333-33992)
related to our IPO was declared effective on June 26, 2000, and the related
offering commenced on June 27, 2000. We sold 5,500,000 shares at a price of
$13.00 per share on June 30, 2000 for an aggregate public offering price of
$71,500,000. The net offering proceedings to the Company after deducting the
total expenses associated with the IPO were $64,459,370. The following table
summarizes the amount of these net offering proceeds that were used during the
period from June 30, 2000 through December 31, 2001 for the purposes shown:

<TABLE>
<S>                                                                                     <C>
      Infrastructure and cost savings initiatives.....................................  $18,500,000*
      Product development expenditures................................................   11,200,000*
      Construction of plants, buildings and facilities................................    7,400,000*
      Purchase and installation of machinery and equipment............................    8,600,000*
      Purchases of real estate........................................................            0
      Acquisition of other businesses.................................................   13,456,370*
      Repayment of indebtedness.......................................................    5,303,000
      Working capital.................................................................            0
      Temporary investments (money market funds and commercial paper having a
      maturity of two weeks or less)..................................................            0
                                                                                        -----------
          Total.......................................................................  $64,459,370
                                                                                        ===========
</TABLE>

      ----------
      * Estimated.

      None of the expenses incurred for the Company's account in connection with
the offering nor the proceeds thereof were paid to any director, officer, or
general partner of the Company and its associates or to any person owning 10
percent or more of any class of the Company's securities or otherwise affiliated
with the Company.


                                       14
<PAGE>
ITEMS 6, 7, 7A AND 8.

SELECTED FINANCIAL DATA, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK AND FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SELECTED FINANCIAL DATA

The following selected financial data should be read together with the
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The selected
statement of operations data shown below for each of the years in the four-year
period ended December 31, 2001 and the selected balance sheet data as of
December 31, 2001, 2000, 1999 and 1998, are derived from eFunds' audited
consolidated financial statements.

The selected statement of operations data shown on the following page for the
year ended December 31, 1997 and the selected balance sheet data as of December
31, 1997 are derived from eFunds' unaudited consolidated financial statements.
In the opinion of eFunds' management, all adjustments necessary for a fair
presentation of these financial statements are included. Other than the
adjustments relating to contract losses, restructuring charges and legal
proceedings discussed in notes 5, 6 and 12, respectively, to the eFunds
consolidated financial statements, the adjustments consist only of normal
recurring items.

On February 19, 1999, we acquired all of the outstanding shares of an electronic
check conversion company. On April 13, 1999, we acquired the remaining 50%
ownership interest in an Indian joint venture that we had previously created
with HCL Corporation of India (HCL). In March 2000, we acquired an approximate
24% ownership interest in Access Cash International, L.L.C. (ACI) a provider of
automated teller machine (ATM) services. In October 2001 we acquired the
remaining 76% interest in ACI. Each of these acquired companies is included in
our payment systems and services segment. Prior to its acquisition, each of
these companies was recorded in our financial statements under the equity method
of accounting. The acquisitions have been accounted for under the purchase
method of accounting and, as a result, our consolidated financial statements
include the total results of these businesses subsequent to their acquisition
dates. On June 30, 2000, we completed an initial public offering of 5.5 million
shares.


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                  ---------------------------------------------------------------------
(in thousands, except per share data)                2001           2000           1999           1998           1997
                                                  ---------      ---------      ---------      ---------      ---------
<S>                                               <C>            <C>            <C>            <C>            <C>
Statement of Operations Data:
Net revenue ....................................  $ 513,637      $ 417,894      $ 302,340      $ 267,520      $ 229,065
                                                  ---------      ---------      ---------      ---------      ---------
  Cost of revenue excluding loss contract and
    asset impairment charges (credits) .........    309,389        252,262        185,590        171,359        143,966
  Loss contract and asset impairment
    charges (credits) ..........................     (2,500)         9,700          8,700         40,949          2,470
                                                  ---------      ---------      ---------      ---------      ---------
  Total cost of revenue ........................    306,889        261,962        194,290        212,308        146,436
                                                  ---------      ---------      ---------      ---------      ---------

Gross margin ...................................    206,748        155,932        108,050         55,212         82,629
                                                  ---------      ---------      ---------      ---------      ---------
  Selling, general and administrative expense ..    150,671        146,056        109,138         81,823         71,940
  Asset impairment charges .....................         --             --             --             --          9,361
                                                  ---------      ---------      ---------      ---------      ---------
  Total operating expenses .....................    150,671        146,056        109,138         81,823         81,301
                                                  ---------      ---------      ---------      ---------      ---------

Income (loss) from operations ..................     56,077          9,876         (1,088)       (26,611)         1,328
Other income (expense)
  Legal proceedings ............................         --             --          2,094          4,157        (40,050)
  Equity in loss of investee ...................     (1,097)          (500)        (1,114)        (1,759)          (665)
  Interest expense .............................       (670)        (3,897)        (2,595)        (1,024)          (825)
  Interest and other income (expense) ..........      1,938          2,803             63          2,077           (253)
                                                  ---------      ---------      ---------      ---------      ---------

Income (loss) before income taxes ..............     56,248          8,282         (2,640)       (23,160)       (40,465)
Benefit (provision) for income taxes ...........    (18,956)        (3,644)        (5,586)         8,569          6,397
                                                  ---------      ---------      ---------      ---------      ---------

Net income (loss) ..............................  $  37,292      $   4,638      $  (8,226)     $ (14,591)     $ (34,068)
                                                  =========      =========      =========      =========      =========
  Net income (loss) per share - basic ..........  $    0.81      $    0.11      $   (0.21)     $   (0.36)     $   (0.85)
                                                  =========      =========      =========      =========      =========
  Net income (loss) per share - diluted ........  $    0.79      $    0.11      $   (0.21)     $   (0.36)     $   (0.85)
                                                  =========      =========      =========      =========      =========
Shares used in computing:
  Net income (loss) per share - basic ..........     45,985         42,788         40,000         40,000         40,000
  Net income (loss) per share - diluted ........     47,445         42,867         40,000         40,000         40,000
</TABLE>

<TABLE>
<CAPTION>
                                                                       December 31,
                                              --------------------------------------------------------------
(in thousands)                                   2001         2000         1999         1998         1997
                                              ----------   ----------   ----------   ----------   ----------
<S>                                           <C>          <C>          <C>          <C>          <C>
Balance Sheet Data:
Cash and cash equivalents ..................  $  101,871   $   78,731   $   35,849   $   16,055   $   23,843
Working capital ............................     118,632       72,054       25,607        1,869       39,686
Total assets ...............................     441,304      388,587      289,929      186,335      187,810
Long-term debt, excluding current portion ..       2,529        2,244        3,597        4,029        4,571
Total stockholders' equity .................     337,206      287,320      199,105       89,803       87,690
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

You should read the following discussion together with "Selected Financial Data"
and our consolidated financial statements and the notes to those financial
statements included in this annual report. In addition to historical and pro
forma information, this discussion contains forward-looking information that
involves risks and uncertainties. Our actual future results could differ
materially from those presently anticipated due to a variety of factors. Some of
these factors are discussed in Exhibit 99.1 to this Annual Report on Form 10-K.
This Exhibit is on file with the Securities and Exchange Commission.

OVERVIEW - Our Company was incorporated in Delaware in December 1984 and
historically operated our transaction processing and government services
businesses under the names Deluxe Electronic Payment Systems, Inc. and Deluxe
Government Services. Prior to our initial public offering (the "IPO") in June
2000, we were a wholly owned subsidiary of Deluxe Corporation, a Minnesota
corporation ("Deluxe"). Deluxe is the largest check printer in the world. The
shares of Deluxe are publicly traded on the New York Stock Exchange under the
symbol "DLX."

In April 1999, we began the process of combining four of Deluxe's other former
operating units into an integrated electronic payments and risk management
business. The operations combined were DebitBureau, Chex Systems, Inc., Deposit
Payment Protection Services, Inc. and an electronic check conversion company
that Deluxe acquired in February 1999. In September 1999, we changed the name of
our Company to eFunds Corporation. In January 2000, we decided to combine
Deluxe's professional services business, eFunds IT Solutions Group, Inc. and
eFunds International India Private Limited, with our electronic payments


                                       16
<PAGE>
and risk management businesses. In June 2000, we sold 5,500,000 shares of our
common stock to the public at a price of $13.00 per share. After the IPO, Deluxe
continued to own about 87.9% of the outstanding shares of our common stock. In
December 2000, Deluxe distributed all of the shares of our common stock owned by
it to its shareholders through a tax-free spin-off (the "Spin-Off") in which
each of its shareholders received approximately .5514 of a share of our common
stock for each Deluxe share owned by them. Following the Spin-Off, Deluxe ceased
to own any shares of our common stock.

In March 2000, we paid cash of $20.0 million for an approximate 24% interest in
Access Cash International, L.L.C. ("ACI"), a limited liability company that
provides automated teller machines ("ATM") services. ACI was the second largest
independent provider of ATM services in the United States. In September 2000, we
entered into an ATM deployment and management agreement with ACI under which we
received fees paid by customers utilizing ATMs deployed by us and interchange
fees from their banks. ACI managed this network of ATMs in exchange for a
management fee determined by reference to the number of ATMs under management.
Effective October 1, 2001, we acquired (the "Acquisition") the remaining
approximately 76% of the equity interests in ACI for approximately $44.6
million, of which approximately $40.3 million was paid in cash on the closing
date of the Acquisition. Payment of the $4.3 million balance of the purchase
price is subject to the satisfaction of certain post-closing conditions. We
entered into the ATM deployment and management agreement and ultimately acquired
ACI as part of our strategy to increase our transaction processing revenues
through the acquisition and control of ATM transactions at the point of
origination. The terms of the ATM deployment and management agreement and our
acquisition of ACI were determined by negotiation of the parties. At the time of
the Acquisition, ACI managed a network of approximately 8,500 ATMs throughout
the U.S. and Canada.

ACI had been operating at a loss in periods prior to the Acquisition. A major
objective of the Acquisition was to improve its financial performance in 2002
and beyond. We expect improvement in the ACI business to come from four major
sources: (i) reduced operating costs through the integration of sales,
marketing, operations and facilities, (ii) the elimination of processing fees
for more than 6,000 of ACI's ATMs that were being paid by ACI to third party
processors by migrating the processing of all of ACI's transactions to our data
centers, (iii) the redeployment of under-performing or idle ATMs and (iv) higher
branding revenues from existing and new branding customers. We currently expect
that the Acquisition will be accretive in 2002.

We provide transaction processing and ATM outsourcing services, decision support
and risk management products as well as information technology consulting and
business process management services to financial institutions, retailers,
electronic funds transfer networks, e-commerce providers and government
agencies. We also offer business process outsourcing services to complement our
payments business. Our payment system and services segment offers all of our
products and services to all of our customers other than government agencies.
Our government services segment provides online electronic transfer of benefits
(EBT) under entitlement programs on behalf of state and local governments and
Medicaid eligibility verification services. We operate primarily in the United
States, although our payment systems and services segment has international
operations.

We had previously announced our intention to exit the government services
business when our then-current contractual commitments expired in 2006. We have
revised this position and now intend to pursue contracts for this business
without regard to their expiration date. We also intend to continue to take
steps to further improve the profitability of this business.

Our consolidated financial statements for periods prior to and including the
December 29, 2000 Spin-Off date have been prepared using the historical results
of operations and historical bases of the assets and liabilities of the Deluxe
businesses that comprise our Company. The consolidated financial statements for
such periods also include allocations to us of certain liabilities and expenses,
including: profit sharing and other employee benefits; information technology
services; facility costs; and other Deluxe administrative services costs. The
expense allocations have been determined on bases that both Deluxe and we
considered to be a reasonable reflection of the utilization of the services
provided to us or the benefit received by us. The expense allocation methods are
based on number of employees, transaction processing costs, square footage and
relative sales.

The financial information presented in this report may not necessarily reflect
what our financial position, results of operations or cash flows would have been
had we been a separate, stand-alone entity for all the periods presented, nor is
it indicative of our future financial position, results of operations or cash
flows.

OVERVIEW OF CONSOLIDATED STATEMENTS OF OPERATIONS

Net revenues - Our net revenues generally consist of transaction processing and
service fees, decision support fees, software licensing, maintenance and support
fees, government service fees, and information technology consulting and
business process management services fees.

Cost of Revenue - Cost of revenue consists primarily of salaries and benefits,
depreciation and maintenance of equipment and facilities and amortization of
software used to operate our data centers. Expenses are recognized when
incurred, with the exception of installation costs. Installation costs are
capitalized and recognized ratably over the life of the contract, which
approximates the revenue recognition.

Expenses - Selling, general and administration expenses consist of salaries and
benefits, consulting fees, facilities and equipment


                                       17
<PAGE>
costs, recruiting and training, travel expenses, corporate administrative
charges, depreciation and amortization and all other corporate costs.

Interest expense represents the cost of funds for working capital and other
purposes and reflects Deluxe's internal cost of funds to the extent Deluxe
provided such funding. Interest expense also includes interest costs associated
with capital leases and borrowings against our line of credit. Interest income
primarily consists of interest earned on short-term investments such as
commercial paper.

Loss Contract and Other Charges - We experienced significant losses in our
government service business beginning in 1997 and continuing into 2000. In 1997,
we recorded a $40.0 million charge related to a judgment entered against us in
an action brought by Mellon Bank in connection with a potential bid to provide
electronic benefit transfer services to a state coalition. In 1998, $4.2 million
of this reserve was reversed due to the denial of Mellon's motion for
prejudgment interest. In 1999, after we paid the judgment of $32.2 million to
Mellon Bank, we reversed $2.1 million of the reserve through a credit to legal
proceedings expense.

In 1998, we concluded that net revenues from many of our government services
contracts would be lower than anticipated because the number of recipients had
declined as a result of welfare reform and a strong economy. In addition, we
concluded that we had underestimated the costs required to support our services
when bidding for some of these contracts. The primary sources of these
additional costs were a need to install a greater number of point-of-sale
terminals, higher than expected transaction volumes per recipient and higher
support costs. Because we could not recover these costs, we wrote-off $26.3
million of assets used in the government services business and accrued $14.7
million for future losses on these contracts. Subsequent to the 1998 charges,
additional state systems began operations while a continuing strong economy led
to further reductions in the number of welfare cases. In addition, Citibank
notified us that it would not renew an exclusive switching contract we had with
it. As a result, we recorded additional charges in 1999 totaling $8.7 million,
primarily for additional expected future contract losses.

We increased our provision for expected future losses on long-term contracts by
approximately $12.2 million in the second quarter of 2000 to reflect the signing
in April 2000 of a definitive contract with Citibank for a coalition of states
for which Citibank serves as the prime contractor and we serve as a
subcontractor. Prior to executing this agreement with Citibank, we were
providing services for this coalition without a binding subcontract. Although we
believe that we did not have a legal obligation to provide services to this
coalition before signing our agreement with Citibank, the states included in
this coalition did not have alternative means of delivering benefits under their
entitlement programs. As a result, we believed we could not terminate the
provision of services during our contract negotiations with Citibank because any
unilateral decision to do so would have subjected us to a substantial risk of
litigation by the coalition states as well as potential claims by Citibank. At
the same time, our negotiations with Citibank had to be conducted within the
basic framework of our bid to Citibank and its bid to the coalition states. The
execution of the agreement allowed us to avoid the possibility that our future
losses could be larger if Citibank were ultimately to prevail on its assertions
regarding the appropriate pricing and other terms applicable to our services.
Offsetting this charge was the reversal of $2.5 million of previously recorded
contract loss accruals resulting from productivity improvements and cost savings
from lower than anticipated telecommunications and interchange expenses.

In 2001, we continued to reduce the cost of conducting our government services
business and we further reduced our contract loss reserve by $3.8 million. This
was offset by an addition to the reserve of $1.3 million for a state where we
had previously underestimated the direct costs of providing service as we were
still in process of completing installation work and had not yet begun full
operations. These two items resulted in a net credit of $2.5 million that is
reflected in our statement of operations as a reduction to cost of sales.

Deluxe has agreed to indemnify us for future losses arising from any litigation
based on the conduct of our government services business prior to our IPO and
from future losses on identified loss contracts in excess of our $29.2 million
loss contract reserve as of April 30, 2000, which amount includes the $12.2
million charge discussed above. The indemnification obligation does not apply to
losses contemplated by the existing reserves or to any contract that was not in
a loss position as of April 30, 2000. The maximum amount of litigation and
contract losses for which Deluxe will indemnify us is $14.6 million. Any
indemnification payments received from Deluxe will be recorded as a reduction of
expense when the additional losses, if any, are recognized. Through December 31,
2001, no such indemnification payments have been required.


                                       18
<PAGE>
The significant charges recorded in 2001, 2000, and 1999 on a pretax basis are
as follows:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                           -----------------------------------
      (dollars in thousands)                                 2001          2000         1999
                                                           --------      --------    ---------
<S>                                                        <C>           <C>         <C>
      Legal proceedings reversals........................  $     --      $     --    $  (2,094)
      Asset impairment charges...........................        --            --          492
      Loss contract charges (credits), net...............    (2,500)        9,700        8,208
      Restructuring charges (reversals)..................     3,200           555       (2,399)
                                                           --------      --------    ---------
        Total............................................  $    700      $ 10,255    $   4,207
                                                           ========      ========    =========
</TABLE>

These charges are reflected in the statements of operations for 2001, 2000 and
1999 as follows:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                           -----------------------------------
      (dollars in thousands)                                 2001          2000         1999
                                                           --------      --------    ---------
<S>                                                        <C>           <C>         <C>
      Cost of sales......................................  $ (2,500)     $  9,700    $   8,700
      Selling, general and administrative expenses.......     3,200           555       (2,399)
      Other income (expense).............................        --            --       (2,094)
                                                           --------      --------    ---------
        Total............................................  $    700      $ 10,255    $   4,207
                                                           ========      ========    =========
</TABLE>

For more information about these charges, refer to Notes 5, 6 and 12 to our
consolidated financial statements.

Critical Accounting Policies and Estimates - Our discussion and analysis of our
financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates and judgments, including those related to revenue
recognition, intangible assets, accrued contract losses, bad debts, income taxes
and stock based compensation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Our net revenues generally consist of transaction
processing and service fees, decision support fees, software licensing,
maintenance and support fees, government service fees, and information
technology consulting and business process management services fees. Our revenue
recognition policies for these various fees are as follows:

      -     Transaction processing and service fees are recognized in the period
            that the service is performed. These services consist of processing
            our customers' electronic debit transactions through electronic
            funds transfer networks and settling the funds with the financial
            institutions involved in the transactions. Additionally, these
            services include monitoring ATMs and point-of-sale devices to alert
            our customers when potential problems occur. These fees are charged
            on a per transaction basis, depending on the contractual arrangement
            with the customer. We also receive fees paid by consumers utilizing
            ATM machines owned or managed by us and interchange fees paid by
            their banks. Government services fees are recognized in the period
            services are provided based on monthly fees per benefits recipient.

      -     Decision support fees are recognized as revenue in the period the
            services are provided. Decision support services consist of new
            account applicant and check verification screenings to manage the
            risk associated with account openings and check acceptance. Decision
            support fees are based on the number of inquiries against the
            databases used for screening purposes or monthly fees based on the
            aggregate dollar value of checks authorized by the retailer or other
            similar measures, depending on the product and service.

      -     Software license fees for standard software products are recognized
            when a license agreement has been signed, the license fee is fixed
            and determinable, collectibility of the license fee is probable,
            delivery has occurred and there are no uncertainties surrounding
            product acceptance. If a software license contains customer
            acceptance criteria for which significant uncertainties exist, the
            software revenue is recognized upon the earlier of customer
            acceptance or the expiration of the acceptance period. Certain
            software products include multiple modules and the license fee
            charged to the customer is based on the modules licensed. If a
            customer contract requires we deliver multiple elements, the fees
            are allocated to the various elements based upon vendor-specific
            objective evidence of fair value.

      -     The Company also provides information technology consulting and
            business process management services. Recognition of revenue from
            providing such services is generally recognized under two methods,
            depending on


                                       19
<PAGE>
            contractual terms. Under the time and materials method, which is
            relevant to most of our professional services contracts, revenue is
            based on a fee per hour basis and is recognized as hours are
            completed. Under the fixed contract method, a pre-set fee is agreed
            upon for a project, and revenue is recognized proportionately to the
            percentage completion of the project. If the information technology
            consulting services involve the significant customization of
            software that has been licensed from the Company, the license fee is
            also recognized proportionately to the percentage completion of the
            project.

      -     Software maintenance and support revenue is recognized ratably over
            the term of the contract, and/or as the services are provided.

The process involved in evaluating the appropriateness of revenue recognition
involves judgments about vendor-specific objective evidence of fair value,
collectibility of license fees, and projections of costs to complete projects
for our customers.

Our intangible assets consist primarily of goodwill, capitalized software costs
and customer contract costs. We capitalize the cost of software developed or
obtained for internal use once the preliminary project stage has been completed,
management commits to funding the project and it is probable that the project
will be completed and that the software will be used to perform the function
intended. Capitalized costs include only (1) external direct costs of materials
and services consumed in developing or obtaining internal-use software, (2)
payroll and payroll-related costs for employees who are directly associated with
and who devote time to the internal-use software project, and (3) interest costs
incurred, when material, while developing internal-use software. Capitalization
of costs ceases when the project is substantially complete and the software is
ready for its intended use.

We capitalize the cost of software developed for licensing and resale once
technological feasibility has been established. Costs incurred prior to
establishing technological feasibility are expensed as incurred. Technological
feasibility is established when we have completed all planning, designing,
coding and testing activities that are necessary to determine that a product can
be produced to meet its design specifications, including functions, features and
technical performance requirements. Capitalization of costs ceases when the
product is available for general release to customers. Such costs are amortized
on a product-by-product basis over no longer than five years. Software developed
for resale is carried at the lesser of amortized cost or net realizable value.

The process of evaluating goodwill and other intangible assets including
capitalized software costs and customer contract costs for impairment involves
judgments about market conditions and economic indicators, estimates of future
cash flows and assumptions about our strategic plans with regard to our
operations. To the extent additional information arises or our strategies
change, it is possible that our conclusions regarding the carrying value of our
intangible assets could change and materially affect our financial position or
results of operations.

We maintain a reserve for expected future losses on certain electronic benefit
transfer contracts. Our estimates of such losses are based on a variety of
assumptions including assumptions about future welfare case levels, number of
transactions per case and costs related to processing transactions and support
services. These assumptions are subject to significant uncertainties and may
differ substantially from our estimates. In the event such differences arise, a
revision to the loss contract reserve would be required. Any such revision could
have a material effect on our financial position or results of operations.

We maintain an allowance for doubtful accounts for estimated losses resulting
from our customers failing to make required payments. If the financial condition
of our customers were to deteriorate, thereby impairing their ability to make
payments, additional allowances may be required.

We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. Although we have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
determine that we will be able to realize our deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the deferred tax asset
would increase income in the period any such determination was made. Likewise,
should we determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period any such determination was made.

We consider the undistributed earnings of our foreign subsidiaries to be
permanently invested and, accordingly, we have not provided for U.S. Federal,
state income or applicable foreign withholding taxes on those amounts. Upon any
distribution of those earnings in the form of dividends or otherwise, we would
be subject to both U.S. income taxes (subject to an adjustment for foreign tax
credits) and applicable withholding taxes payable to the foreign countries.
Determination of the amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with such a
hypothetical calculation.

As permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, we continue to account for our employee
stock-based compensation in accordance with Accounting Principles Board Opinion
No.


                                       20
<PAGE>
25, Accounting for Stock Issued to Employees. No compensation cost has been
recognized for fixed stock options issued under our option programs. We
disclosed pro forma net income (loss) and net income (loss) per share as if the
fair value method of SFAS No. 123 had been used. Had we elected to utilize SFAS
No. 123 to account for our stock-based compensation, our reported net income
(loss) would have been $30.5 million, $1.8 million and $(10.6) million for the
years ended December 31, 2001, 2000 and 1999, respectively. Our earnings (loss)
per diluted share would have been $0.64, $0.04 and $(0.27) for the years ended
December 31, 2001, 2000 and 1999, respectively. See Note 8 to our consolidated
financial statements for a full discussion of our stock based compensation
plans.

RECENT EVENTS

Acquisition of Hanco Systems - On January 31, 2002, we purchased substantially
all of the U.S. ATM-related assets of Hanco Systems, Inc., an independent ATM
deployment and management company ("Hanco"). We paid approximately $11.4 million
in cash, plus an additional amount for outstanding accounts receivable of Hanco
and the assumption of certain of its liabilities. Hanco managed a network of
approximately 2,500 ATMs in 30 states. We are actively pursuing the acquisition
of the ATM portfolios of other independent ATM deployment and management
companies.

Transactions with STAR - In 2001, Concord EFS acquired the STAR debit network,
formerly our largest transaction processing customer, and notified us that it
intended to terminate STAR's processing agreement with us and perform the
processing for this network at its own data centers. As part of the transition
of this activity, Concord EFS licensed our EFT software and contracted for the
long-term maintenance thereof and for professional services to assist in the
migration effort. The license to Concord EFS represented our largest software
licensing transaction to date. The transition of the processing for the STAR
network to Concord EFS is currently scheduled to be completed by the fourth
quarter of 2002. Concord EFS will pay us fixed monthly fees for the transaction
processing we will perform for the STAR network during the transition period and
we expect to see the revenues from our relationship with STAR decline
substantially from historical levels in future periods. Including software
license and maintenance fees and fees for processing transactions for STAR,
Concord EFS accounted for approximately $56.2 million of net revenues during the
year ended December 31, 2001, or approximately 10.9% of our total net revenues
in that year. We do not expect that the fees we received from Concord EFS in
2001 will recur at comparable levels in future periods and we currently estimate
that the total net revenues we will recognize from our relationship with Concord
EFS in 2002 will approximate $25 million. Approximately 40% of this amount is
expected to be recognized in the first quarter of 2002 and substantially all of
the remaining balance is expected to occur ratably in the second and third
quarters.

Restatement of Consolidated Financial Statements - In March 2000, we paid cash
of $20.0 million for an approximately 24% interest in Access Cash International
L.L.C., a limited liability company that provides automated teller machine (ATM)
management services. In September 2000, we entered into an ATM deployment and
management agreement with ACI under which we received fees paid by customers
utilizing ATMs deployed by us and interchange fees from their banks. ACI managed
this network of ATMs in exchange for a management fee determined by reference to
the number of ATMs deployed. We and ACI entered into an agreement, dated June
29, 2001 (Amendment Agreement), to amend the ATM deployment and management
agreement whereby ACI agreed to assign its revenue from equipment sales and
maintenance during the second quarter of 2001 to us in order to settle various
disputes that had arisen regarding ACI's performance under the ATM deployment
and management agreement.

The Amendment Agreement also amended the ATM deployment and management agreement
so that, commencing in July 2001, we assumed the obligation for future ATM
equipment sales and related maintenance and agreed to pay ACI a fixed monthly
fee of $0.7 million to support these activities. We retained the right to cancel
this feature of the Amendment Agreement if the equipment sales and maintenance
revenues did not exceed $0.6 million per month. The Amendment Agreement also
provided that we would pay ACI an additional $0.25 million per month under the
ATM deployment and management agreement to provide further incentives to ACI to
support our sales efforts and to defray the cost to ACI of doing so. The
Amendment Agreement also extended the minimum term of the ATM deployment and
management agreement through March 31, 2002.

We and the then majority owner of ACI also entered into an agreement, dated July
2, 2001 (Letter Agreement), acknowledging our mutual desire to pursue a
transaction by which we would acquire the remaining 76% of ACI. The Letter
Agreement required us to pay $150,000 to the other owners of ACI if we had not
acquired the remaining equity interests in ACI by July 31, 2001 with additional
payments becoming due if we had not acquired the remaining equity interests in
ACI by subsequent milestone dates through March 31, 2002. In addition, the
Letter Agreement required us to pay the other owners of ACI $200,000 in exchange
for their agreement not to pursue other potential purchasers of their equity
interests in ACI.


                                       21
<PAGE>
In February 2002, in response to questions raised by a former ACI employee
regarding the accounting for the Amendment Agreement, we conducted a review of
the Amendment Agreement and the Letter Agreement. Based on the review, we
concluded that these two agreements are inter-dependent and in substance are one
agreement that became effective in July 2001, and that the various elements of
the two agreements cannot be economically separated so as to support accounting
for each element independently. As a result, the payments among ACI, us and the
owner of the remaining equity interests in ACI should have been accounted for as
advances and repayments with the net amount being an increase or decrease to the
purchase price for our acquisition of the remaining equity interests in ACI,
rather than as revenues and expenses. Previously, we had recorded revenue of
$2.1 million in the three months ended June 30, 2001, based on ACI's assignment
in the Amendment Agreement of its equipment sales in the second quarter of 2001
to us to settle disputes related to an existing ATM deployment and management
agreement, and we had also previously recorded in the three months ended
September 30, 2001, revenues of $2.4 million for payments received from ACI and
$3.2 million in costs of revenue for payments made in accordance with the two
agreements. In March 2002, we restated our consolidated financial statements
included in our second and third quarter reports on Form 10-Q to account for the
transactions resulting from these two agreements as discussed above and to
record the appropriate related adjustments to the provision for income taxes and
our equity in the earnings of ACI.

Webtel Investment - In December 2001, the Company entered into a subscription
agreement to acquire a 15% interest in Webtel Pty. Ltd., an Australian
corporation (Webtel). Pursuant to the subscription agreement, the Company
invested $2.5 million (AUD) in Webtel in 2001 and has committed to invest an
additional $1.5 million (AUD) in Webtel upon the satisfaction of certain
conditions specified in such agreement.

SEC Inquiry - On March 8, 2002 we received a letter from a Staff Accountant at
the Central Regional Office of the Securities and Exchange Commission (the
"SEC") stating that the SEC is conducting an inquiry of us and requesting our
voluntary assistance in connection with the provision of certain documents
relating to our 2001 financial results and certain transactions between us and
ACI, among other things. The letter from the SEC states that the inquiry is
non-public and that it should not be construed as an indication that the SEC
believes any violation of law has occurred. We intend to cooperate fully with
the SEC in resolving this matter. We may, however, be the subject of additional
inquiries or become subject to a fine or other liabilities.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the relative
composition of net revenues and selected statements of operations data as a
percentage of net revenues:

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                    ----------------------------------
                                                                                     2001           2000          1999
                                                                                    -----          -----         -----
<S>                                                                                 <C>            <C>           <C>
      Net revenue
        Payment systems and services............................................     91.3%          89.4%         84.0%
        Government services.....................................................      8.7           10.6          16.0
                                                                                    -----          -----         -----
          Total net revenues....................................................    100.0          100.0         100.0
                                                                                    -----          -----         -----

      Cost of revenue
        Payment systems and services............................................     54.9           53.2          48.6
        Government services
          Cost of revenue excluding loss contract and asset impairment
            charges (credits)...................................................      5.3            7.2          12.8
          Loss contract and asset impairment charges (credits)..................     (0.5)           2.3           2.9
                                                                                    -----          -----         -----
            Total cost of revenue...............................................     59.7           62.7          64.3
                                                                                    -----          -----         -----

      Gross margin..............................................................     40.3           37.3          35.7
                                                                                    -----          -----         -----

      Selling, general and administrative expense...............................     29.4           34.9          36.1
                                                                                    -----          -----         -----

      Income (loss) from operations.............................................     10.9            2.4          (0.4)
                                                                                    -----          -----         -----

      Other income (expense)
        Legal proceedings.......................................................       --             --           0.7
        Equity in loss of investee..............................................     (0.2)          (0.1)         (0.3)
        Interest expense........................................................     (0.1)          (0.9)         (0.9)
        Interest and other income (expense).....................................      0.4            0.6          (0.0)
                                                                                    -----          -----         -----

      Income (loss) before income taxes.........................................     11.0            2.0          (0.9)

      Provision for income taxes................................................     (3.7)          (0.9)         (1.8)
                                                                                    -----          -----         -----

      Net income (loss).........................................................      7.3%           1.1%         (2.7)%
                                                                                    =====          =====         =====
</TABLE>


                                       22
<PAGE>
      YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

      NET REVENUE - Net revenue increased $95.7 million, or 22.9%, to $513.6
million in 2001 from $417.9 million in 2000.

      Payment systems and services - Net revenue increased $95.1 million, or
25.5%, to $468.7 million in 2001 from $373.6 million in 2000. A variety of
factors contributed to the increase in revenue. Total revenue from ACI,
including pre-acquisition revenue from the ATM deployment and management
agreement, vault cash agreement and processing agreement in effect prior to our
acquisition of ACI and from the ownership of ACI after our acquisition,
increased by $49.7 million to $72.4 million in 2001 from approximately $22.7
million in 2000. This increase resulted from a full year of our relationship
with ACI in 2001 compared with only four months of such relationship in 2000.

      Revenue derived from software licensing and software maintenance and
support generated revenue of $64.9 million in 2001, an increase of approximately
$31 million from 2000. This increase resulted primarily from the licensing of
our electronic funds transfer (EFT) software to Concord EFS and Visa USA. We do
not expect that software transactions of this magnitude are likely to be
repeated in the foreseeable future.

      Our call center in Mumbai, India completed its first full year of
operations in 2001 and generated revenue of approximately $16.5 million. This
call center commenced operations in mid-December 2000 and generated less than
$0.5 million of revenue in 2000. Also contributing to the increase in this
segment's revenue in 2001 were increased sales of products and services based on
our DebitBureau(R) database as well as increased usage of our debit account
opening products.

      These increases were offset to some extent by a decrease in revenue from
our check authorization business of $3.1 million resulting from customer losses,
bankruptcies and pricing concessions associated with the execution of longer
term contracts, lower revenue of $3.2 million from our collections business and
a decrease in revenue earned from Deluxe. Deluxe has been, and is expected to
continue to be, one of our most significant customers.

      Total sales to Deluxe were $47.6 million, $59.3 million and $9.8 million
for the years ended December 31, 2001, 2000 and 1999, respectively. Although no
longer related parties, we continue to maintain a business relationship with
Deluxe. Sales to Deluxe for the year ended December 31, 2001 include fees
related to services provided pursuant to a five-year software development and
business process outsourcing agreement executed during 2000. If Deluxe fails to
spend a minimum of $43 million for software development services under this
agreement in any year, it will be obligated to make payments to us based on a
schedule in the contract that is reflective of an estimate of our lost profits.
For the year ended December 31, 2001, Deluxe's spending attributable to this
component of this agreement was $41.1 million, which did not meet the
minimum-spending target and, accordingly, additional fees of $0.3 million were
accrued. This agreement also calls for us to provide business process management
services, including accounts receivable, accounts payable and other general
accounting and data entry services to Deluxe. Deluxe's annual minimum spending
target for business process management services ranges from $8.1 million in 2000
to $4.2 million in 2004. Revenue from Deluxe for business process outsourcing
services was $6.2 million for the year ended December 31, 2001. Although Deluxe
has indicated to us that it expects to purchase software development services
from us in 2002 at approximately the $43 million level contemplated by our
outsourcing agreement with it, further efforts at expense reductions by Deluxe
could cause the revenues we receive from Deluxe to continue to decline. The loss
of Deluxe as a customer or a continuing material reduction in the amount of
services it orders from us would materially adversely affect our future results
of operations and financial condition. The provision of services by us under the
software development and business process outsourcing agreement is
non-exclusive, and Deluxe may contract with any third party for the provision of
professional services.

      Government services - Net revenue increased $0.6 million, or 1.3%, to
$44.9 million in 2001 from $44.3 million in 2000. The increase in revenue for
2001 compared to 2000 was primarily due to increased revenues from Medicaid
eligibility verification services coupled with an increase in the number of
cases processed. This increase was partially offset by the expiration of an
electronic benefit-switching contract with Citibank in the third quarter of
2000. Although we continue to pursue EBT contracts where we can obtain them on a
profitable basis, we expect to see a decline in the revenues of the government
services segment in 2002 if our Medicaid eligibility verification contract with
the state of New York expires. This contract provided us $11.9 million of
revenue in 2001 and was originally scheduled to expire at the end of October
2001. New York has extended this agreement through October 2002. It is possible
that we may receive further extensions, but we are unable to predict whether we
in fact will receive any such extensions. No other EBT contracts are scheduled
to expire until the fourth quarter of 2002 (at which time a contract that
generated $1.8 million of revenue in 2001 is scheduled to expire), although all
of our government services contracts are terminable by the contracting
governmental entity at any time. We have recently been informed that we have
been awarded the prime EBT contracts for the States of Alabama and Missouri. The
contract with Alabama will commence in June 2002 and we believe the Missouri
agreement will commence in January 2003. When fully operational, these
relationships are expected to generate an aggregate of approximately $4.5
million in annual incremental revenues over the amounts we received from these
states in 2001 by reason of our subcontract with Citibank.


                                       23
<PAGE>
      COST OF REVENUE - Cost of revenue increased $44.9 million, or 17.1%, to
$306.9 million in 2001 from $262.0 million in 2000. As a percentage of net
revenue, cost of revenue was 59.7% in 2001, compared to 62.7% in 2000. Excluding
a net credit of $2.5 million and a net charge of $9.7 million to our reserve for
future losses on certain government EBT contracts taken in 2001 and 2000,
respectively, cost of revenue, as a percentage of net revenue was 60.2% and
60.4% in 2001 and 2000, respectively.

      Payment systems and services - Cost of revenue increased $59.7 million, or
26.8%, to $282.1 million in 2001 from $222.4 million in 2000. As a percentage of
payment systems and services net revenue, cost of revenue increased to 60.2% in
2001 as compared to 59.5% in 2000. Total cost of revenue related to ACI from the
ATM deployment and management agreement, vault cash agreement and processing
agreement in effect prior to our October acquisition of ACI, and from our
ownership of ACI after this acquisition, increased by approximately $45.2
million to $66.4 million in 2001 from approximately $21.2 million in 2000. This
increase resulted from a full year of our relationship with ACI in 2001 compared
with only 4 months of such relationship in 2000. Costs associated with the new
call center in Mumbai, India of approximately $9.5 million also contributed to
the increase in cost of revenue over last year. Telecommunication costs
increased approximately $4.3 million due to the cost of improved data links with
our Indian operations and our need to expand our infrastructure in certain areas
as a result of our separation from Deluxe. Additionally, cost of revenue in the
payment systems and services segment has increased as a result of costs
associated with the introduction of newer products and services. Software and
data license revenues of $64.9 million in 2001 did not contribute significantly
to cost of revenue.

      Government services - Cost of revenue decreased $14.8 million, or 37.4%,
to $24.8 million in 2001 from $39.6 million in 2000. As a percentage of
government services net revenue, cost of revenue decreased to 55.3% in 2001 as
compared to 89.3% in 2000. Excluding a net credit of $2.5 million and a net
charge of $9.7 million to our reserve for future losses on certain government
EBT contracts taken in 2001 and 2000, respectively, cost of revenue was $27.3
million in 2001 and $29.9 million in 2000. Excluding these special items, cost
of revenue as a percentage of net revenue was 60.9% in 2001 and 67.4% in 2000.
The decrease in cost of revenue, exclusive of the credits and charges incurred
in 2001 and 2000, of $2.6 million relates to a reduction in direct costs
resulting from expiration of an electronic benefit switching contract in the
third quarter of 2000, a decrease in rental expense associated with the
expiration of a lease for certain equipment and a reduction in maintenance
costs.

      GROSS MARGIN - Gross margin increased $50.8 million, or 32.6%, to $206.7
million during 2001 from $155.9 million in 2000. As a percentage of net revenue,
gross margin increased to 40.3% during 2001 as compared to 37.3% in 2000.
Excluding net loss contract credits of $2.5 million in 2001 and charges of $9.7
million recorded in 2000, gross margin as a percentage of net revenue was 39.8%
in 2001 and 39.6% in 2000. Factors causing gross margin to increase in 2001
include an additional $31 million in software and data license revenue in 2001
as these revenues carry high gross margins and the new call center in Mumbai
that also made a contribution to gross margin. Cost savings in the government
services business also contributed to increased gross margins. These factors
were offset somewhat by losses attributable to our relationship with ACI
throughout the entire year of 2001, as opposed to only four months in 2000. In
addition, the introduction of new products and services that have not yet
generated sufficient revenue to contribute positively to gross margin and the
underutilization of personnel allocated to our software development and business
process outsourcing agreement with Deluxe also contributed to the decrease in
gross margin.

      SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES - SG&A expenses
increased $4.6 million, or 3.1%, to $150.7 million during 2001 from $146.1
million in 2000. In 2001 we incurred a $3.2 million charge related to the
closure of our operations in Bothell, Washington. In 2000, we incurred charges
of $6.1 million related to our separation from Deluxe. Excluding these charges,
SG&A expenses increased $7.5 million, or 5.4%, to $147.5 million during 2001
from $140.0 million in 2000. The increase in SG&A expense over last year is
primarily related to our growth. Depreciation and amortization expense included
in SG&A increased $5.8 million in 2001 reflecting the high level of capital
spending in 2000 and to a lesser degree, 2001. In addition, the acquisition of
ACI in October 2001 contributed $2.1 million to SG&A expenses. Increased hosting
costs associated with our DebitBureau database and costs to support the demands
associated with becoming a public company offset reduced promotion and
advertising expenses, costs savings in the government services business related
to personnel costs and the absence of allocated costs from Deluxe. Excluding the
$3.2 million incurred for the closure of the Bothell operations in 2001 and the
$6.1 million incurred in 2000 for costs related to our separation from Deluxe,
SG&A expense as a percentage of net revenue decreased to 28.7% in 2001 from
33.5% in 2000.

      OTHER INCOME (EXPENSE) - Other income (expense) was $0.2 million during
2001 compared to $(1.6) million for 2000, or a decrease in expense of $1.8
million. This decrease in other expense was the result of lower interest cost
associated with our India line of credit that was fully repaid at March 31,
2001, lower interest costs associated with reductions in the principal amount of
capital leases and lower interest costs associated with the absence of
intercompany borrowings from Deluxe. Our intercompany balance with Deluxe was
settled at the Spin-Off. These savings were partially offset by costs associated
with the disposal of certain computer equipment and the write-off of certain
leasehold improvements when we moved our corporate headquarters in the fourth
quarter of 2001. The equity in loss of investee represents our 24% share of
losses incurred by ACI prior to our acquisition of the remaining 76% of this
company in October 2001. The increase in our share of the loss in 2001 relates
to increased inventory obsolescence and bad debt charges taken by ACI in 2001.


                                       24
<PAGE>
      PROVISION FOR INCOME TAXES - The provision for income taxes was $19.0
million in 2001 compared to $3.6 million in 2000 resulting in effective tax
rates of 33.7% and 44.0%, respectively. The decrease in the effective tax rate
in 2001 from 2000 was the partially result of recognizing the income tax benefit
of certain federal net operating losses. The income tax benefit of these losses
was not previously recognized. In addition, our Indian software development and
business process management operations contributed to the decrease in our
effective tax rate as they qualify for tax incentives associated with such
businesses that operate within designated geographic locations. Such incentives
generally provide us with exemptions from Indian tax on certain business income
generated from these operations and phase out through March 2009. The effect of
such tax incentives was to reduce income tax expense by approximately $5.1
million in 2001 and $1.9 million in 2000.

      YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

      NET REVENUE - Net revenue increased $115.6 million, or 38.2%, to $417.9
million in 2000 from $302.3 million in 1999. On a full year pro forma basis
assuming our April 1999 acquisition of the remaining 50% interest in our joint
venture with HCL occurred on January 1, 1999, net revenue increased $111.2
million, or 36.3%, to $417.9 million in 2000 from $306.7 million in 1999.

      Payment systems and services - Net revenue increased $119.5 million, or
47.0%, to $373.6 million in 2000 from $254.1 million in 1999. Net revenue was
not recorded for our joint venture with HCL in the first quarter of 1999 because
the equity method of accounting was used prior to our acquisition of the
remaining 50% interest in this entity in April 1999. On a pro forma basis taking
into account this acquisition as if it had occurred on January 1, 1999, payment
systems and services net revenue increased $115.2 million, or 44.6%, to $373.6
million in 2000 from $258.4 million in 1999.

      Two new agreements contributed significantly to the increase in our
revenues in 2000. Our software development and outsourcing agreement with Deluxe
contributed $59.3 million in revenue during the year ended December 31, 2000.
Revenue for similar services provided to Deluxe in 1999 amounted to $9.8
million. In addition, our September 2000 ATM deployment and management agreement
with ACI, in which we then owned a 24% interest, contributed approximately $19.9
million in incremental revenue and when coupled with our existing vault cash and
processing agreements, resulted in total revenue of $22.7 million.

      Our collection service offerings contributed significantly to our revenue
growth by generating incremental revenue of $14 million over 1999. Increases in
transaction processing and account inquiry verification volumes of 8% and 16.8%,
respectively, in 2000 over 1999, also contributed to our increase in revenue,
although the revenue increases related to increased transaction processing
volumes were offset, to some extent, by lower fees for new customers and
customers renewing their agreements. The increase in revenue related to account
verification inquiry volumes was further enhanced by price increases. Total net
revenue from Deluxe was $59.3 million, or 14.2% of our total net revenues in
2000 and $9.8 million, or 3.2% of our total net revenues for 1999.

      Government services - Net revenues decreased $4.0 million, or 8.2%, to
$44.3 million during 2000 from $48.3 million in 1999. The decrease was primarily
due to the expiration of an electronic benefit transfer contract in the second
quarter of 2000 partially offset by increased revenues from Medicaid eligibility
verification services performed for the State of New York.

      COST OF REVENUE - Cost of revenue increased $67.7 million, or 34.8%, to
$262.0 million in 2000 from $194.3 million in 1999. As a percentage of net
revenue, cost of revenue was 62.7% in 2000, compared to 64.3% in 1999. Excluding
net charges of $9.7 million and $8.7 million for loss contract and asset
impairment charges in the government services business taken in 2000 and 1999,
respectively, cost of revenue, as a percentage of net revenue was 60.4% and
61.4% in 2000 and 1999, respectively. On a full year pro forma basis assuming
our April 1999 acquisition of the remaining 50% interest in our Indian joint
venture with HCL occurred on January 1, 1999 and excluding loss contract and
asset impairment charges, cost of revenue as a percentage of net revenue was
60.4% and 61.4% in 2000 and 1999, respectively.

      Payment systems and services - Cost of revenue increased $75.6 million, or
51.5%, to $222.4 million in 2000 from $146.8 million in 1999. As a percentage of
payment systems and services net revenue, cost of revenue increased to 59.5% in
2000 as compared to 57.8% in 1999. On a full year pro forma basis assuming our
April 1999 acquisition of the remaining 50% interest in our Indian joint venture
with HCL occurred on January 1, 1999, cost of revenue increased $72.8 million,
or 48.6%, to $222.4 million in 2000 from $149.6 million in 1999. On a pro forma
basis, cost of revenue was 57.9% of payment systems and services net revenue in
1999.

      The increase in cost of revenue was driven primarily by our software
development and outsourcing agreement with Deluxe, increased collections and
transaction processing activity and initial costs associated with both the new
ATM deployment agreement and the opening of a new call center in Mumbai, India.
The new call center generated minimal revenue in 2000 while


                                       25
<PAGE>
the ATM deployment agreement exhibited a loss of $1.4 million. Including the
vault cash and processing agreements with ACI, total cost of revenue associated
with the relationship amounted to $21.2 million. These increases in cost of
revenue were partially offset by an increasing proportion of work being
performed at lower cost in India, a shift toward electronic customer inquiries
in the account verification business that generates higher margins and decreased
reliance on subcontractors.

      Government services - Cost of revenue decreased $7.9 million, or 16.6%, to
$39.6 million in 2000 from $47.5 million in 1999. As a percentage of government
services net revenue, cost of revenue decreased to 89.3% in 2000 as compared to
98.4% in 1999. Excluding $9.7 million and $8.7 million of net loss contract
charges recorded in 2000 and 1999, respectively, cost of revenue as a percentage
of net revenue was 67.4% and 80.4% for 2000 and 1999, respectively. The
reduction in cost of revenue on a percentage basis for the year ended December
31, 2000 (exclusive of the $9.7 million charge) is a reflection of programs
implemented to serve our customers more efficiently and reduce our costs as well
as reduced costs associated with the expiration of an EBT contract.

      GROSS MARGIN - Gross margin increased $47.9 million, or 44.4%, to $155.9
million during 2000 from $108.0 million in 1999. As a percentage of net revenue,
gross margin increased to 37.3% during 2000 as compared to 35.7% in 1999.
Excluding net loss contract and other charges of $9.7 million and $8.7 million
recorded in 2000 and 1999, respectively, gross margin as a percentage of net
revenue was 39.6% in 2000 and 38.5% in 1999. Excluding the net loss contract
charges, gross margin, as a percentage of net revenue was 38.4% for 1999 on a
pro forma basis taking into account our April 1999 acquisition of the remaining
50% interest in our Indian joint venture.

      SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES - SG&A expenses
increased $37.0 million, or 33.8%, to $146.1 million during 2000 from $109.1
million in 1999. We incurred $6.1 million in 2000 for one-time transition costs
related to the separation of the Company from Deluxe. These transition and
severance costs contributed to the increase in SG&A expense compared to 1999. We
do not expect to incur further costs and expenses associated with the separation
from Deluxe in future periods. The increase in SG&A in 2000 over 1999 was also
related to the acquisition of the remaining 50% interest in our joint venture
with HCL in April 1999. No SG&A expenses were recorded for this entity in the
first quarter of 1999 because the equity method of accounting was used prior to
this acquisition. Other factors contributing to the increase were additional
promotional advertising geared toward creating brand awareness of the eFunds
name, infrastructure investments needed to support higher levels of business in
the payment systems and services area both in the United States and India
related to our new software development and outsourcing agreement with Deluxe
and increased goodwill amortization due to the acquisition of an electronic
check conversion company in February 1999. Also, in the first quarter of 1999,
$2.4 million of restructuring accruals from prior periods were reversed,
reducing SG&A expenses for that year.

      As a percentage of net revenue, SG&A expenses decreased to 35.0% during
2000 compared to 36.1% in 1999. Assuming our April 1999 acquisition of the
remaining 50% interest in our Indian joint venture occurred on January 1, 1999
and excluding the $6.1 million incurred in 2000 for costs related to the
spin-off and $2.9 million of one-time costs related to the acquisition incurred
in 1999, SG&A expense as a percentage of net revenue decreased to 33.5% in 2000
from 35.0% in 1999.

      OTHER INCOME (EXPENSE) - Other income (expense) was $(1.6) million during
2000 compared to $(1.6) million for 1999. Other income (expense) in 2000
includes the interest earned on the proceeds of our IPO offset by interest
expense related to our inter-company balance payable to Deluxe, interest on our
India line of credit, equity losses of $0.5 million from our 24% investment in
ACI and $1.0 million of goodwill amortization related to that investment. In
1999, other income (expense) included interest income earned from our
intercompany balance receivable from Deluxe and reversals of $2.1 million of
reserves for legal accruals offset by losses recorded under the equity method of
accounting for our Indian joint venture and interest on our India line of
credit. Prior to our acquisition of the remaining ownership interest in our
operations in India in April 1999, we recorded our 50% share of the joint
venture's losses in interest and other expense. For the majority of 2000, net
intercompany balances were in a payable position to Deluxe.

      PROVISION FOR INCOME TAXES - The provision for income taxes was $3.6
million in 2000 compared to $5.6 million in 1999 resulting in effective tax
rates of 44% and (212)%, respectively. The decrease in the tax provision for
2000 was due to lower taxes on foreign earnings partially offset by
non-deductible goodwill amortization. Our Indian software development and
business process management operations qualify for tax incentives associated
with such businesses that operate within designated geographic locations. Such
incentives generally provide us with exemptions from Indian tax on certain
business income generated from these operations and phase out through March
2009. The effect of such tax incentives in 2000 was to reduce income tax expense
by approximately $1.9 million.


                                       26
<PAGE>
      LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

      At December 31, 2001, cash and cash equivalents were $101.9 million. We
had $1.1 million of restricted cash that we temporarily hold in custodial
accounts on behalf of clients and had supplied $21.1 million in cash to ATMs.
Prior to our acquisition of ACI, we had agreed to make up to $35 million
available for supplying cash to ATMs. The agreements with ACI provided that we
would retain control over and ownership of this cash. Subject to our approval,
ACI determined the level of cash required to be maintained within the ATMs up to
the maximum of $35 million. We received a fee for making such cash available.
The agreements, and the corresponding restrictions on the ATM vault cash, ceased
to be effective following our acquisition of ACI last fall. Accordingly, we have
reclassified the cash in ATMs that had been classified as restricted at December
31, 2000 to cash and cash equivalents during 2001. ACI also has a vault cash
agreement with a financial institution. The agreement provides that the
financial institution has the option to provide cash services for ATMs deployed
by ACI on a case-by-case basis. ACI pays a monthly fee of the New York Prime, as
defined, plus one half percent on the average daily balance of funds provided to
the ATMs. The bank may terminate the agreement if it incurs material losses. The
Company may terminate the agreement upon payment of a penalty. The initial term
of the agreement expires in November 2003. Total cash provided as a result of
this agreement was $17.8 million at December 31, 2001.

      Prior to our acquisition of ACI, we had also committed to guarantee up to
$3.0 million (CAD) of equipment lease payments for ACI's Canadian customers and
through December 31, 2001, we had guaranteed lease payments amounting to $1.3
million (USD) or $2.1 million (CAD). Through December 31, 2001, we have been
required to make payments of $59,000 pursuant to these guarantees.

      In September 2001, we obtained a new revolving credit facility in the
amount of $20.0 million to replace an existing facility that was maturing. The
lender reissued an irrevocable standby letter of credit in the amount of $4.0
million to guarantee our performance under a government services contract with
the state of New York. In November 2001, the letter of credit was reduced to
$1.0 million and, accordingly, our unused borrowing capacity under the new
facility was increased from $16.0 million to $19.0 million. We did not borrow
any funds under this facility through December 31, 2001. Loans under this
facility will bear interest at the applicable prime rate or the LIBOR rate plus
a margin determined by reference to our leverage ratio, as defined in the loan
documents. The facility is guaranteed by certain of our subsidiaries and
requires us to comply with certain financial and non-financial covenants. We are
currently in compliance with all of these requirements. This facility has a term
of one year.

      Our India operations previously had a $10.0 million credit facility,
denominated in Indian rupees, available at the lender's prime interest rate.
Borrowings under this facility were due on demand and were guaranteed by us. In
March 2001, we repaid the outstanding balance of this facility and $8.5 million
of a $10.0 million time deposit account maintained by us to support our guaranty
of the facility was returned to us. We subsequently requested that the amount
available for borrowing under the facility be reduced to $1.5 million. We now
use the facility primarily for the purpose of securing letters of credit issued
in the ordinary course of business. This facility matures on September 30, 2002.
The average amount drawn on this credit facility during the first quarter of
2001 was $5.3 million at a weighted average interest rate of 15.5%. We did not
borrow against this credit facility during the remainder of 2001. As of December
31, 2000, $5.3 million was outstanding at an interest rate of 15.4%. The average
amount drawn on this line during 2000 was $4.5 million at a weighted average
interest rate of 15.4%. The average amount drawn down on this line during 1999
was $2.7 million at a weighted average interest rate of 15.8%.

      In connection with our government services business and our collection
activities, we post surety bonds with state agencies guaranteeing our
performance of certain obligations related to contracts or state requirements.
The aggregate amount of such bonds outstanding at December 31, 2001 was $7.8
million. We have also pledged $1.3 million of time deposits maintained in Indian
banks as collateral for guarantees of our performance under a software
development contract.

      The following table sets forth our contractual cash obligations in total
and for each of the next five years and thereafter as of December 31, 2001:

<TABLE>
<CAPTION>
                                                                       Payments Due by Period
                                              --------------------------------------------------------------------------
(dollars in thousands)                          Total      2002       2003       2004       2005      2006    Thereafter
                                              --------   --------   --------   --------   --------  --------  ----------
<S>                                           <C>        <C>        <C>        <C>        <C>       <C>       <C>
Capital lease and debt obligations .....      $  5,310   $  2,781   $  1,417   $  1,106   $      6  $     --  $       --
Outsourcing and maintenance obligations..       58,870     14,793     13,429     12,743     12,423     5,482          --
Operating leases .......................        64,083     14,453     11,354      9,257      5,580     4,929      18,510
                                              --------   --------   --------   --------   --------  --------  ----------
Total contractual cash obligation ......      $128,263   $ 32,027   $ 26,200   $ 23,106   $ 18,009  $ 10,411  $   18,510
                                              ========   ========   ========   ========   ========  ========  ==========
</TABLE>

      The following table sets forth our future commercial commitments as of
December 31, 2001:

<TABLE>
<CAPTION>
                                                Commitment Expiration by Period
                                   ------------------------------------------------------------
(dollars in thousands)              Total     2002    2003    2004    2005    2006   Thereafter
                                   --------  ------  ------  ------  ------  ------  ----------
<S>                                <C>       <C>     <C>     <C>     <C>     <C>     <C>
Letters of credit and other .....  $  2,357  $2,042  $   --  $  315  $   --  $   --  $       --
Guarantees ......................     1,320     383     360     311     204      62          --
Performance bonds ...............     7,829   6,489     215     125      --   1,000          --
                                   --------  ------  ------  ------  ------  ------  ----------
Total commitments ...............  $ 11,506  $8,914  $  575  $  751  $  204  $1,062  $       --
                                   ========  ======  ======  ======  ======  ======  ==========
</TABLE>

      The Company is party to certain other contracts with third parties whereby
the third party provides services to the Company. These services are operational
in nature and our obligations under these contracts vary from period to period
based on our utilization of these services to serve our customers. The amount of
these commitments are not included in the above tables as they are not currently
determinable.


                                       27
<PAGE>
      The following table sets forth a summary of our cash flow activity and
should be read in conjunction with our consolidated statements of cash flows:

<TABLE>
<CAPTION>
                                                                Summary of Cash Flows
                                                               Years Ended December 31,
                                                               ------------------------
(dollars in thousands)                                            2001          2000
                                                               ----------    ----------
<S>                                                            <C>           <C>
Cash provided by operating activities........................  $   85,022    $   43,769
Cash used in investing activities............................     (72,555)      (61,219)
Cash provided by financing activities........................      10,673        64,459
Adjustment for lag in financial reporting....................          --        (4,127)
                                                               ----------    ----------
Net increase in cash and cash equivalents....................  $   23,140    $   42,882
                                                               ==========    ==========
</TABLE>

      Cash flows from operating activities were approximately $85.0 million and
$43.8 million for the years ended December 30, 2001 and 2000, respectively. The
increase in operating cash flow results primarily from the increase in our net
income of $32.7 million, the lapse of restrictions on our cash because the
acquisition of ACI enabled us to reclassify approximately $27.7 million of cash
from restricted to unrestricted cash as well as an increase in non-cash
expenses. Offsetting these items to some degree was an increase in accounts
receivable of $16.3 million and a decrease in accounts payable of $16.3 million.
The increase in accounts receivable is reflective of our revenue growth and a
change in the way we process our billings to and from Deluxe. Prior to the
Spin-Off, all billing activity with Deluxe was settled through a single
intercompany account. Subsequent to the Spin-Off, we send Deluxe invoices which
are recorded as receivables. Excluding the effect of our change in billing
methods with Deluxe, days sales in accounts receivable was 49 days at December
31, 2001 compared to 46 days at December 31, 2000. The decrease in accounts
payable resulted from a temporary suspension of payments at December 31, 2000 as
we separated our payables systems from those of Deluxe. This suspension was not
repeated in 2001.

      Cash used in investing activities was $72.6 million for the year ended
December 31, 2001. Our investing activities primarily relate to the acquisition
of the remaining 76% of ACI and our investment in Webtel for a total of $40.6
million and purchases of fixed assets and expenditures for software of $30.9
million. Cash used in investing activities was $61.2 million for the year ended
December 31, 2000 and primarily related to the investment of $20.0 million to
purchase an initial 24% interest in ACI and purchases of capital assets and
software investments of $41.9 million.

      Cash provided by financing activities was $10.7 million for the year ended
December 31, 2001. We used cash to repay debt of $8.9 million, including the
repayment of $5.3 million outstanding under our Indian credit facility. These
payments were partially offset by the return of $8.5 million of the $10.0
million that we had placed in a time deposit as collateral to support our
guarantee of this facility. The remaining $1.5 million remains in deposit with
the lender as collateral for letters of credit issued under this facility. In
addition, proceeds from the exercise of stock options and shares purchased
through our employee stock purchase plan provided cash of $11.0 million. Cash
provided from financing activities was $64.5 million for the year ended December
31, 2000 as a result of our IPO in June 2000. In addition, Deluxe provided $10.1
million to increase our capitalization in preparation for the Spin-Off and we
had net repayments of borrowings of approximately $0.3 million. We also placed
$10.0 million in a time deposit account as collateral to support our guarantee
of our Indian credit facility.

      The adjustment for the lag in financial reporting during December 1999
represents the net cash flows of our Indian operations. Previously, this
business reported its results of operations and financial position on a
one-month lag. In January 2000, this business changed its reporting period to
coincide with the rest of our Company. We believe that cash generated from
operations, borrowings under our available credit facility and cash on hand will
provide sufficient funds for our operations for the foreseeable future.

RECENT DEVELOPMENTS

      In March 2000, we paid cash of $20.0 million for an approximate 24%
interest in ACI, a limited liability company that provides automated teller
machines services. Effective October 1, 2001, we acquired the remaining
approximately 76% of the equity interests in ACI for approximately $44.6
million, of which approximately $40.3 million was paid in cash on or before the
closing date of the Acquisition. Payment of the $4.3 million balance of the
purchase price is subject to the satisfaction of certain post-closing
conditions.

     On January 31, 2002, we purchased substantially all of the U.S. ATM-related
assets of Hanco Systems, Inc., an independent ATM deployment and management
company ("Hanco"). We paid approximately $11.4 million in cash, plus an
additional amount for outstanding accounts receivable of Hanco and the
assumption of certain of its liabilities. Hanco managed a network of
approximately 2,500 ATMs in 30 states.


                                       28
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

On January 1, 2001, we adopted Statement of Financial Accounting Standards
"SFAS" No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended, which provides guidance on accounting for derivatives and hedge
transactions. The effect of this pronouncement did not have a material impact on
our reported operating results or financial position.

In July 2001, the FASB issued SFAS No. 141, Business Combinations, which
established new standards for accounting and reporting requirements for business
combinations and requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is prohibited. We implemented SFAS No. 141 in
connection with our October 2001 acquisition of the remaining outstanding equity
interest in ACI. The implementation did not have a material impact on our
consolidated financial statements.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, that became effective for us on January 1, 2002. SFAS No. 142 requires,
among other things, the cessation of the amortization of goodwill. In addition,
the standard includes provisions for the reassessment of the useful lives of
existing recognized intangibles, a new method of measuring reported goodwill for
impairment and the identification of reporting units for purposes of assessing
potential future impairments of goodwill. SFAS No. 142 also requires us to
complete a transitional goodwill impairment test on or before June 30, 2002. We
are assessing the total impact the foregoing requirements will have on our
consolidated balance sheet and statement of operations. Goodwill amortization
for the years ended December 31, 2001, 2000 and 1999 amounted to $3.9 million,
$4.0 million and $3.0 million, respectively.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 establishes a single accounting
model for the impairment or disposal of long-lived assets, including
discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of, and
certain provisions of APB Opinion No. 30, Reporting the Results of Operation --
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. The provisions of
SFAS 144 are effective for us in 2002 and are to be applied prospectively. We do
not believe the adoption of SFAS 144 will have a material impact on our
consolidated financial position or results of operations.

DISCLOSURES ABOUT MARKET RISK

We operate internationally, and so are subject to potentially adverse movements
in foreign currency rate changes. We have not entered into foreign exchange
forward contracts to reduce our exposure to foreign currency rate changes on
intercompany foreign currency denominated balance sheet positions.

We are exposed to foreign exchange risk to the extent of adverse fluctuations in
the Indian rupee and the British pound. We do not believe that a change in the
Indian rupee and British pound exchange rates of 10% would result in a material
effect on our future earnings, financial position or cash flows.

As our international operations continue to grow and the related foreign
exchange risks increase, we may seek to enter into transactions that qualify for
hedge accounting treatment under SFAS No. 133 to reduce our exposure to foreign
currency rate changes.

FORWARD LOOKING STATEMENTS

We have previously commented upon our current expectations for 2002. Excluding
nonrecurring and unusual items:

      -     We are targeting revenue growth of 16% in 2002, with total revenue
            expected to be approximately $596 million for the full year.
            Approximately $450 million of 2002 revenues is expected to be
            generated by the flow through and normal growth of existing 2001
            contracts. Growth is expected to be achieved through the expansion
            of existing customer and product relationships (approximately $70
            million), initiation of new customer and product relationships
            (approximately $40 million) and purchase of additional ATM network
            assets (approximately $35 million);

      -     Operating income is expected to be approximately 13 to 15 percent of
            our 2002 revenue, including the benefit of the elimination of
            goodwill amortization effective January 1, 2002 pursuant to the
            adoption of Statement of Financial Accounting Standards No. 142
            (SFAS No. 142);

      -     The effective tax rate for 2002 is expected to average approximately
            34 percent, including the benefit of the adoption of SFAS No. 142;


                                       29
<PAGE>
      -     Net income is expected to approximate $1.18 per diluted share,
            including the estimated positive impact of the adoption of Financial
            Accounting SFAS No. 142;

      -     2002 diluted shares are assumed to be 47.5 million; and

      -     Capital spending is targeted at approximately $40 million,
            reflecting product development and enhancement costs, customer
            service improvements, as well as infrastructure needs to support
            continued growth. This estimate does not include amounts expected to
            be expended for the purchase of additional ATM network assets.

We have also provided guidance for the first quarter:

      -     Revenues are expected to be approximately $127 to $130 million;

      -     Diluted earnings per share are expected to approximate $.16 to $.18,
            including the impact of SFAS No. 142.

On a sequential quarter basis, revenues are expected to be flat and earnings
lower in the first quarter of 2002 as compared to the fourth quarter of 2001.
The decline in earnings is primarily the result of a change in the revenue mix
and investments in new product launches in 2002. We expect significant revenue
and earnings improvement in second quarter of 2002 from the ramping up of new
products.

Our actual future results could differ materially from those presently
anticipated due to a variety of factors. Some of these factors are discussed in
Exhibit 99.1 to this Annual Report on Form 10-K. This Exhibit is on file with
the Securities and Exchange Commission.


                                       30
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of:
eFunds Corporation
Scottsdale, Arizona

We have audited the accompanying consolidated balance sheets of eFunds
Corporation and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of operations, comprehensive income (loss),
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of iDLX Holdings NV (a consolidated subsidiary), which statements
reflect total assets constituting 9% of consolidated total assets at December
31, 2001 and revenue and net income constituting 5% and 34% respectively, of
consolidated total revenue and net income for the year ended December 31, 2001.
Those statements were audited by other auditors whose report has been furnished
to us and our opinion, insofar as it relates to the amounts included for iDLX
Holdings NV, is based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of eFunds Corporation and subsidiaries at December 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 25, 2002 (March 8, 2002,
as to the second paragraph of Note 12)

                                       31
<PAGE>
                               EFUNDS CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          December 31
                                                                                   -------------------------
(dollars in thousands)                                                                2001           2000
                                                                                   ----------     ----------
<S>                                                                                <C>            <C>
Current Assets:
  Cash and cash equivalents ..................................................     $  101,871     $   78,731
  Deposits subject to compensating balance arrangement .......................          2,448         10,000
  Restricted custodial cash ..................................................          1,124          3,787
  Accounts receivable - net ..................................................         79,444         57,825
  Deferred income taxes ......................................................         10,844         13,069
  Prepaid expenses and other current assets ..................................         14,444          7,111
                                                                                   ----------     ----------
    Total current assets .....................................................        210,175        170,523
                                                                                   ----------     ----------
Property and equipment - net .................................................         75,638         77,355
Long-term investments ........................................................          2,747         18,500
Restricted cash ..............................................................             --         27,734
Intangibles:
  Goodwill - net .............................................................         87,151         43,019
  Software - net .............................................................         35,652         33,150
  Other intangible assets - net ..............................................         24,780         15,004
                                                                                   ----------     ----------
    Total intangibles - net ..................................................        147,583         91,173
                                                                                   ----------     ----------
  Other non-current assets ...................................................          5,161          3,302
                                                                                   ----------     ----------
      Total non-current assets ...............................................        231,129        218,064
                                                                                   ----------     ----------
        Total assets .........................................................     $  441,304     $  388,587
                                                                                   ==========     ==========
Current Liabilities:
  Accounts payable ...........................................................     $   25,511     $   29,163
  Accrued liabilities:
    Accrued compensation and employee benefits ...............................         17,127         18,703
    Accrued contract losses ..................................................         14,777         22,247
    Accrued income taxes .....................................................          7,719          4,728
    Deferred revenue .........................................................         12,831          2,211
    Other ....................................................................         10,797         14,014
  Borrowings on line of credit ...............................................             --          5,303
  Long-term debt due within one year .........................................          2,781          2,100
                                                                                   ----------     ----------
    Total current liabilities ................................................         91,543         98,469
Long-term debt ...............................................................          2,529          2,244
Deferred income taxes ........................................................          7,313            504
Other long-term liabilities ..................................................          2,713             50
Commitments and contingencies (Notes 2, 10, 12 and 13)
Stockholders' equity:
Preferred stock $.01 par value; 100,000,000 shares authorized; no shares
    issued and outstanding ...................................................             --             --
Common stock $.01 par value (authorized: 250,000,000 shares; issued and
  outstanding: 46,379,841 and 45,500,000 shares at December 31, 2001 and 2000,
  respectively) ..............................................................            464            455
Additional paid-in capital ...................................................        404,993        391,699
Accumulated deficit ..........................................................        (65,941)      (103,233)
Accumulated other comprehensive loss .........................................         (2,310)        (1,601)
                                                                                   ----------     ----------
    Stockholders' equity .....................................................        337,206        287,320
                                                                                   ----------     ----------
      Total liabilities and stockholders' equity .............................     $  441,304     $  388,587
                                                                                   ==========     ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       32
<PAGE>
                               EFUNDS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                        ----------------------------------------
(dollars and shares in thousands, except per share amounts)                2001           2000           1999
                                                                        ----------     ----------     ----------
<S>                                                                     <C>            <C>            <C>
Net Revenue .......................................................     $  513,637     $  417,894     $  302,340
                                                                        ----------     ----------     ----------
  Cost of revenue, excluding loss contract and asset impairment
    charges (credits) .............................................        309,389        252,262        185,590
  Loss contract and asset impairment charges (credits) ............         (2,500)         9,700          8,700
                                                                        ----------     ----------     ----------
    Total cost of revenue .........................................        306,889        261,962        194,290
                                                                        ----------     ----------     ----------
Gross Margin ......................................................        206,748        155,932        108,050
  Selling, general and administrative expense .....................        150,671        146,056        109,138
                                                                        ----------     ----------     ----------
  Income (loss) from operations ...................................         56,077          9,876         (1,088)
Other Income (Expense)
  Legal proceedings ...............................................             --             --          2,094
  Equity in loss of investee ......................................         (1,097)          (500)        (1,114)
  Interest expense ................................................           (670)        (3,897)        (2,595)
  Interest and other income .......................................          1,938          2,803             63
                                                                        ----------     ----------     ----------
Income (loss) before income taxes .................................         56,248          8,282         (2,640)
Provision for income taxes ........................................        (18,956)        (3,644)        (5,586)
                                                                        ----------     ----------     ----------
Net income (loss) .................................................     $   37,292     $    4,638     $   (8,226)
                                                                        ==========     ==========     ==========
  Weighted average shares outstanding .............................         45,985         42,788         40,000
                                                                        ==========     ==========     ==========
  Weighted average shares and potential dilutive shares outstanding         47,445         42,867         40,000
                                                                        ==========     ==========     ==========
Net income (loss) per share - basic ...............................     $     0.81     $     0.11     $    (0.21)
                                                                        ==========     ==========     ==========
Net income (loss) per share - diluted .............................     $     0.79     $     0.11     $    (0.21)
                                                                        ==========     ==========     ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       33
<PAGE>
                               EFUNDS CORPORATION
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                               -------------------------------------
(dollars in thousands)                            2001          2000         1999
                                               ----------    ----------   ----------
<S>                                            <C>           <C>          <C>
Net income (loss) ........................     $   37,292    $    4,638   $   (8,226)
Other comprehensive loss:
  Foreign currency translation adjustments           (709)       (1,054)        (419)
                                               ----------    ----------   ----------
  Comprehensive income (loss) ............     $   36,583    $    3,584   $   (8,645)
                                               ==========    ==========   ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       34
<PAGE>
                               EFUNDS CORPORATION
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                Retained      Accumulated
                                         Common Stock          Additional       earnings         other           Total
                                   -------------------------    paid-in       (accumulated   comprehensive    stockholders'
(dollars and shares in thousands)    Shares         Amount      capital         deficit)          loss           equity
                                   -----------    ----------  ------------    ------------   --------------   ------------
<S>                                <C>            <C>         <C>             <C>            <C>              <C>
Balance, December 31, 1998.....         40,000    $      400  $     14,564    $     74,967   $         (128)  $     89,803
Net loss.......................             --            --            --          (8,226)              --         (8,226)
Contributions by Deluxe, net...             --            --       277,634              --               --        277,634
Dividends paid to Deluxe.......             --            --            --        (159,687)              --       (159,687)
Translation adjustment.........             --            --            --              --             (419)          (419)
                                   -----------    ----------  ------------    ------------   --------------   ------------
Balance, December 31, 1999.....         40,000           400       292,198         (92,946)            (547)       199,105
Net income.....................             --            --            --           4,638               --          4,638
Adjustment for lag in financial
  reporting (see Note 2).......             --            --            --          (1,125)              --         (1,125)
Offering proceeds, net.........          5,500            55        64,404              --               --         64,459
Contributions by Deluxe, net...             --            --        35,097              --               --         35,097
Dividends paid to Deluxe.......             --            --            --         (13,800)              --        (13,800)
Translation adjustment.........             --            --            --              --           (1,054)        (1,054)
                                   -----------    ----------  ------------    ------------   --------------   ------------
Balance, December 31, 2000.....         45,500           455       391,699        (103,233)          (1,601)       287,320
Net income.....................             --            --            --          37,292               --         37,292
Proceeds from exercise of
  stock options................            732             8         9,827              --               --          9,835
Restricted stock units.........             32            --           333              --               --            333
Proceeds from employee stock
  purchase plan................            116             1         1,190              --               --          1,191
Tax benefits attributable to
  stock options exercised......             --            --         1,944              --               --          1,944
Translation adjustment.........             --            --            --              --             (709)          (709)
                                   -----------    ----------  ------------    ------------   --------------   ------------
Balance, December 31, 2001.....         46,380    $      464  $    404,993        $(65,941)  $       (2,310)  $    337,206
                                   ===========    ==========  ============    ============   ==============   ============
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       35
<PAGE>
                               EFUNDS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                          ---------------------------------------
(dollars in thousands)                                                       2001           2000          1999
                                                                          ----------     ----------    ----------
<S>                                                                       <C>            <C>           <C>
Cash Flows from Operating Activities:
  Net income (loss) ...................................................   $   37,292     $    4,638    $   (8,226)
  Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:
      Depreciation ....................................................       18,140         13,935        12,519
      Amortization ....................................................       21,812         17,134         9,982
      Asset impairment charges ........................................           --             --           492
      Loss on sales of property and equipment .........................        1,753            172         4,973
      Deferred income taxes ...........................................       12,750           (464)        8,927
      Equity in loss of investee ......................................        1,097            500         1,114
      Changes in assets and liabilities, net of effects from
        acquisitions:
            Restricted cash ...........................................       29,449            847       (27,902)
            Accounts receivable .......................................      (16,336)        (4,542)          393
            Accounts payable ..........................................      (16,257)         8,654         7,963
            Income taxes receivable/payable ...........................        1,169         13,214        (4,310)
            Reserve for legal proceedings .............................           --             --       (34,200)
            Accrued contract losses ...................................       (7,470)         1,344         5,902
            Other assets and liabilities ..............................        1,623        (11,663)       10,223
                                                                          ----------     ----------    ----------
                Net cash provided by (used in) operating activities ...       85,022         43,769       (12,150)
                                                                          ----------     ----------    ----------
Cash Flows from Investing Activities:
  Capital expenditures ................................................      (30,902)       (41,893)      (38,225)
  Payments for acquisitions and investments, net of cash acquired .....      (40,620)       (20,000)      (35,667)
  Proceeds from sales of property and equipment .......................          415            407         1,229
  Other ...............................................................       (1,448)           267          (546)
                                                                          ----------     ----------    ----------
                Net cash used in investing activities .................      (72,555)       (61,219)      (73,209)
                                                                          ----------     ----------    ----------
Cash Flows from Financing Activities:
  Net borrowings (payments) on line of credit .........................       (5,303)         1,831         3,054
  Proceeds from exercise of stock options and employee stock
    purchase plan .....................................................       11,026             --            --
  Payments on long-term debt ..........................................       (3,550)        (2,107)       (6,665)
  Release of (investment to establish) loan guarantee collateral ......        8,500        (10,000)           --
  Proceeds from initial public offering (net of offering costs of
    $7.0 million) .....................................................           --         64,459            --
  Capital contributions by Deluxe .....................................           --         23,905       268,440
  Dividends paid to Deluxe ............................................           --        (13,800)     (159,687)
  Other ...............................................................           --            171            11
                                                                          ----------     ----------    ----------
                Net cash provided by financing activities .............       10,673         64,459       105,153
                                                                          ----------     ----------    ----------
Adjustment for lag in financial reporting (see Note 2) ................           --         (4,127)           --
Net increase in cash and cash equivalents .............................       23,140         42,882        19,794
Cash and cash equivalents at beginning of period ......................       78,731         35,849        16,055
                                                                          ----------     ----------    ----------
Cash and cash equivalents at end of period ............................   $  101,871     $   78,731    $   35,849
                                                                          ==========     ==========    ==========
</TABLE>

                 See Notes to Consolidated Financial Statements


                                       36
<PAGE>
                               EFUNDS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

NOTE 1: SPIN-OFF AND BASIS OF PRESENTATION: The Company was incorporated in
Delaware in December 1984 and changed its name from Deluxe Electronic Payment
Systems, Inc. to eFunds Corporation in September 1999. The Company was formerly
a wholly owned subsidiary of Deluxe Corporation (Deluxe). In January 2000,
Deluxe announced that its board of directors had approved a plan to combine its
electronic payments, risk management, professional services and government
services businesses under the Company and to undertake a series of transactions
designed to establish the Company as an independent, publicly traded company. As
part of this process, Deluxe contributed the ownership of various subsidiaries
and certain assets and liabilities of certain business operations (the
Transferred Businesses) to the Company on March 31, 2000.

The Company issued 5.5 million shares of common stock to the public in June 2000
(the IPO). Proceeds from the offering, based on the offering price of $13.00 per
share, totaled $71.5 million ($64.5 million, net of offering expenses).
Subsequent to the IPO, Deluxe continued to own 40 million shares of the
Company's common stock, representing 87.9% of the Company's total outstanding
common shares.

In October 2000, Deluxe announced that it planned to distribute all of the
shares of the Company's common stock owned by it to its shareholders through a
Spin-Off transaction (the Spin-Off). In November 2000, Deluxe declared a
dividend of the 40 million common shares of the Company held by it. This
dividend was distributed on December 29, 2000, in the amount of approximately
0.5514 of an eFunds share for each outstanding Deluxe share. Deluxe received a
ruling from the Internal Revenue Service that this distribution qualified as
tax-free to Deluxe and its shareholders for U.S. federal income tax purposes,
except to the extent that cash was received in lieu of fractional shares.

In connection with the IPO and the Spin-Off, the Company and Deluxe entered into
various agreements that addressed the allocation of assets and liabilities
between them and that defined their relationship after the separation. The
agreements related to matters such as consummation of the IPO and the
distribution of the Company's stock, registration rights for Deluxe,
intercompany loans, information technology consulting, business process
management services, indemnification, data sharing, real estate matters, tax
sharing and transition services. For transition services, the Company and Deluxe
compensated each other for providing services. The transition period varied
depending on the agreement, but most transition services terminated following
the Spin-Off.

Deluxe has agreed to indemnify the Company for certain future losses arising
from identified loss contracts of the Company's government services business.
The Company plans to record any amounts received from Deluxe under the
indemnification agreement as a reduction of expense if any additional contract
losses are recognized. Under the indemnification agreement, the Company is
required to calculate increases or decreases to the loss contract reserve in a
manner consistent with Deluxe's historical practices, which may differ from the
Company's calculation of estimated future losses for financial statement
purposes. Deluxe will also indemnify the Company against any liabilities, losses
or expenses arising from the litigation or claims asserted against the Company
in connection with the operation of the government services business prior to
the completion of the IPO. Deluxe's total indemnification obligations to the
Company with respect to the government services business are limited to $14.6
million. No such indemnification obligations have been incurred through December
31, 2001.

All transactions between the entities included in the consolidated financial
statements have been eliminated. Because the Transferred Businesses and the
Company were under the common control of Deluxe prior to the Spin-Off, the
accompanying consolidated financial statements have been retroactively restated
to reflect the Company's consolidated results of operations and cash flows for
the year ended December 31, 1999, as if Deluxe's March 31, 2000 contribution of
the Transferred Businesses to the Company had occurred on January 1, 1999 and
the Company had been operating as a stand-alone business throughout the periods
presented on an "as-if-pooled" basis.

The historical financial information included in the consolidated financial
statements for the periods prior to the Spin-Off may not be reflective of what
the results of operations, financial condition and cash flows would have been
had the Company actually been a separate, stand-alone entity during the periods
presented. As a result, the historical financial information may not necessarily
be indicative of what the Company's results of operations, financial condition
and cash flows will be in the future.

For periods prior to the Spin-Off, the consolidated statements of operations
include allocated portions of Deluxe's expenses relating to the Transferred
Businesses. Allocations of common expenses were calculated based on a percentage
of Company revenue to total Deluxe revenue, number of employees, square footage
and transaction processing costs and included costs for various support
functions such as human resources, information services and finance. These
common costs to the Company and Deluxe were allocated because specific
identification of the actual costs incurred was not practicable. In addition,
historically,


                                       37
<PAGE>
Deluxe has purchased certain assets or paid certain liabilities that were
attributable to the Company. These items were specifically identified within the
Deluxe consolidated financial statements and have been recorded in the Company's
consolidated financial statements.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES: Consolidation - All significant
intercompany accounts, transactions and profits have been eliminated. For
purposes of consolidating certain international operations that are primarily
based in India, the Company used financial statements with a November 30 fiscal
period end through December 31, 1999.

Effective January 1, 2000, the Company's Indian operations, which had previously
reported their results of operations and financial position on a one-month lag,
changed their reporting dates to coincide with the rest of the Company's
subsidiaries. This change, which was made in conjunction with the implementation
of the Company's central accounting and financial reporting system, reflects the
financial results of that segment on a more timely basis and improves operating
and planning efficiencies. The results of operations for the Company's Indian
operations for the month of December 1999 were excluded from the Company's
consolidated statements of operations and were reflected as an adjustment to
accumulated deficit during the first quarter of 2000. These operations generated
a net loss of $1.1 million and consumed $4.1 million of cash in the month of
December 1999.

Cash and cash equivalents - The Company considers all cash on hand, money market
funds, outstanding transfers of cash for authorized settlement of automated
teller machines (ATMs) with financial institutions, cash in ATMs, and other
highly liquid investments with original maturities of three months or less to be
cash and cash equivalents. Cash in ATMs at December 31, 2001 was $21.1 million.
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents approximate fair value.

Statements of Cash Flows - Cash paid for income taxes amounted to $7.0 million
for the year ended December 31, 2001. Cash paid for interest amounted to $0.7
million, $3.0 million and $1.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. Non-cash investing and financing activity in 2000
consisted primarily of the acquisition of real property and a data center from
Deluxe for $10 million. The purchase price was included in the amount
contributed to the Company's capital at March 31, 2000. For all periods
presented, non-cash investing and financing activities consist of the
acquisition of assets from or through Deluxe or the settlement of liabilities on
the Company's behalf by Deluxe in the ordinary course of business that had not
been repaid by the Company at the time Deluxe contributed intercompany balances
to the Company's capital at each of March 31, 2000 and December 31, 1999.

Restricted cash - In connection with the Company's electronic payment business,
the Company also has cash belonging to customers that temporarily resides in
custodial accounts maintained by the Company. The Company records these amounts
as current restricted custodial cash with a corresponding liability within other
accrued liabilities in the consolidated balance sheets. Restricted cash at
December 31, 2000 also includes amounts, which the Company supplied to Access
Cash International L.L.C. for use in its ATM business.

Accounts receivable - Accounts receivable are stated net of allowances for
uncollectible accounts of $4.8 million and $5.3 million at December 31, 2001 and
2000, respectively. The Company records allowances for uncollectible accounts
when it is probable that the accounts receivable balance will not be collected.
When estimating the allowances for uncollectible accounts, the Company takes
into consideration such factors as its day-to-day knowledge of specific
customers, the industry and size of the customers, the overall composition of
its accounts receivable aging, prior history of accounts receivable write-offs
and prior history of allowances in proportion to the overall receivable balance.
Increases in the allowances for uncollectible accounts are recorded as bad debt
expense and are reflected in selling, general and administrative expense in the
Company's consolidated statements of operations. Bad debt expense was $1.8
million in 2001, $3.3 million in 2000 and $2.9 million in 1999. When a specific
account receivable is determined to be uncollectible, the Company reduces both
its accounts receivable and allowances for uncollectible accounts accordingly.
As of December 31, 2001 Visa U.S.A., Inc. accounted for 14.8% of the Company's
total receivables.

Property and equipment - Property and equipment, including leasehold and other
improvements that extend an asset's useful life or productive capabilities, are
stated at historical cost. Buildings with 40-year lives and computer and other
equipment with lives of three to eight years are generally depreciated using
accelerated methods. Leasehold and building improvements are depreciated on a
straight-line basis over the estimated useful life of the property or the life
of the lease, whichever is shorter.


                                       38
<PAGE>
At December 31, property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                         December 31,
                                                         ------------
            (dollars in thousands)                    2001          2000
                                                  -----------   -----------
<S>                                               <C>           <C>
            Land and improvements.............    $     6,961   $     6,961
            Buildings and improvements........         48,445        45,917
            Machinery and equipment...........         38,530        29,957
            Computer equipment................         73,536        70,049
                                                  -----------   -----------
              Total property and equipment....        167,472       152,884
            Accumulated depreciation..........        (91,834)      (75,529)
                                                  -----------   -----------
              Property and equipment - net....    $    75,638   $    77,355
                                                  ===========   ===========
</TABLE>

Long-term investments - At December 31, long-term investments consisted of the
following:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                                ------------
      (dollars in thousands)                                                  2001       2000
                                                                            --------   --------
<S>                                                                         <C>        <C>
      Investment in Access Cash International, L.L.C...................     $     --   $ 18,500
      Investment in Webtel Pty. Ltd....................................        1,312         --
      Cash surrender value of insurance contracts......................        1,119         --
      Certificate of deposit bearing interest at 7% maturing 6/2004....          316         --
                                                                            --------   --------
                                                                            $  2,747   $ 18,500
                                                                            ========   ========
</TABLE>

The Company acquired a 24% equity interest in Access Cash International, L.L.C.
(ACI) in March 2000. The investment was accounted for under the equity method.
In October 2001, the Company acquired the remaining equity interests in ACI and
the balance of the investment was included in the purchase price allocation. See
Note 4. In December 2001, the Company entered into a subscription agreement to
acquire a 15% interest in Webtel Pty. Ltd., an Australian corporation (Webtel).
Pursuant to the subscription agreement, the Company invested $2.5 million (AUD)
in Webtel in 2001 and has committed to invest an additional $1.5 million (AUD)
in Webtel upon the satisfaction of certain conditions specified in such
agreement. The certificate of deposit secures a guarantee issued by an Indian
bank with respect to the Company's performance under a customer contract.

Intangibles - Intangibles are presented in the consolidated balance sheets net
of accumulated amortization. Goodwill is amortized on a straight-line basis over
periods of 10 to 30 years. Customer contract costs are amortized on a
straight-line basis over a period of time approximating the estimated useful
life of the related contracts. Software and other intangible assets are
amortized on a straight-line basis over periods ranging from one to five years.
Other intangibles consist primarily of software held for licensing and resale.
The Company periodically re-evaluates the original assumptions and rationale
utilized in the establishment of the estimated lives of its identifiable
intangible assets and goodwill.

Total intangibles were as follows:

<TABLE>
<CAPTION>
                                                  December 31,
                                                  ------------
      (dollars in thousands)                   2001           2000
                                           ------------   ------------
<S>                                        <C>            <C>
      Goodwill (see Note 4).............   $    109,690   $     61,413
      Software..........................         65,079         52,606
      Customer contracts acquired......          11,693             --
      Other intangible assets...........         71,768         80,530
                                           ------------   ------------
        Total...........................        258,230        194,549
      Less accumulated amortization.....       (110,647)      (103,376)
                                           ------------   ------------
      Intangibles - net.................   $    147,583   $     91,173
                                           ============   ============
</TABLE>

Impairment of long-lived assets and intangibles - When circumstances indicate
that a long-lived asset that is not held for sale may be impaired, the Company
evaluates the recoverability of the asset by measuring its carrying amount
against the estimated undiscounted future cash flows associated with it. Should
the sum of the expected future net cash flows be less than the carrying value of
the asset being evaluated, an impairment loss would be recognized. The
impairment loss would be calculated as the amount by which the carrying value of
the asset exceeds its fair value. In evaluating whether there is any impairment
of a long-lived asset associated with a long-term service contract, the amount
of any loss contract accrual is excluded from the undiscounted future cash flows
associated with the long-lived asset when determining whether the asset is
impaired.

The Company evaluates the recoverability of property and equipment and
identifiable intangibles held for disposal by comparing the asset's carrying
amount with its fair value less costs to sell. If a large segment or separable
group of assets that were acquired in a business purchase combination were held
for disposal, all of the unamortized goodwill associated with those assets would
be included in the carrying amount of the assets for purposes of this
evaluation. Should the fair value less costs to sell be less than the carrying
value of the long-lived asset(s), an impairment loss would be recognized. The
impairment loss would be calculated as the amount by which the carrying value of
the asset(s) exceeds the fair value of the asset(s) less costs to sell. The
unamortized goodwill associated with those assets would be eliminated before
recording any reduction in the carrying value of the asset(s).


                                       39
<PAGE>
The Company evaluates the carrying value of goodwill when events or changes in
circumstances with regard to the related businesses indicate that the carrying
amount of the goodwill may not be recoverable. Such circumstances could include,
but are not limited to, (1) a current period operating or cash flow loss
combined with a history of operating or cash flow losses, (2) a forecast that
demonstrates continuing losses, (3) a significant adverse change in legal
factors or in business climate, or (4) an adverse action or assessment by a
regulator. In evaluating the recoverability of goodwill, the Company measures
the carrying amount of the goodwill against the estimated undiscounted future
cash flows of the businesses to which the goodwill relates. In determining the
future cash flows, the Company looks to historical results and current
forecasts. The estimated net cash flows include the effects of income tax
payments and interest charges. Should the sum of the expected future net cash
flows be less than the carrying value of the goodwill, an impairment loss would
be recognized. The impairment loss would be calculated as the amount by which
the net book value of the related businesses exceeds their fair value.

Income taxes - In most cases, the Company's domestic businesses were included in
Deluxe's consolidated tax return through December 29, 2000. Pursuant to a tax
sharing agreement, tax payments are made to and tax benefits are reimbursed by
Deluxe for tax periods prior to the Spin-Off. The consolidated financial
statements include income tax benefits (provisions) and liabilities calculated
as if separate tax returns were prepared for the periods covered. Deferred
income taxes result from temporary differences between the financial reporting
bases of assets and liabilities and their respective tax reporting bases. Future
tax benefits are recognized to the extent that realization of such benefits is
more likely than not.

Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $16.4 million at December 31, 2001. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. federal
and state income taxes has been provided thereon. Upon distribution of those
earnings in the form of dividends or otherwise, the Company would be subject to
both U.S. income taxes (subject to an adjustment for foreign tax credits) and
applicable withholding taxes payable to the foreign countries. Determination of
the amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with such a hypothetical calculation.

Translation adjustment - The financial position and results of operations of the
Company's international subsidiaries are measured using local currencies as the
functional currencies. Assets and liabilities of these operations are translated
at the exchange rate in effect at the balance sheet date. Income statement
accounts are translated at the average exchange rate during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included in accumulated other comprehensive loss in the
stockholders' equity section of the consolidated balance sheets. Gains and
losses that result from foreign currency transactions are included in earnings.

Revenue recognition - Revenue is recorded net of any applicable discounts.
Transaction processing and service fees are recognized in the period that the
service is performed. These services consist of processing customers' electronic
debit transactions through electronic funds transfer networks and settling the
funds with the financial institutions involved in the transactions.
Additionally, these services include monitoring ATMs and point-of-sale devices
to alert the Company's customers when potential problems occur. Processing fees
are generally charged on a per transaction basis, depending on the contractual
arrangement with the customer. The Company also receives fees paid by consumers
utilizing certain ATMs owned or managed by the Company and interchange fees paid
by their banks. Government services fees are recognized in the period services
are provided based on monthly fees per benefits recipient.

Decision support fees are recognized as revenue in the period the services are
provided. Decision support services consist of new account applicant and check
verification screenings to manage the risk associated with account openings and
check acceptance. Decision support fees are based on the number of inquiries
against the databases used for screening purposes or monthly fees based on the
aggregate dollar value of checks authorized by the retailer or other similar
measures, depending on the product and service.

Software and data license fees for standard products are recognized when a
license agreement has been signed, the license fee is fixed and determinable,
collectibility of the license fee is probable, delivery has occurred and there
are no uncertainties surrounding product acceptance. If a software license
contains customer acceptance criteria for which significant uncertainties exist,
the software revenue is recognized upon the earlier of customer acceptance or
the expiration of the acceptance period. Certain software products include
multiple modules and the license fee charged to the customer is based on the
modules licensed. If a customer contract requires the Company to deliver
multiple elements, the fees are allocated to the various elements based upon
vendor-specific objective evidence of fair value.

The Company also provides information technology consulting and business process
management services. Recognition of revenue from providing such services is
generally recognized under two methods, depending on contractual terms. Under
the time and materials method, revenue is based on a fee per hour basis and is
recognized as hours are completed. Under the fixed contract method, a pre-set
fee is agreed upon for a project, and revenue is recognized proportionately to
the percentage completion of the


                                       40
<PAGE>
project. If the information technology consulting services involve the
significant customization of software that has been licensed from the Company,
the license fee is also recognized proportionately to the percentage completion
of the project.

Software maintenance and support revenue is recognized ratably over the term of
the contract, and/or as the services are provided.

Software and data license fees amounted to $50.9 million and $14.5 million in
the years ended December 31, 2001 and 2000, respectively.

Long-term service contracts - Long-term service contracts are definitive
agreements to provide services over a period of time in excess of one year and
with respect to which the Company has no contractual right to adjust the prices
or terms at which its services are supplied during the term of the contract. The
Company's long-term service contracts are for transaction processing in the
government services segment and the payment systems and services segment and
business process management services in the payment systems and services
segment. Total revenue for some long-term service contracts may vary based on
the demand for services. Revenue from long-term service contracts are recognized
under the applicable revenue recognition policy above. Expenses are recognized
when incurred, with the exception of installation costs. In existing long-term
service contracts, installation costs are not recovered at the time of
installation but are factored into billing rates over the term of the contract.
Accordingly, installation costs for long-term service contracts are initially
capitalized and then amortized over the life of the contract. Any equipment and
software purchased to support a long-term service contract is capitalized and
depreciated or amortized over the life of the related contract or the life of
the asset, whichever is shorter.

In determining the profitability of a long-term service contract, only direct
and allocable indirect costs associated with the contract are included in the
calculation. The appropriateness of allocations of indirect costs depends on the
circumstances and involves the judgment of management, but such costs may
include the costs of indirect labor, contract supervision, tools and equipment,
supplies, quality control and inspection, insurance, repairs and maintenance,
depreciation and amortization and, in some circumstances, support costs. The
method of allocating any indirect costs included in the analysis is also
dependent upon the circumstances and the judgment of management, but the
allocation method must be systematic and rational. Selling, general and
administrative costs are not included in the analysis. Provisions for estimated
losses on long-term service contracts, if any, are made in the period in which
the loss first becomes probable and reasonably estimable. Projected losses are
based on management's best estimates of a contract's revenue and costs. Actual
losses on individual long-term service contracts are compared with loss
projections periodically, with any changes in the estimated total contract loss
recognized as they become probable and reasonably estimable.

Certain direct costs associated with the EBT contracts discussed in Note 5 are
common to a number of contracts and are attributed to each contract based on its
use of the services associated with these common direct costs. Revenue, case
counts or other applicable statistics are used to attribute these costs to
individual contracts.

In the event an asset impairment loss is recognized on long-lived assets used to
support a long-term service contract, the original estimation of the contract's
costs is revised to reduce the depreciation and amortization associated with the
impaired assets.

Advertising expense - Advertising and promotional costs are expensed as
incurred. The Company incurred advertising and promotional expense of $3.6
million, $9.9 million, and $0.7 million in 2001, 2000, and 1999, respectively.

Research and development expenses - Research and development costs are charged
to expense as incurred and recorded in selling, general and administrative
expenses. Research and development expenses amounted to $0.3 million, $1.4
million and $3.7 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

Capitalization of internal-use software - The Company capitalizes the cost of
software developed or obtained for internal use once the preliminary project
stage has been completed, management commits to funding the project and it is
probable that the project will be completed and that the software will be used
to perform the function intended. Capitalized costs include only (1) external
direct costs of materials and services consumed in developing or obtaining
internal-use software, (2) payroll and payroll-related costs for employees who
are directly associated with and who devote time to the internal-use software
project, and (3) interest costs incurred, when material, while developing
internal-use software. Capitalization of costs ceases when the project is
substantially complete and the software is ready for its intended use. The
carrying value of internal-use software is reviewed in accordance with the
Company's policy on impairment of long-lived assets and intangibles.

Capitalization of software developed for resale - The Company capitalizes the
cost of software developed for licensing and resale once technological
feasibility has been established. Costs incurred prior to establishing
technological feasibility are expensed as incurred. Technological feasibility is
established when the Company has completed all planning, designing, coding and
testing activities that are necessary to determine that a product can be
produced to meet its design specifications, including functions, features and
technical performance requirements. Capitalization of costs ceases when the
product is available for general release


                                       41
<PAGE>
to customers. Such costs are amortized on a product-by-product basis over no
longer than five years. Software developed for resale is carried at the lesser
of amortized cost or net realizable value.

Employee stock-based compensation - Until the IPO and the Spin-Off, the
Company's employees participated in Deluxe's stock incentive programs. In
connection with the IPO and the Spin-Off, the Company adopted new stock
incentive programs for the benefit of its employees. As permitted by Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, the Company continues to account for its employee stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. No compensation cost has been
recognized for fixed stock options issued under the Deluxe or eFunds programs.
The Company discloses pro forma net income (loss) and net income (loss) per
share as if the fair value method of SFAS No. 123 had been used (see Note 8).

Income (loss) per share and stockholders' equity - The following table reflects
the calculation of basic and diluted income (loss) per share:

<TABLE>
<CAPTION>
                                                                                       Year Ended December 31,
                                                                                ------------------------------------
      (dollars and shares outstanding in thousands, except per share amounts)      2001         2000         1999
                                                                                ----------   ----------   ----------
<S>                                                                             <C>          <C>          <C>
      Net income (loss) per share - basic
         Net income (loss)....................................................  $   37,292   $    4,638   $   (8,226)
         Weighted average shares outstanding..................................      45,985       42,788       40,000
                                                                                ----------   ----------   ----------
         Net income (loss) per share - basic..................................  $     0.81   $     0.11   $    (0.21)
                                                                                ==========   ==========   ==========
      Net income (loss) per share - diluted
         Net income (loss)....................................................  $   37,292   $    4,638   $   (8,226)
                                                                                ----------   ----------   ----------
         Weighted average shares outstanding..................................      45,985       42,788       40,000
         Dilutive impact of options...........................................       1,460           79           --
                                                                                ----------   ----------   ----------
         Weighted average shares and potential dilutive shares outstanding....      47,445       42,867       40,000
                                                                                ----------   ----------   ----------
         Net income (loss) per share - diluted................................  $     0.79   $     0.11   $    (0.21)
                                                                                ==========   ==========   ==========
</TABLE>

Options to purchase 94,838 shares of common stock were excluded from the above
calculation, as they were antidilutive at December 31, 2001.

On January 27, 2000, the Company increased the number of authorized shares from
2,500 to 250 million. On May 12, 2000, the Company declared a 16,000 to one
stock split, increasing the shares issued and outstanding from 2,500 to 40
million. Income (loss) per share is presented as if 40 million shares had been
outstanding for all periods presented.

On April 4, 2000, the Company authorized 100 million shares of preferred stock
with a par value of $.01 per share. No such shares are issued or outstanding.

In connection with the IPO the Company adopted a stockholder rights plan. The
rights have anti-takeover effects, as they will cause substantial dilution to a
person or group that attempts to acquire control of the Company pursuant to an
offer that is not approved by the Company's Board of Directors. The rights
should not interfere with any tender offer or merger approved by the Board
because the Board of Directors may redeem the rights or approve an offer at any
time prior to such time as any person becomes the beneficial owner of 15% or
more of the Company's outstanding common stock.

Comprehensive income - The Company's total comprehensive income consists of net
income or loss and foreign currency translation adjustments. The foreign
currency translation adjustments are reflected as accumulated other
comprehensive loss in the Company's consolidated balance sheets.

Use of estimates - The Company has prepared the accompanying consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America. In this process, it is necessary for management
to make certain assumptions and related estimates affecting the amounts reported
in the consolidated financial statements and related notes. These estimates and
assumptions are developed based upon all information available using
management's best efforts. However, actual results can differ from assumed and
estimated amounts.

New accounting pronouncements - On January 1, 2001, the Company adopted
Statement of Financial Accounting Standards "SFAS" No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended, which provides
guidance on accounting for derivatives and hedge transactions. The effect of
this pronouncement did not have a material impact on the reported operating
results or financial position of the Company.

In July 2001, the FASB issued SFAS No. 141, Business Combinations, which
established new standards for accounting and reporting requirements for business
combinations and requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is prohibited. The Company implemented SFAS No. 141
in connection with its October 2001 acquisition of the remaining outstanding
equity interest in Access Cash


                                       42
<PAGE>
International, L.L.C. See Note 4. The implementation did not have a material
impact on the Company's consolidated financial statements.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, that became effective for the Company on January 1, 2002. SFAS No. 142
requires, among other things, the cessation of the amortization of goodwill. In
addition, the standard includes provisions for the reassessment of the useful
lives of existing recognized intangibles, a new method of measuring reported
goodwill for impairment and the identification of reporting units for purposes
of assessing potential future impairments of goodwill. SFAS No. 142 also
requires the Company to complete a transitional goodwill impairment test on or
before June 30, 2002. The Company is assessing the total impact the foregoing
requirements will have on its consolidated balance sheet and statement of
operations. Goodwill amortization for the years ended December 31, 2001, 2000
and 1999 amounted to $3.9 million, $4.0 million and $3.0 million, respectively.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 establishes a single accounting
model for the impairment or disposal of long-lived assets, including
discontinued operations. SFAS No. 144 superseded SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of, and
certain provisions of APB Opinion No. 30, Reporting the Results of Operation --
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. The provisions of
SFAS 144 are effective for the Company in 2002 and are to be applied
prospectively. The Company does not believe the adoption of SFAS 144 will have a
material impact on its consolidated financial position or results of operations.

Classification - Certain amounts in prior periods have been reclassified to
conform to the current period classification.

NOTE 3: TRANSACTIONS WITH DELUXE: Prior to the IPO in June 2000, the Company was
a wholly owned subsidiary of Deluxe. Subsequent to the IPO and through the
Spin-Off, the Company remained a majority owned subsidiary of Deluxe. Prior to
the Spin-Off, Deluxe allocated $16.4 million and $25.6 million for the years
ended December 31, 2000 and 1999, respectively, to the Company for the cost of
corporate services provided. In 2000, these costs included items related to data
sharing, real estate matters and transition services. Prior to 2000, these
allocations were based on the ratio of the Company's revenue to Deluxe's
revenue, the number of employees in the two organizations and transaction
processing costs. The allocated amounts included expenses for various support
functions such as human resources, information services and finance. Costs
common to the Company and Deluxe were allocated because specific identification
of the actual costs incurred was not practicable. The Company believes that this
allocation method was reasonable. The amounts allocated to the Company are
included in selling, general and administrative expense in the consolidated
statements of operations. During 2000, certain of the costs for these support
functions were incurred directly by the Company. The remaining corporate
services provided by Deluxe were allocated to the Company based on estimates of
the costs that would have been incurred by the Company if it were a stand-alone,
independent company. The amounts allocated to the Company are included in
selling, general and administrative expense in the Company's consolidated
statements of operations. The allocation of costs to the Company by Deluxe
ceased at the Spin-Off.

Under Deluxe's centralized cash management system, advances from Deluxe and
excess cash sent to Deluxe through March 31, 2000, are reflected as
contributions by and distributions to Deluxe and are included in stockholders'
equity in the consolidated balance sheets. Deluxe also charged the Company for
interest expense or credited the Company for interest income based on the cash
the Company had borrowed from or provided to Deluxe. The Company was charged or
credited net interest income (expense) by or from Deluxe of $(0.9) million and
$2.8 million for the years ended December 31, 2000 and 1999, respectively. The
average interest rates used to calculate these amounts were 6.7% and 5.1% for
the years ended December 31, 2000 and 1999, respectively. These charges and
credits are included in interest and other income (expense) in the Company's
consolidated statements of operations. The interest rate for net receivables
from Deluxe was based on the average 30-day commercial paper composite rate. The
interest rate for net payables was based on the average 30-day commercial paper
composite rate plus 2%. At December 31, 1999 and again at March 31, 2000, Deluxe
forgave the net outstanding amount it was owed by the Company. The Company
recorded these transactions as capital contributions. The Company also paid a
dividend to Deluxe of $13.8 million at March 31, 2000. Subsequent to March 31,
2000, and through the Spin-Off, the Company and Deluxe have repaid any net
amounts owed to each other in cash. The interest rates applied subsequent to
March 31, 2000, were based on the one-month LIBOR rate plus 0.25%.

Deluxe provided the Company with an unsecured revolving credit facility of up to
$75 million until the Spin-Off. The Company never borrowed any funds under this
facility.

On March 31, 2000, the Company purchased real property and a data center located
in Phoenix, Arizona and certain related personal property from a subsidiary of
Deluxe for $10.0 million. The Company previously rented portions of this
facility. The purchase price of the property and data center was at the net book
value that was recorded on the general ledger of the Deluxe subsidiary. The
Company has leased portions of another facility to Deluxe for various periods
through December 2003.


                                       43
<PAGE>
Transactions involving the purchase and sale of goods and services between the
Company and Deluxe were executed at either then current market prices or
agreed-upon transfer prices. Purchases from Deluxe were $0.2 million and $2.9
million for the years ended December 31, 2000 and 1999, respectively.

Sales to Deluxe were $59.3 million and $9.8 million for the years ended December
31, 2000 and 1999, respectively. Although no longer related parties, the Company
and Deluxe continue to maintain a business relationship. Sales to Deluxe for the
year ended December 31, 2000, include fees related to services provided pursuant
to a five-year software development and business process outsourcing agreement
executed during 2000. If Deluxe fails to spend a minimum of $43 million for
software development services under this agreement in any year, it will be
obligated to make payments to the Company based on a schedule in the contract
that is reflective of the Company's estimates of its lost profits. For the year
ended December 31, 2001, Deluxe's spending attributable to this agreement was
$41.1 million, which did not meet the minimum-spending target, and accordingly
additional fees of $0.3 million were accrued. This agreement also calls for the
Company to provide business process management services, including accounts
receivable, accounts payable and other general accounting and data entry
services to Deluxe. Deluxe's annual minimum spending target for business process
management services ranges from $8.1 million in 2000 to $4.2 million in 2004.
Revenue from Deluxe for business process outsourcing services was $6.2 million
for the year ended December 31, 2001. The provision of services by the Company
under the software development and business process outsourcing agreement is
non-exclusive, and Deluxe may contract with any third party for the provision of
professional services.

NOTE 4: BUSINESS COMBINATIONS: Effective October 1, 2001, the Company acquired
(the Acquisition) the remaining approximately 76% equity interest (the
Interests) in Access Cash International L.L.C., a Delaware limited liability
company (ACI), from ATM Holding, Inc., a Minnesota corporation (ATM Holding).
The acquisition has been accounted for as a purchase in accordance with the
provisions of SFAS No. 141. ACI is the second largest independent provider of
automated teller machine (ATM) services in the United States. ACI provides
turnkey ATM deployment solutions, including ATM sales and management activities,
as well as branding and advertising services. The Acquisition is part of a
strategy to increase the Company's transaction processing revenues through the
acquisition and control of ATM transactions at the point of origination.

The total purchase price (the Purchase Price) of the Interests was $44.6
million, of which approximately $40.3 million was paid in cash on or prior to
the Closing Date. Payment of the balance of the Purchase Price (approximately
$4.3 million) is subject to the satisfaction of certain post-closing conditions.
If these conditions are resolved such that the Company is required to pay any
portion of the balance of the Purchase Price, such payments will be accounted
for as an increase to goodwill. The Purchase Price was determined by negotiation
between the parties and was paid using the available cash reserves of the
Company.

In March 2000, the Company paid cash of $20.0 million for an approximate 24%
interest in ACI. The Company accounted for this initial investment under the
equity method of accounting. The difference of $20.0 million between the
investment and the underlying equity in the net assets of ACI was being
accounted for in the same manner as goodwill and amortized over 15 years.
Following the Acquisition of the Interests, the Company owned 100% of the
outstanding equity interests in ACI. Accordingly, under the equity method of
accounting the Company's results of operations for the year ended December 31,
2001 include its 24% share of the results of ACI's operations for the period
from January 1, 2001, to September 30, 2001 which is recorded in equity in loss
of investee, and 100% of the results of ACI's operations for the period from
October 1, 2001 to December 31, 2001.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed in connection with the acquisition of ACI, including the
remaining balance of the initial $20.0 million investment:

<TABLE>
<CAPTION>
                                                October 1,
               (dollars in thousands)              2001
                                               ------------
<S>                                            <C>
               Current assets...............   $     12,074
               Property and equipment.......          4,404
               Goodwill.....................         48,994
               Other intangible assets......         13,178
               Other non-current assets.....            347
                                               ------------
                 Total assets acquired......         78,997
                                               ------------
               Current liabilities..........         14,818
               Long-term debt...............          3,517
               Other long-term liabilities..          1,895
                                               ------------
                 Total liabilities assumed..         20,230
                                               ------------
                 Net assets acquired........   $     58,767
                                               ============
</TABLE>

Other intangible assets primarily represent the estimated fair value of ACI's
contractual relationships with its customers, which are being amortized over an
estimated useful life of 15 years. The entire amount of goodwill was assigned to
the payment systems and services segment. Of that total amount, $45.6 million is
expected to be deductible for tax purposes.


                                       44
<PAGE>
The following table summarizes the unaudited pro forma results of operations of
the Company as though the acquisition of ACI had occurred at the beginning of
each period presented:

<TABLE>
<CAPTION>
                                                   (unaudited)
              (dollars in thousands)           2001          2000
                                            ----------    ----------
<S>                                         <C>           <C>
              Revenue..................     $  512,903    $  459,451
              Net income...............         32,923         1,020
              Net income per share:
                Basic..................     $     0.72    $     0.02
                Diluted................     $     0.69    $     0.02
</TABLE>

In September 2000, the Company entered into an ATM deployment and management
agreement with ACI under which the Company received fees paid by consumers
utilizing ATMs deployed by it and interchange fees from their banks. ACI managed
this network of ATMs in exchange for a management fee determined by reference to
the number of ATMs deployed. In June 2001, the ATM deployment and management
agreement was amended (Amendment Agreement) and extended until at least March
31, 2002. The ATM deployment and management agreement was of no further effect
upon completion of the Acquisition. In July 2001, the Company and ATM Holding
entered into an agreement (Letter Agreement) acknowledging their mutual desire
to pursue a transaction by which the Company would acquire the remaining 76% of
ACI.

Collectively, the June 2001 Amendment Agreement and the July 2001 Letter
Agreement resulted in payments among the Company, ACI and ATM Holding. These
Payments were accounted for as advances and repayments between the parties and
the net amount of these payments was treated as a $1.3 million reduction to the
purchase price of ACI.

Prior to the Acquisition, the Company had entered into agreements with ACI to
supply cash for ATMs managed by ACI and deployed by the Company in various
locations throughout the United States. These vault cash agreements provided
that the Company would retain control over and ownership of this cash. Subject
to the approval of the Company, ACI determined the level of cash required to be
maintained within the ATMs up to an authorized level. The Company received a fee
for making such cash available. The agreements, and the corresponding
restrictions on the vault cash ceased to be effective following the Acquisition.
Accordingly, the Company has reclassified the cash in ATMs that had been
classified as restricted at December 31, 2000, to cash and cash equivalents
during 2001. ACI also has a vault cash agreement with a financial institution.
The agreement provides that the financial institution has the option to provide
cash services for ATMs deployed by ACI on a case-by-case basis. ACI pays a
monthly fee of the New York Prime, as defined plus one half percent on the
average daily balance of funds provided to the ATMs. The bank may terminate the
agreement if it incurs material losses. The Company may terminate the agreement
upon payment of a penalty. The initial term of the agreement expires in November
2003. Total cash provided as a result of this agreement was $17.8 million at
December 31, 2001.

Prior to the Acquisition, the Company had agreed to guarantee up to $3.0 million
(CAD) of equipment lease payments for ACI's Canadian customers and through
December 31, 2001, the Company had guaranteed lease payments amounting to $1.3
million. Through December 31, 2001, the Company made payments of $59,000
pursuant to these guarantees.

The following table summarizes the transactions between the Company and ACI
during the period from March 2000 when the Company made its initial investment
in ACI until September 30, 2001 when the Company acquired the remainder of the
equity interests in ACI.

<TABLE>
<CAPTION>
         (dollars in thousands)             2001        2000
                                          --------    --------
<S>                                       <C>         <C>
         Revenue:
           Surcharge/interchange          $ 50,673    $ 19,861
           Transaction processing              893         539
           ATM cash....................      1,459       2,113
           Other.......................        157         186
         Expenses:
           Management fee..............     49,924      20,948
           Other.......................         23         300
         Other:
           Equity in losses of ACI.....     (1,097)       (500)
</TABLE>

On April 13, 1999, Deluxe acquired the remaining 50% ownership interest in
HCL-Deluxe, N.V. (eFunds India) for $23.4 million in cash. This entity commenced
operations as a joint venture between Deluxe and HCL Corporation of India in
September 1997. eFunds India provides information technology consulting and
business process management services to financial services companies and to all
of the Company's and Deluxe's businesses. The ownership of eFunds India was
transferred to the Company under the Plan discussed in Note 1. The acquisition
was accounted for under the purchase method of accounting. Accordingly, the


                                       45
<PAGE>
consolidated financial statements of the Company include the entire results of
this business from the date the Company acquired 100% ownership. Prior to this
point, the Company recorded its 50% ownership of the joint venture's results
under the equity method of accounting. This business is included in the payment
systems and services segment. The purchase price was allocated to the assets
acquired and liabilities assumed based on their relative fair values on the date
of purchase. Total cost in excess of net assets acquired in the amount of $24.9
million is reflected as goodwill and is being amortized over 15 years.

On February 19, 1999, Deluxe acquired all of the outstanding shares of eFunds
Corporation of Tustin, California, an electronic check conversion company, for
$13 million in cash. The company provides electronic check conversion and
electronic funds transfer solutions for financial services companies and
retailers. The ownership of this company was transferred to the Company under
the Plan discussed in Note 1. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the consolidated financial
statements of the Company include the results of this business subsequent to its
acquisition date. This business is included in the payment systems and services
segment. The purchase price was allocated to the assets acquired and liabilities
assumed based on their relative fair values on the date of purchase. Total cost
in excess of net assets acquired in the amount of $15.7 million is reflected as
goodwill and is being amortized over 10 years.

NOTE 5: CONTRACT LOSSES: The Company has historically incurred losses related to
its government services business and has established a reserve to provide for
expected future losses on existing long-term service contracts. During 2001, the
Company recorded a net credit of $2.5 million to reflect an overall reduction in
the level of expected future losses on long-term service contracts within its
government services segment. This amount is reflected in cost of revenue in the
Company's consolidated statement of operations. The net credit is composed of
reductions to the reserve of $3.8 million reflecting costs which continue to be
lower than originally anticipated, offset by a provision for a loss of $1.3
million for an additional state where projected future costs exceed projected
future revenue.

During the second quarter of 2000, the Company recorded net charges of $9.7
million for additional expected future losses on the contracts of the government
services segment's electronic benefits transfer (EBT) business. This amount is
reflected in cost of sales in the Company's consolidated statement of
operations. In April 2000, the Company completed negotiations with the prime
contractor for a state coalition for which the Company provides EBT services.
Prior to this, the Company and the prime contractor were operating without a
binding, legally enforceable contract. The Company increased its accrual for
expected future losses on long-term service contracts by $12.2 million to
reflect the fact that the Company had a signed agreement with this contractor.
Offsetting this charge was the reversal of $2.5 million of previously recorded
contract loss accruals. These reversals resulted from productivity improvements
and cost savings from lower than anticipated telecommunications and interchange
expenses.

During 1999, charges of $8.2 million were recorded to provide for additional
expected future losses on the contracts of the government services segment and
an additional $0.5 million was recorded to reflect the impairment of the assets
used in servicing such contracts. These charges are reflected in cost of sales
in the 1999 consolidated statement of operations. A majority of the charges
resulted from the conclusion of negotiations with a prime contractor regarding
the timing and costs of transitioning switching services from the Company to a
new processor. Also, lower than projected actual transaction volumes (primarily
related to states fully rolled-out in 1999) contributed to the changes in the
estimates underlying the previously recognized charges.

The following table summarizes the activity of the accrued contract loss
reserve:

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                      -------------------------------
      (dollars in thousands)                            2001        2000       1999
                                                      --------    --------   --------
<S>                                                   <C>         <C>        <C>
      Beginning balance...........................    $ 22,247    $ 20,599   $ 14,697
      Provision for contract losses...............       1,295      12,200      8,208
      Reversal of provision for contract losses...      (3,795)     (2,500)        --
      Charges to reserve..........................      (4,970)     (8,052)    (2,306)
                                                      --------    --------   --------
      Ending balance..............................    $ 14,777    $ 22,247   $ 20,599
                                                      ========    ========   ========
</TABLE>

NOTE 6: RESTRUCTURING CHARGES: The Company's consolidated balance sheets reflect
restructuring accruals of $2.4 million and $0.4 million as of December 31, 2001
and 2000, respectively, for employee severance and other costs. During the first
quarter of 2001, a restructuring charge of $3.2 million was recorded relating to
the planned closure of the Company's operations in Bothell, Washington. This new
restructuring charge is reflected in selling, general and administrative (SG&A)
expenses in the consolidated statement of operations.

In 2000, the Company identified additional opportunities for savings in the
payment systems and services segment and planned to reduce the workforce in the
United Kingdom division of this segment by 31 employees. Accordingly, the
Company expensed $0.6 million.


                                       46
<PAGE>
During 1999, the Company reversed $2.4 million of restructuring accruals
relating to its 1998 initiative to reduce SG&A expense and a 1996 plan to reduce
the workforce at the international operations of the payment systems and
services segment. The reduction in the SG&A expense initiative accrual was due
to higher than anticipated attrition that resulted in severance payments to 37
fewer employees than originally anticipated. Also, due to the Company's decision
in 1999 to retain the international operations of its payment systems and
services segment, planned reductions within that business were canceled. These
accrual reversals are reflected in SG&A expense in the 1999 consolidated
statement of operations.

The following table summarizes the change in the Company's restructuring
accruals for 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                    Years Ended December 31,
                                            -----------------------------------------------------------------------
                                                     2001                    2000                      1999
                                            ---------------------  ------------------------  ----------------------
                                            Number of               Number of                 Number of
                                            employees               employees                 employees
     (dollars in thousands)                 affected      Amount    affected      Amount      affected      Amount
                                            ---------    --------   ---------    --------     ---------    --------
<S>                                         <C>          <C>        <C>          <C>          <C>          <C>
     Balance - beginning of year..........       9       $    378        6       $  1,242        186       $  4,672
     Provisions for restructuring.........     224          3,200       31            555         --             --
     Severance and other costs paid.......    (159)        (1,170)     (28)        (1,419)       (18)        (1,031)
     Adjustments to accrual...............      --             --       --             --       (162)        (2,399)
                                              ----       --------      ---       --------       ----       --------
     Balance - end of year................      74       $  2,408        9       $    378          6       $  1,242
                                              ====       ========      ===       ========       ====       ========
</TABLE>

NOTE 7: PROVISION FOR INCOME TAXES: Income (loss) before income taxes consists
of:

<TABLE>
<CAPTION>
                                       Years Ended December 31,
                                   --------------------------------
       (dollars in thousands)        2001        2000        1999
                                   --------    --------    --------
<S>                                <C>         <C>         <C>
       Domestic................    $ 45,147    $  5,368    $ (2,163)
       Foreign.................      11,101       2,914        (477)
                                   --------    --------    --------
         Total.................    $ 56,248    $  8,282    $ (2,640)
                                   ========    ========    ========
</TABLE>

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                           -------------------------------------
      (dollars in thousands)                  2001          2000         1999
                                           ----------    ----------   ----------
<S>                                        <C>           <C>          <C>
      Current tax benefit (provision)
        Federal ......................     $   (3,913)   $   (4,030)  $    5,527
        Foreign ......................           (100)          (47)          --
        State ........................         (2,193)          (31)        (271)
                                           ----------    ----------   ----------
          Total ......................         (6,206)       (4,108)       5,256
      Deferred tax benefit (provision)
        Federal ......................        (12,259)          684      (10,811)
        State ........................           (491)         (220)         (31)
                                           ----------    ----------   ----------
          Total ......................     $  (18,956)   $   (3,644)  $   (5,586)
                                           ==========    ==========   ==========
</TABLE>

The Company's effective tax rate on pretax income (loss) differs from the U.S.
Federal statutory tax rate of 35% as follows:

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                       -------------------------------------
      (dollars in thousands)                                              2001          2000         1999
                                                                       ----------    ----------   ----------
<S>                                                                    <C>           <C>          <C>
      Income tax at Federal statutory rate .........................   $  (19,687)   $   (2,899)  $      924
      State income taxes net of Federal income tax benefit .........       (1,680)         (163)        (196)
      Difference between Federal statutory rate and foreign tax rate        4,096         1,713          (58)
      Amortization and write down of intangibles ...................       (1,570)       (1,412)      (1,074)
      Change in valuation allowance ................................        2,989          (826)      (4,591)
      Other ........................................................       (3,104)          (57)        (591)
                                                                       ----------    ----------   ----------
      Provision for income taxes ...................................   $  (18,956)   $   (3,644)  $   (5,586)
                                                                       ==========    ==========   ==========
</TABLE>


                                       47
<PAGE>
Tax effected temporary differences, which give rise to a significant portion of
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                    2001                       2000
                                         -------------------------   -------------------------
                                          Deferred      Deferred      Deferred      Deferred
                                            tax           tax           tax           tax
                                           assets      liabilities     assets      liabilities
                                         -----------   -----------   -----------   -----------
<S>                                      <C>           <C>           <C>           <C>
(dollars in thousands)
Net operating loss carryforwards ...     $    11,606   $        --   $    14,625   $        --
Reserve for legal proceedings ......             114            --           407            --
Accrued contract losses ............           5,917            --         9,166            --
Restructuring accruals .............           1,107            --           144            --
Property and equipment .............              --           695            10            --
Intangibles ........................              --         6,618           440            --
Employee benefit and incentive plans           1,155            --         1,257            --
Miscellaneous reserves and accruals            2,067            --         1,397            --
All other ..........................             484            --           218           504
                                         -----------   -----------   -----------   -----------
Subtotal ...........................          22,450         7,313        27,664           504
Valuation allowance ................         (11,606)           --       (14,595)           --
                                         -----------   -----------   -----------   -----------
Total deferred taxes ...............     $    10,844   $     7,313   $    13,069   $       504
                                         ===========   ===========   ===========   ===========
</TABLE>

The valuation allowance relates principally to the uncertainty of realizing
federal, foreign and state net operating loss carryforwards. The valuation
allowance includes approximately $1.5 million for net operating loss
carryforwards of a business that was acquired in 1999. Any utilization of these
net operating loss carryforwards would be recorded as a reduction of goodwill.
The amount of net operating loss utilization for 2001 recorded as a reduction of
goodwill was $0.2 million.

At December 31, 2001, net operating loss carryforwards relating to federal,
state and foreign jurisdictions amounted to $10.1 million, $95.8 million and
$10.6 million, respectively. Of these carryforwards $10.6 million of foreign net
operating losses may be carried forward indefinitely. Federal and State net
operating loss carryforwards are subject to expiration as follows:

<TABLE>
<CAPTION>
         (dollars in thousands)    Federal     State       Total
                                   -------   ---------   ---------
<S>                                <C>       <C>         <C>
                    2002-2005      $    --   $      80   $      80
                    2006-2010           --         149         149
                      2011              --       5,955       5,955
                      2012              --       5,076       5,076
                      2013              --      20,359      20,359
                      2014              --      31,398      31,398
                      2015              --      31,261      31,261
                      2016              --          31          31
                      2017              --          46          46
                      2018           4,317         327       4,644
                      2019           5,620         497       6,117
                      2020             165         571         736
                                   -------   ---------   ---------
                  Total            $10,102   $  95,750   $ 105,852
                                   =======   =========   =========
</TABLE>

The Company's Indian software development and business process management
operations qualify for tax incentives associated with businesses which operate
within designated geographic locations in India. Such incentives generally
provide the Company with exemptions from Indian tax on certain business income
generated from these operations and phase out through March 2009. These tax
incentives reduced the Company's income tax expense by approximately $5.1
million and $1.9 million in the years ended December 31, 2001 and 2000,
respectively.

NOTE 8: EMPLOYEE BENEFIT PLANS: Stock purchase plan - Until the Spin-Off, the
Company's U.S. employees participated in Deluxe's employee stock purchase plan.
This plan enabled eligible employees within the Deluxe organization to purchase
Deluxe's common stock at 75% of its fair market value on the first business day
following each three-month purchase period. The Company's participation in the
stock purchase plan terminated at the time of the Spin-Off. Compensation expense
was recognized for the difference between the participating employees' purchase
price and the fair value of the stock purchased in the amount of $0.9 million
and $0.7 million in 2000 and 1999, respectively.

Following the Spin Off, the Company established a non-compensatory Employee
Stock Purchase Plan (ESPP) as defined in Section 423(b) of the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
The Company has reserved 2.3 million shares for issuance in accordance with the
provisions of the ESPP. All regular full-time employees of the Company are
eligible to participate in the ESPP, subject to certain limitations. The ESPP
enables eligible employees to purchase the Company's common stock at the lesser
of 85% of its fair market value on the first or last business day


                                       48
<PAGE>
of each three-month purchase period (six months with respect to the first
purchase period). The Company's shareholders approved the ESPP in 2001.

Stock incentive plans - Employees of the Company participated in Deluxe's other
stock incentive plans through the date of the Spin-Off. Under these plans,
stock-based awards could be issued to employees via a broad range of methods,
including non-qualified or incentive stock options, restricted stock and
restricted stock units, stock appreciation rights and other similar awards.
Options become exercisable in varying amounts beginning generally one year after
the date of grant.

In connection with the Spin-Off (see Note 1), Deluxe and the Company decided
that Deluxe options outstanding as of the record date for the Spin-Off would be
converted to options to purchase shares of the Company and options to purchase
shares of Deluxe based on a formula that compared the market value of the
Company's and Deluxe's common stock at the record date for the Spin-Off. The
formula was designed to maintain an equivalent intrinsic value for the option
holder utilizing the criteria described in Emerging Issues Task Force No. 90-9,
Changes to Fixed Employee Stock Option Plans as a Result of Equity
Restructuring. To accommodate the conversion, the Company established the eFunds
Corporation Stock Incentive Plan for Deluxe Conversion Awards (the "Conversion
Plan").

Under the Conversion Plan, the converted options retain their remaining terms,
vesting and other characteristics as provided in the Deluxe plans except that
options awarded under the 1998 DeluxeSHARES program were modified to require
that vesting prior to January 30, 2001 was conditioned upon the per share price
of the Company's common stock reaching a market price at least equal to 150% of
the per share exercise price of the converted option rather than 150% of per
share exercise price of the original DeluxeSHARES option. The DeluxeSHARES
conversion options became exercisable on January 31, 2001.

Options to purchase 2.9 million shares of the Company's common stock were
outstanding with a weighted average exercise price of $13.75 per share at
December 31, 2000 under the Conversion Plan. The Company did not record
compensation expense as a result of the conversion process.

In connection with the IPO, the Company established the eFunds Corporation 2000
Stock Incentive Plan under which 9.1 million shares were reserved for issuance.
The plan provides for a broad range of methods to deliver stock-based awards
similar to those of the Deluxe plans, except that incentive stock options may
not be issued under the Company's stock incentive plan. Options issued under the
plan become exercisable in varying amounts beginning generally one year after
the date of grant and generally become fully vested after three years. Awards
made under the plan have a maximum term of ten years.

Deluxe issued restricted shares and restricted stock units to Company employees
as follows: 11,456 units at a weighted-average fair value of $26.19 per share
during 2000, and 6,264 shares and units at a weighted-average fair value of
$26.19 per share during 1999. All outstanding Deluxe restricted stock units held
by employees of the Company were cancelled in connection with the Spin-Off. The
Company issued 53,514 restricted stock units in 2001 and 10,000 restricted stock
units in 2000 prior to the Spin-Off. These Awards generally vested over periods
ranging from one to five years. No consideration is paid by the employees for
these awards. The Company recorded compensation expense of $665,000, $328,000
and $164,000 for restricted share and restricted stock unit awards for the years
ended December 31, 2001, 2000 and 1999, respectively. One member of the Board of
Directors elected to receive 1,537 restricted stock units in lieu of
compensation.

Information with respect to stock option activity is as follows:

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                         ---------------------------------------------
                                                                  2001                   2000
                                                         ---------------------   ---------------------
                                                                      Wtd. Avg.               Wtd. Avg.
                                                                      Exercise                Exercise
                                                          Shares       Price      Shares        Price
                                                         ---------    --------   ---------    --------
<S>                                                      <C>          <C>        <C>          <C>
      Options outstanding at beginning of year.......    5,485,908    $  13.33          --    $     --
      Deluxe options converted to eFunds options.....           --          --   2,918,435       13.75
      Options granted................................    1,330,174       11.51   2,772,458       12.84
      Options exercised..............................     (732,312)      13.43          --          --
      Options cancelled..............................     (412,385)      12.57    (204,985)     (12.89)
                                                         ---------    --------   ---------    --------
      Options outstanding at end of year.............    5,671,385    $  12.95   5,485,908    $  13.33
                                                         =========    ========   =========    ========
</TABLE>


                                       49
<PAGE>
For options outstanding and exercisable at December 31, 2001, the exercise price
ranges and average remaining lives in years were as follows:

<TABLE>
<CAPTION>
     Ranges of           Options          Wtd. Avg.         Wtd. Avg.         Options        Wtd. Avg.
  Exercise Prices      Outstanding     Remaining Life     Exercise Price    Exercisable    Exercise Price
  ---------------      -----------     --------------     --------------    -----------    --------------
<S>                    <C>             <C>                <C>              <C>             <C>
   $7.13 - $12.87       1,679,076           8.45              $ 11.01          262,083        $ 11.35
  $13.00 - $13.88       2,467,993           8.15                13.02        1,097,039          13.04
  $14.05 - $21.33       1,524,316           6.55                14.97        1,223,070          14.64
                        ---------           ----              -------        ---------        -------
                        5,671,385           7.81              $ 12.95        2,582,192        $ 13.63
                        =========           ====              =======        =========        =======
</TABLE>

Pro forma information regarding net income (loss) and net income (loss) per
share has been determined as if the Company had accounted for its employee
stock-based compensation under the fair value method. The fair value of options
was estimated at the date of grant using a Black-Scholes option-pricing model.
The following weighted-average assumptions were used in valuing options issued
in 2001, 2000 and 1999, respectively: risk-free interest rate of 4.6%, 5.0% and
6.7%; dividend yield of 0.0%, 0.0% and 4.6%; and expected volatility of 78.6%,
50.0% and 24.0%, respectively. The weighted-average expected option life was 5
years, 5 years and 9 years for 2001, 2000 and 1999, respectively. The
weighted-average fair value of options granted in 2001, 2000 and 1999 was $7.74,
$6.33 and $8.28, respectively. For purposes of pro forma disclosures, the
estimated fair value of the options was recognized as expense over the options'
vesting periods.

The Company's pro forma net income (loss) and net income (loss) per share were
as follows:

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                            -------------------------------
      (dollars in thousands, except per share amounts)         2001       2000       1999
                                                               ----       ----       ----
<S>                                                         <C>         <C>       <C>
       Net income (loss):
        As reported....................................     $  37,292   $  4,638  $  (8,226)
        Pro Forma......................................     $  30,463   $  1,795  $ (10,638)
      Basic and diluted net income (loss) per share:
        As reported:
          Basic........................................     $    0.81   $   0.11  $   (0.21)
          Diluted......................................     $    0.79   $   0.11  $   (0.21)
        Pro Forma:
          Basic........................................     $    0.66   $   0.04  $   (0.27)
          Diluted......................................     $    0.64   $   0.04  $   (0.27)
</TABLE>

Profit sharing, defined contribution and 401(k) plans - As part of the Spin-Off
(see Note 1), the Company established a new 401(k) plan effective on January 1,
2001. During 2001, employees could contribute the lesser of $10,500 or 10% of
their eligible wages to the new plan. The Company matched 100% of the first 5%
of wages contributed. The new 401(k) plan has a profit sharing feature whereby
the Company will contribute up to an additional 10% of an employee's
contribution, depending on the Company's performance, as long as the employee is
enrolled in the plan and contributing at least 3% of their eligible wages. The
Company's expense for matching and profit sharing amounted to $9.7 million for
the year ended December 31, 2001. The Company also maintains a defined
contribution plan for its UK based employees. Expenses under this plan amounted
to $0.4 million in 2001.

Prior to the Spin-Off from Deluxe, the Company participated in Deluxe's profit
sharing plans, defined contribution pension plan and plans established under
section 401(k) of the Internal Revenue Code to provide retirement benefits for
certain employees. The plans covered substantially all U.S. based full-time
employees with approximately 15 months of service. Contributions to the profit
sharing and defined contribution plans were made solely by the Company.
Employees were able to contribute up to the lesser of $10,000 or 10% of their
wages to the 401(k) plan. The Company matched the first 1% of wages contributed
and 50% of the next 4% of wages contributed. All contributions were remitted to
the plans' respective trustees, and benefits provided were paid from accumulated
funds of the trusts.

Contributions to the defined contribution pension plan equaled 4% of eligible
compensation in 2000 and 1999. Related expense allocated to the Company for
these years was $4.9 million and $3.2 million, respectively. Contributions to
the profit sharing plans varied based on the Company's performance. Related
expense incurred by the Company for these plans was $3.1 million and $4.8
million in 2000 and 1999, respectively. Company contributions to the 401(k) plan
were $2.3 million and $1.5 million in 2000 and 1999, respectively.

Profit sharing and defined contribution expenses were recorded by the Company
based on system generated payroll reports detailing the eligible wages on which
the contribution is based. The expense was determined based on Deluxe's
contribution


                                       50
<PAGE>
percentage for the plan year multiplied by the applicable wages. During 2000 and
1999, the allocation for 401(k) expense was based on a fixed percentage of the
Company's salaries and wages and varied by business segment.

The Company has also established a deferred compensation plan that permits
eligible employees to defer base salary, annual cash incentive compensation
and/or sales incentive compensation in accordance with the terms of the plan.
The amount of compensation to be deferred is based on elections made by each
participant. The amounts of base salary, annual cash incentive compensation and
sales incentive compensation deferred by a participant is credited with earnings
and investment gains and losses by assuming that the amount deferred was
invested in one or more investment options selected by the participant. The
Company will also credit certain amounts specified in the plan related to the
401(k) plan to participants' accounts. The plan provides that the Company may
make additional contributions to the participants' accounts at its sole
discretion. No such supplemental contributions have been made.

NOTE 9: POST-RETIREMENT BENEFITS: Prior to the Spin-Off, the Company provided
certain health care benefits for a portion of its retirees. Although the plan
was combined with the Deluxe Corporation Post-Retirement Health Care Plan (the
Deluxe plan), the actuarial valuation for the Company's plan was calculated
separately from the rest of the Deluxe plan.

The Company terminated this plan as of the date of the Spin-Off (see Note 1).
Employees and retirees who were eligible for medical benefits as of the Spin-Off
will continue to receive this benefit; however, the obligation to provide this
benefit was assumed by Deluxe. In connection with the termination of this plan,
the Company recognized a gain of $0.6 million relating to the termination of
retiree medical coverage for those not eligible for benefits as of the Spin-Off
date. Net post-retirement benefit cost for the years ended December 31, 2000 and
1999 amounted to $0.2 million and $0.2 million, respectively.

NOTE 10: LEASE AND DEBT COMMITMENTS: Long-term debt was as follows:

<TABLE>
<CAPTION>
                                                     December 31,
                                                 -------------------
         (dollars in thousands)                    2001       2000
                                                 --------   --------
<S>                                              <C>        <C>
         Capital leases and other............    $  5,310   $  4,344
         Less amount due within one year.....      (2,781)    (2,100)
                                                 --------   --------
           Total.............................    $  2,529   $  2,244
                                                 ========   ========
</TABLE>

Long-term debt consists principally of capital lease obligations related to
equipment. The capital lease obligations bear interest rates of 6.1% to 35.9%
and are due through the year 2004. Carrying value approximates fair value for
these obligations. Maturities of long-term debt for the five years ending
December 31, 2006, are $2.8 million in 2002, $1.4 million in 2003, $1.1 million
in 2004, $0 in 2005 and $0 in 2006. The net book value of equipment under
capital leases was $3.5 million at December 31, 2001.

The Company has entered into operating leases on certain facilities and
equipment. Future minimum lease payments for non-cancelable operating leases for
each of the years in the five-year period ending December 31, 2006, are $14.5
million in 2002, $11.4 million in 2003, $9.3 million in 2004, $5.6 million in
2005 $4.9 million in 2006 and $18.5 million thereafter. Rental expense was $13.5
million, $17.5 million and $20.7 million in 2001, 2000 and 1999, respectively.

In September 2001, the Company obtained a new revolving credit facility in the
amount of $20.0 million to replace a facility that was maturing. The lender
reissued an irrevocable standby letter of credit in the amount of $4.0 million
to guarantee the Company's performance under a government services contract with
the state of New York. In November 2001, the letter of credit was reduced to
$1.0 million and, accordingly, the Company's borrowing capacity under the new
facility was increased from $16.0 million to $19.0 million. This letter of
credit had originally been issued under the prior credit facility. The Company
did not borrow any funds under this facility through December 31, 2001. Loans
under this facility will bear interest at the applicable prime rate or the LIBOR
rate plus a margin determined by reference to the Company's leverage ratio, as
defined in the loan documents. The facility is guaranteed by certain of the
Company's subsidiaries and requires the Company to comply with certain financial
and non-financial covenants. The Company is currently in compliance with all of
these requirements. This facility has a term of one year.

On December 29, 2000, the Company obtained a $15.0 million revolving credit
facility with a term of nine months. The Company did not borrow any funds under
this facility through its maturity in September 2001.

The Company's India operations had a $10.0 million credit facility, denominated
in Indian rupees, available at the lender's prime interest rate. Borrowings
under this facility were due on demand and guaranteed by the Company. In March
2001, the Company repaid the outstanding balance of this facility and $8.5
million of a $10.0 million time deposit account maintained by the Company to
support its guaranty was returned to the Company. The Company subsequently
requested that the amount available for borrowing under the facility be reduced
to $1.5 million. The Company now uses the facility primarily for the purpose of


                                       51
<PAGE>
securing letters of credit issued in the ordinary course of business. At
December 31, 2001, the aggregate value of outstanding letters of credit amounted
to $1.3 million. This facility matures on September 30, 2002. The average amount
drawn on this credit facility during the first quarter of 2001 was $5.3 million
at a weighted average interest rate of 15.5%. The Company did not borrow against
this credit facility during the remainder of 2001. As of December 31, 2000, $5.3
million was outstanding at an interest rate of 15.4%. The average amount drawn
on this line during 2000 was $4.5 million at a weighted average interest rate of
15.4%. The average amount drawn down on this line during 1999 was $2.7 million
at a weighted average interest rate of 15.8%.

NOTE 11: BUSINESS SEGMENT INFORMATION: The Company has organized its business
units into two operating segments based on the nature of each segment's
customers. These segments are payment systems and services and government
services. The payment systems and services segment provides the financial
services and retail industries with a comprehensive suite of transaction
processing and risk management and decision support products as well as
professional services including information technology consulting, software
development and business process outsourcing services. The government services
segment provides online EBT services under entitlement programs on behalf of
state and local governments and Medicaid eligibility verification services.

The Company's segments operate primarily in the United States. The payment
systems and services segment also has international operations. Concord EFS
accounted for approximately 10.9% of the Company's total net revenue during the
year ended December 31, 2001 and Deluxe accounted for 14.2% of the Company's
total net revenue during the year ended December 31, 2000.

The accounting policies of the segments are the same as those described in Note
2. In evaluating segment performance, management focuses on operating income.
The operating income measurement utilized by management excludes special charges
(e.g., restructuring charges, asset impairment charges, certain one-time charges
that management believes are not reflective of on-going operations, etc.). Net
special items in 2001 resulted from a charge of $0.7 million consisting of a
special charge of $3.2 million related to the closure of the Company's Bothell,
Washington operations and a net special credit of $2.5 million related to a
reduction in the loss contract reserve. The special charge for the Bothell
closure is recorded in the payment systems and services segment. The net special
credit of $2.5 million is recorded in the government services segment. Special
charges in 2000 were $15.8 million, $6.1 million of which was included in the
payment systems and services segment and related primarily to costs incurred in
connection with the Spin-Off from Deluxe and $9.7 million of which was included
in the government services segment and related to a charge taken for loss
contracts. In 1999, special charges of $8.7 million related primarily to loss
contracts within the government services business.

Prior to the acquisition of the remaining 50% interest in eFunds India in 1999
(see Note 4), the results of this business were recorded under the equity method
of accounting. As such, the Company recorded its 50% ownership of the joint
venture's results of operations prior to the acquisition in other expense in the
consolidated statements of operations. To be consistent with management
reporting, the entire results of the joint venture for the pre-acquisition
periods are reflected in the business segment information as if the business had
been a consolidated entity.

Segment information is as follows:

<TABLE>
<CAPTION>
                                                            Year Ended December 31, 2001
                                                       ---------------------------------------
                                                         Payment
                                                       systems and   Government      Total
(dollars in thousands)                                   services     services    Consolidated
                                                       -----------   ----------   ------------
<S>                                                    <C>           <C>          <C>
Total net revenue..................................     $ 468,736     $ 44,901     $  513,637
Gross margin excluding net special items...........       186,675       17,573        204,248
Operating income excluding net special items.......        42,500       14,277         56,777
Net special items..................................        (3,200)       2,500           (700)
Gross margin including net special items...........       186,675       20,073        206,748
Operating income including net special items.......        39,300       16,777         56,077
Depreciation and amortization expense..............        39,952           --         39,952
Segment assets.....................................       421,060       20,244        441,304
Capital purchases..................................        30,902           --         30,902
</TABLE>


                                       52
<PAGE>
<TABLE>
<CAPTION>
                                                              Year Ended December 31, 2000
                                                         -----------------------------------------
                                                           Payment
                                                         systems and     Government      Total
      (dollars in thousands)                               services       services    Consolidated
                                                         -----------    -----------   ------------
<S>                                                      <C>            <C>           <C>
      Net revenue from unaffiliated external customers   $   314,278    $    44,332   $    358,610
      Net revenue from Deluxe .........................       59,284             --         59,284
        Total net revenue .............................      373,562         44,332        417,894
      Gross margin excluding special charges ..........      151,170         14,462        165,632
      Operating income excluding special charges ......       16,059          9,594         25,653
      Special charges .................................       (6,077)        (9,700)       (15,777)
      Gross margin including special charges ..........      151,170          4,762        155,932
      Operating income (loss) including special charges        9,982           (106)         9,876
      Depreciation and amortization expense ...........       31,069             --         31,069
      Segment assets ..................................      366,190         22,397        388,587
      Capital purchases ...............................       41,893             --         41,893
</TABLE>

<TABLE>
<CAPTION>
                                                                Year Ended December 31, 1999
                                                         -----------------------------------------
                                                           Payment
                                                         systems and     Government      Total
      (dollars in thousands)                               services       services    Consolidated
                                                         -----------    -----------   ------------
<S>                                                      <C>            <C>           <C>
      Net revenue from unaffiliated external customers.  $   248,630    $    48,277   $    296,907
      Net revenue from Deluxe..........................        9,758             --          9,758
        Total net revenue..............................      258,388         48,277        306,665
      Gross margin excluding special charges...........      108,757          9,478        118,235
      Operating income excluding special charges.......        7,033          3,454         10,487
      Special charges..................................       (2,713)       (10,096)       (12,809)
      Gross margin including special charges...........      108,757            778        109,535
      Operating income (loss) including special charges        4,320         (6,642)        (2,322)
      Depreciation and amortization expense............       22,644             --         22,644
      Segment assets...................................      246,861         34,410        281,271
      Capital purchases................................       37,441            929         38,370
</TABLE>

A summary of the Company's revenue by segment and product line follows:

<TABLE>
<CAPTION>
                                           Year Ended December 31, 2001
                                           ----------------------------
                                         Payment
                                       systems and   Government
(dollars in thousands)                   services     services     Total
                                         --------     --------    --------
<S>                                    <C>            <C>         <C>
Transaction processing .............     $188,152     $ 44,901    $233,053
Risk management and decision support      142,034           --     142,034
Professional services ..............      138,550           --     138,550
                                         --------     --------    --------
Total net revenue ..................     $468,736     $ 44,901    $513,637
                                         ========     ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                           Year Ended December 31, 2000
                                           ----------------------------
                                         Payment
                                       systems and   Government
(dollars in thousands)                   services     services     Total
                                         --------     --------    --------
<S>                                    <C>           <C>          <C>
Transaction processing..............     $129,812     $ 44,332    $174,144
Risk management and decision support      137,701           --     137,701
Professional services...............      106,049           --     106,049
                                          -------     --------    --------
Total net revenue...................     $373,562     $ 44,332    $417,894
                                         ========     ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                           Year Ended December 31, 1999
                                           ----------------------------
                                         Payment
                                       systems and   Government
(dollars in thousands)                   services     services     Total
                                         --------     --------    --------
<S>                                    <C>           <C>          <C>
Transaction processing..............     $101,429     $ 48,278    $149,707
Risk management and decision support      107,897           --     107,897
Professional services...............       49,061           --      49,061
                                         --------     --------    --------
Total net revenue...................     $258,387     $ 48,278    $306,665
                                         ========     ========    ========
</TABLE>


                                       53
<PAGE>
Segment information reconciles to consolidated amounts as follows:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                 ------------------------------------
(dollars in thousands)                                              2001         2000         1999
                                                                 ----------   ----------   ----------
<S>                                                              <C>          <C>          <C>
Total net revenue:
  Total segment net revenue ................................     $  513,637   $  417,894   $  306,665
  Professional services pre-acquisition elimination ........             --           --       (4,325)
                                                                 ----------   ----------   ----------
    Total consolidated net revenue .........................     $  513,637   $  417,894   $  302,340
                                                                 ==========   ==========   ==========

Operating income (loss) including net special items:
  Total segment operating loss .............................     $   56,077   $    9,876   $   (2,322)
  Professional services pre-acquisition elimination ........             --           --        1,234
                                                                 ----------   ----------   ----------
    Total consolidated operating income (loss) .............     $   56,077   $    9,876   $   (1,088)
                                                                 ==========   ==========   ==========

Depreciation and amortization expense:
  Total segment depreciation and amortization expense ......     $   39,952   $   31,069   $   22,644
  Professional services pre-acquisition elimination ........             --           --         (143)
                                                                 ----------   ----------   ----------
    Total consolidated depreciation and amortization expense     $   39,952   $   31,069   $   22,501
                                                                 ==========   ==========   ==========

Total assets:
 Total segment assets ......................................     $  441,304   $  388,587   $  281,271
  Income tax receivable and long-term deferred tax asset
    not allocated to segments ..............................             --           --        8,658
                                                                 ----------   ----------   ----------
    Total consolidated assets ..............................     $  441,304   $  388,587   $  289,929
                                                                 ==========   ==========   ==========

Capital purchases:
  Total segment capital purchases ..........................     $   30,902   $   41,893   $   38,370
  Professional services pre-acquisition elimination ........             --           --         (145)
                                                                 ----------   ----------   ----------
    Total consolidated capital purchases ...................     $   30,902   $   41,893   $   38,225
                                                                 ==========   ==========   ==========
</TABLE>

Revenue is attributed to geographic areas based on the location of the assets
producing the revenue. The Company's operations by geographic area are as
follows:

<TABLE>
<CAPTION>
                                                   Total Net Revenue            Property and Equipment
                                                Year Ended December 31,              December 31,
                                         ------------------------------------   ----------------------
(dollars in thousands)                      2001         2000         1999         2001        2000
                                         ----------   ----------   ----------   ----------  ----------
<S>                                      <C>          <C>          <C>          <C>         <C>
United States ......................     $  473,250   $  392,139   $  281,933   $   64,687  $   69,806
United Kingdom .....................         15,164       16,219       17,468        1,736       1,849
India ..............................         23,075        9,536        2,939        8,950       5,673
Other foreign countries ............          2,148           --           --          265          27
                                         ----------   ----------   ----------   ----------  ----------
  Total consolidated ...............     $  513,637   $  417,894   $  302,340   $   75,638  $   77,355
                                         ==========   ==========   ==========   ==========  ==========
</TABLE>

NOTE 12: LEGAL PROCEEDINGS: The Company is party to various legal actions
arising in the ordinary course of business. In the opinion of management, the
final disposition of these matters will not have a material adverse effect on
the Company's financial position, results of operations, or cash flows.

On March 8, 2002, the Company received a letter from a Staff Accountant at the
Central Regional Office of the Securities and Exchange Commission (the "SEC")
stating that the SEC is conducting an inquiry of the Company and requesting the
Company's voluntary assistance in connection with the provision of certain
documents relating to the Company's 2001 financial results and certain
transactions between the Company and ACI, among other things. The letter from
the SEC states that the inquiry is non-public and that it should not be
construed as an indication that the SEC believes any violation of law has
occurred. The Company intends to cooperate fully with the SEC in resolving this
matter. The Company may, however, be the subject of additional inquiries or
become subject to a fine or other liabilities.

During 1997, a judgment was entered against the Company in the U.S. District
Court for the Western District of Pennsylvania. The case was brought against the
Company by Mellon Bank (Mellon) in connection with a potential bid to provide
electronic benefit transfer services for the Southern Alliance of States. In
January 1999, the United States Court of Appeals for the Third Circuit affirmed
the judgment of the district court and the Company paid $32.2 million to Mellon
in February 1999. The portion of the reserve established by the Company in 1997
and remaining after the payment of this judgment ($2.1 million) was reversed and
is reflected in legal proceedings in the 1999 consolidated statement of
operations.


                                       54
<PAGE>
NOTE 13: COMMITMENTS AND CONTINGENCIES: In connection with the Company's EBT and
collection activities, the Company posts surety bonds with state agencies
guaranteeing its performance of certain obligations related to contracts or
state requirements. The aggregate amount of such bonds outstanding at December
31, 2001 was $7.8 million.

An Indian bank has issued an advance guarantee on behalf of the Company to
secure its performance under a customer contract. The guarantee is secured by a
time deposit of $0.9 million, which is refundable in March 2002.

The Company operates a call center in Mumbai, India under a customer contract.
The customer is entitled to acquire either a 49% or 100% ownership interest in
the call center operations on or after the earlier of the date the customer has
acquired a 49% interest or the end of the third year of the agreement, unless
extended. The price at which such ownership interest may be acquired by the
customer is to be based on the mutual agreement of the parties or an independent
valuation. The call center operation generated revenue of $16.5 million in 2001.

NOTE 14: SUBSEQUENT EVENT: On January 31, 2002, the Company purchased
substantially all the U.S. ATM-related assets of Hanco Systems, Inc., an
independent ATM deployment and management company. The purchase price paid by
the Company was $11.4 million plus an additional amount for the outstanding
accounts receivable on the date of closing plus the assumption of certain
liabilities. The transaction will be accounted for as a business combination
under SFAS No. 141.


                                       55
<PAGE>
                               EFUNDS CORPORATION
                 SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  2001 Quarters Ended,(1)
                                                     --------------------------------------------------
(dollars in thousands except per share amounts)      March 31      June 30   September 30   December 31
                                                     --------     --------   ------------   -----------
<S>                                                  <C>          <C>        <C>            <C>
Net revenue .......................................  $124,498     $126,057      132,978       $130,104
Cost of revenue ...................................    79,650       77,532       74,046(2)      75,661
Net income ........................................     4,083        7,738       13,645         11,826
Per share of common stock:
  Net income - basic ..............................  $   0.09     $   0.17     $   0.30       $   0.26
  Net income - diluted ............................  $   0.09     $   0.16     $   0.28       $   0.25
</TABLE>

(1)   The sum of quarterly earnings per share may not equal annual earnings per
      share, due to rounding.

(2)   Includes a net credit of $2.5 million to reduce the reserve for additional
      expected future losses on existing contracts of the government services
      segment.

<TABLE>
<CAPTION>
                                                                   2000 Quarters Ended,(1)
                                                     ---------------------------------------------------
(dollars in thousands except per share amounts)      March 31     June 30     September 30   December 31
                                                     --------     --------    ------------   -----------
<S>                                                  <C>          <C>         <C>            <C>
Net revenue........................................  $100,255     $100,970      $ 104,003     $ 112,666
Cost of revenue....................................    58,757       69,139(2)      63,475        70,591
Net income (loss)..................................     1,216       (4,566)         3,887         4,101
Per share of common stock:
  Net income (loss) - basic and diluted............  $   0.03     $  (0.11)     $    0.09     $    0.09
</TABLE>

(1)   The sum of quarterly earnings per share may not equal annual earnings per
      share, due to rounding.

(2)   Includes a charge of $9.7 million to reserve for additional expected
      future losses on existing contracts of the government services segment.


                                       56
<PAGE>
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURES

      None.


                                       57
<PAGE>
                                    PART III

ITEMS 10, 11, 12 AND 13.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
                           EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
                           BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
                           RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company's proxy statement, which will be filed with the SEC on or
before April 30, 2002, is incorporated by reference, other than the sections
entitled "Compensation Committee Report on Executive Compensation" and "Total
Stockholders Return

                                     PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)   The following financial statements, schedules and independent
            auditors' report and consent are filed with or incorporated by
            reference in this report:

<TABLE>
<CAPTION>
            Financial Statements                                                             Page in This Report
            --------------------                                                             -------------------
<S>                                                                                          <C>
            Independent Auditors' Report...................................................          31

            Consolidated Balance Sheets at December 31, 2001 and 2000......................          32

            Consolidated Statements of Operations for each of the three years in the
             period ended December 31, 2001................................................          33

            Consolidated Statements of Comprehensive Income (loss) for each of the
             three years in the period ended December 31, 2001.............................          34

            Consolidated Statements of Stockholders' Equity................................          35

            Consolidated Statements of Cash Flows for each of the three years in the
             period ended December 31, 2001................................................          36

            Notes to Consolidated Financial Statements.....................................          37-55

            Supplemental Financial Information (Unaudited):
             Summarized Quarterly Financial Data...........................................          56

            Independent Auditors' Consent .................................................          F-1

            Schedule re: Valuation and Qualifying Accounts.................................          F-2
</TABLE>

Schedules other than those listed above are not required or are not applicable,
or the required information is shown in the consolidated financial statements or
notes.

      (b)   Reports on Form 8-K

            The Company filed a report on Form 8-K/A on November 13, 2001
related to its acquisition of ACI in October 2001. The report on Form 8-K/A
contained the following financial statements:

            Unaudited Consolidated Balance Sheets of ACI and Subsidiary at June
            30, 2001 and 2000

            Unaudited Consolidated Statements on Income of ACI and Subsidiary
            for the Six-Month periods ended June 30, 2001 and 2000

            Unaudited Consolidated Cash Flows of ACI and Subsidiary for the
            Six-Month periods ended June 30, 2001 and 2000


                                       58
<PAGE>
            Audited Consolidated Balance Sheet of ACI and Subsidiary at December
            31, 2000

            Audited Consolidated Statement of Members' Equity of ACI and
            Subsidiary for the period March 1, 2000 (Date of Formation) through
            December 31, 2000

            Audited Consolidated Statement of Cash Flows of ACI and Subsidiary
            for the period March 1, 2000 (Date of Formation) through December
            31, 2000

            Audited Consolidated Balance Sheet of Access Cash International,
            Inc. ("ACI1") and Subsidiary at December 31, 1999

            Audited Consolidated Statement of Income of ACI1 and Subsidiary for
            the Year Ended December 31, 1999

            Audited Consolidated Statement of Cash Flows of ACI1 and Subsidiary
            for the Year Ended December 31, 1999

            Unaudited Pro Forma Consolidated Balance Sheet of the Company and
            Subsidiaries at June 30, 2001

            Unaudited Pro Forma Consolidated Statement of Operations of the
            Company and Subsidiaries for the Year Ended December 31, 2000 and
            the Six-Months ended June 30, 2001

The following exhibits are filed as part of or are incorporated in this report
by reference:

<TABLE>
<CAPTION>
EXHIBIT NUMBER                                  DESCRIPTION                                            METHOD OF FILING
<S>                <C>                                                                                 <C>
2.1                Interest Purchase Agreement, dated as of August 31, 2001, by and between                    *
                   the Company and ATM Holding, Inc. (incorporated by reference to Exhibit
                   2.1 to the Current Report on Form 8-K filed by the Company with the
                   Securities and Exchange Commission (the "Commission") on October 25, 2001)

3.1                Amended and Restated Certificate of Incorporation (incorporated by                          *
                   reference to Exhibit 3.1 to the Registration Statement on Form S-1 (the
                   "S-1") filed by the Company with Commission on April 4, 2000, Registration
                   No. 333-33992)

3.2                Bylaws (incorporated by reference to Exhibit 3.2 to the S-1)                                *

4.1                Form of common stock certificate (incorporated by reference to Exhibit 4.1                  *
                   to Amendment No. 1 to the S-1 filed by the Company with the Commission on
                   May 15, 2000 ("Amendment No. 1"), Registration No. 333-33992)

4.2                Form of Rights Agreement by and between the Company and Rights Agent,                       *
                   (incorporated by reference to Exhibit 4.2 to Amendment No. 1)

4.3                Certificate of Designations of Series A Participating Preferred Stock                       *
                   (incorporated by reference to Exhibit 4.3 to the Company's Quarterly
                   Report on Form 10-Q for the quarter ended June 30, 2000 (the "June 2000
                   10-Q))

10.1               Assignment and Assumption Agreement, dated as of March 31, 2000, by and                     *
                   between the Company and Deluxe Corporation ("Deluxe") (incorporated by
                   reference to Exhibit 10.1 to the S-1)

10.2               Third Party Indemnification Agreement, dated as of May 1, 2000, by and                      *
                   between the Company and Deluxe (incorporated by reference to Exhibit 10.2
                   to Amendment No. 4 ("Amendment No. 4") to the S-1 filed by the Company
                   with the Commission on June 23, 2000 (registration No. 333-33992)

10.4               Tax Sharing Agreement, dated as of April 1, 2000, by and between the                        *
                   Company and Deluxe (incorporated by reference to Exhibit 10.3 to
</TABLE>


                                       59
<PAGE>
<TABLE>
<S>                <C>                                                                                         <C>
                   Amendment No. 1)

10.5               Sublease, dated as of May 15, 2000, by and between the Company and Deluxe                   *
                   Financial Services, Inc. ("DFSI") for property located in Shoreview,
                   Minnesota (incorporated by reference to Exhibit 10.6 to Amendment No. 1)

10.6               Lease, dated as of May 15, 2000, by and between the Company and DFSI for                    *
                   property located in Phoenix, Arizona (incorporated by reference to Exhibit
                   10.7 to Amendment No. 1)

10.7               Purchase Agreement, dated as of April 3, 2000, by and between the Company                   *
                   and DFSI for property located in Phoenix, Arizona (incorporated by
                   reference to Exhibit 10.7 to Amendment No. 1)

10.8               Professional Services Agreement, dated as of April 1, 2000, by and between                  *
                   the Company and Deluxe (incorporated by reference to Exhibit 10.10 to
                   Amendment No. 1)

10.9               ONE Application Development and Support Agreement, dated as of January 1,                   *
                   2000, by and between the Company and DFSI (incorporated by reference to
                   Exhibit 10.11 to Amendment No. 1)

10.10              Government Services Indemnification Agreement, dated as of May 1, 2000, by                  *
                   and between the Company and Deluxe (incorporated by reference to Exhibit
                   10.17 to Amendment No. 1)

10.11              eFunds Corporation 2000 Stock Incentive Plan, as amended (incorporated by                   *
                   reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for
                   the year ended December 31, 2000 (the "2000 10-K"))

10.12              eFunds Corporation Stock Incentive Plan for Deluxe Conversions Awards, as                   *
                   amended December 8, 2000 (incorporated by reference to Exhibit 4.1 to the
                   Company's Registration Statement on Form S-8 filed on December 8, 2000,
                   Registration No. 333-51536)

10.13              Executive Employment Agreement, dated as of May 9, 2000, by and between                     *
                   the Company and John A. Blanchard III (incorporated by reference to
                   Exhibit 10.21 to Amendment No. 1)

10.14              Cross-Indemnification Agreement, dated June 26, 2000, by and between the                    *
                   Company and Deluxe (incorporated by reference to Exhibit 10.23 to the
                   Company's Quarterly Report on Form 10-Q for the quarter ended June, 30,
                   2000)

10.15              eFunds Corporation Employee Stock Purchase Plan (incorporated by reference                  *
                   to Exhibit 4.1 to the Company's Registration Statement on Form S-8 filed
                   on December 8, 2000, Registration Statement No. 333-51568)

10.16              eFunds Corporation Annual Incentive Plan (incorporated by reference to                      *
                   Exhibit 10.27 to the 2000 10-K)

10.17              eFunds Corporation Deferred Compensation Plan (incorporated by reference                    *
                   to Exhibit 4.1 to the Company's Registration Statement on Form S-8 filed
                   on December 8, 2000, Registration Statement No. 333-51564)

10.18              Change in Control Agreement, dated as of October 19, 2000, between the                      *
                   Company and Paul W. Finch (incorporated by reference to Exhibit 10.4 to
                   the Company's Quarterly Report on Form 10-Q for the quarter ended
                   September 30, 2001)
</TABLE>


                                       60
<PAGE>
<TABLE>
<S>                <C>                                                                                 <C>
10.19              Schedule identifying other Change in Control Agreements omitted pursuant             Filed herewith
                   to Instruction 2 to Item 601 of Regulation S-K

10.20              Letter Agreement, dated as of February 29, 2000, by and between the                         *
                   Company and Dr. Nikhil Sinha (incorporated by reference to Exhibit 10.23
                   to the Registration Statement on Form S-4 (the "S-4") filed by the Company
                   with the Commission on August 25, 2000)

10.21              Letter Agreement, dated as of February 7, 2000, by and between the Company                  *
                   and Paul H. Bristow (incorporated by reference to Exhibit 10.24 to the S-4)

10.22              Letter Agreement, dated as of February 14, 2000, by and between the                         *
                   Company and Steven F. Coleman (incorporated by reference to Exhibit 10.24
                   to the S-4)

10.23              Amendment No. 1, dated as of October 19, 2000, to the Executive Employment                  *
                   Agreement, dated May 9, 2000, by and between the Company and John A.
                   Blanchard III (incorporated by reference to Exhibit 10.36 to the 2000 10-K)

10.24              Letter Agreement, dated as of February 14, 2000, by and between the                         *
                   Company and Colleen McKeown Adstedt (incorporated by reference to Exhibit
                   10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
                   March 31, 2001)

10.25              Non-Employee Director Deferred Compensation Plan (incorporated by                           *
                   reference to Exhibit 10.38 to the 2000 10-K)

10.26              Description of Compensation program for Non-Employee Directors                              *
                   (incorporated by reference to Exhibit 10.39 to the 2000 10-K)

10.27              Amendment, dated as of December 2000, to Tax Sharing Agreement, dated                       *
                   effective April 1, 2000, by and between Deluxe and the Company
                   (incorporated by reference to Exhibit 10.42 to the 2000 10-K)

10.28              Letter Agreement, dated November 19, 2001, extending the ONE Application             Filed herewith
                   Development and Support Agreement, dated as of January 1, 2000, between
                   Deluxe and the Company

10.29              Transition Assistance Agreement, dated as of December 7, 2001, by and                Filed herewith
                   between the Company and Steven F. Coleman

10.30              Transition Assistance Agreement, dated as of December 28, 2001, by and               Filed herewith
                   between the Company and Paul W. Finch

10.31              Schedule identifying additional Transition Assistance Agreement omitted              Filed herewith
                   pursuant to Instruction 2 to Item 601 of Regulation S-K

10.32              Credit Agreement, dated as of September 27, 2001, by and between the                 Filed herewith
                   Company and Wells Fargo Bank, National Association

10.33              Amendment No. 1 to eFunds Deferred Compensation Plan Trust                           Filed herewith

21.1               Subsidiaries of the Company                                                          Filed herewith

23.1               Consent of Deloitte & Touche L.L.P. (incorporated by reference to page F-1                 *
                   of this Annual Report on Form 10-K)

23.2               Consent of Arthur Anderson & Associates                                              Filed herewith

24                 Power of Attorney                                                                    Filed herewith
</TABLE>


                                       61
<PAGE>

<TABLE>
<S>                <C>                                                                                 <C>
99.1               Risk Factors and Cautionary Statements                                               Filed herewith

99.2               Independent Auditors' Report of Arthur Anderson & Associates                         Filed herewith
</TABLE>


----------
*  Incorporated by reference


                                       62
<PAGE>
      Note to recipients of Form 10-K: Copies of exhibits will be furnished upon
written request and payment of the Company's reasonable expenses ($.25 per page)
in furnishing such copies.

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Scottsdale, Arizona.

                                          eFUNDS CORPORATION


      Date:  March 29, 2002               By: /S/ J A BLANCHARD III
                                              ----------------------------------
                                              John A. Blanchard III
                                              Chairman of the Board of Directors
                                              and Chief Executive Officer


      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on March 29, 2002.


<TABLE>
<CAPTION>
SIGNATURE                                           TITLE
---------                                           -----
<S>                                                 <C>
By:             /s/ J A Blanchard III               Chairman of the Board and Chief Executive Officer
     -------------------------------------------    (Principal Executive Officer)
                John A. Blanchard III

By:               /s/ P H Bristow                   Executive Vice President and Chief Financial Officer
     -------------------------------------------    (Principal Financial and Accounting Officer)
                  Paul H. Bristow

By:                      *                          Director
     -------------------------------------------
                  Hatim A. Tyabji

By:                      *                          Director
     -------------------------------------------
                  Jack Robinson

By:                      *                          Director
     -------------------------------------------
             John J. (Jack) Boyle III

By:                      *                          Director
     -------------------------------------------
                  Janet M. Clarke

By:                      *                          Director
     -------------------------------------------
                 Sheila A. Penrose


*By:           /s/ Steven F. Coleman
     -------------------------------------------
                 Steven F. Coleman
                 Attorney-in-Fact
</TABLE>


                                       63
<PAGE>
                    INDEPENDENT AUDITORS' CONSENT AND REPORT

The Board of Directors and Stockholders of:
eFunds Corporation
Scottsdale, Arizona

We consent to the incorporation by reference in Registration Statement Nos.
333-51568, 333-51564, 333-51536, and 333-44830 of eFunds Corporation on Form S-8
of our report dated February 25, 2002 (March 8, 2002, as to the second paragraph
of Note 12), included in this Annual Report on Form 10-K of eFunds Corporation
for the year ended December 31, 2001.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of eFunds Corporation, attached
as page F-2 to this Annual Report on Form 10-K. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.




/s/ Deloitte & Touche LLP
Phoenix, Arizona
March 29, 2002


                                       F-1
<PAGE>
                       eFUNDS CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
        (in thousands)                                              Additions
                                                            -------------------------
                                               Balance      Charged to     Charged to                    Balance
                                             at beginning   costs and        other                      at end of
         Description                  Year    of period      expenses       accounts    Deductions(1)     period
-----------------------------------   ----   ------------   ----------     ----------   -------------   ---------
<S>                                   <C>    <C>            <C>            <C>          <C>             <C>
Allowance for Doubtful Accounts       2001       5,296         1,755           --          (2,260)         4,791
                                      2000       4,513         3,278           --          (2,495)         5,296
                                      1999       2,122         2,918           --            (527)         4,513
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Deductions from the reserve represent write-offs and collections of amounts
for which specific reserves had been previously established


                                       F-2
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                      DESCRIPTION OF EXHIBIT                                         PAGE NUMBER
-------                                     ----------------------                                         -----------
<S>       <C>                                                                                              <C>

10.19     Schedule identifying other Change in Control Agreements omitted pursuant to Instruction 2 to
          Item 601 of Regulation S-K

10.28     Letter Agreement, dated November 19, 2001, extending the ONE Application Development and
          Support Agreement, dated as of January 1, 2000, between Deluxe and the Company

10.29     Transition Assistance Agreement, dated as of December 7, 2001, by and between the Company and
          Steven F. Coleman

10.30     Transition Assistance Agreement, dated as of December 28, 2001, by and between the Company
          and Paul W. Finch

10.31     Schedule identifying additional Transition Assistance Agreement omitted pursuant to
          Instruction 2 to Item 601 of Regulation S-K

10.32     Credit Agreement, dated as of September 27, 2001, by and between the Company and Wells Fargo
          Bank, National Association

10.33     Amendment No. 1 to eFunds Corporation Deferred Compensation Plan Trust

21.1      Subsidiaries of the Company

23.2      Consent of Arthur Anderson & Associates

24        Power of Attorney

99.1      Risk Factors and Cautionary Statements

99.2      Independent Auditors Report of Arthur Anderson & Associates
</TABLE>