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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q



(Mark One)


|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|--- |  | ------------------------------------------------------------------
|    |  | EXCHANGE ACT OF 1934                                              

For the quarterly period ended March 31, 2003

OR

|     |  |                                                                    
|---- |  | -------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|     |  | EXCHANGE ACT OF 1934                                               

For the transition period from           to
Commission File Number 0-30791

eFunds Corporation

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 39-1506286                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

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

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

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.
Yes [X] No [   ]

The number of shares outstanding of the registrants common stock, par value $.01 per share, at May 7, 2003 was 46,749,858.



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TABLE OF CONTENTS



|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|CERTIFICATION                
|Index to Exhibits            
|EX-10.1                      
|EX-10.2                      
|EX-10.3                      
|EX-10.4                      
|EX-10.5                      
|EX-10.6                      
|EX-10.7                      
|EX-10.8                      
|EX-10.9                      
|EX-10.10                     
|EX-10.11                     
|EX-99.1                      
|EX-99.2                      



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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |         |         |         | 
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                |                                                                                                                                                               |                           |                                            |         | (Unaudited) |         |              |         |        
|                                                |                                                                                                                                                               |                           |                                            |         | March 31,   |         | December 31,
|(dollars in thousands)                          |                                                                                                                                                               | 2003                      |                                            | 2002   
|                                                |                                                                                                                                                               |                           |                                            |        
|Current assets:                                 |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                | Cash and cash equivalents                                                                                                                                     |                           | $                                          | 137,636 |             |         | $            | 119,487 |        
|                                                | Deposits subject to compensating balance arrangement                                                                                                          |                           |                                            | 152     |             |         |              | 1,133   |        
|                                                | Restricted custodial cash                                                                                                                                     |                           |                                            | 2,667   |             |         |              | 3,046   |        
|                                                | Accounts receivable  net                                                                                                                                     |                           |                                            | 71,281  |             |         |              | 59,311  |        
|                                                | Deferred income taxes                                                                                                                                         |                           |                                            | 11,230  |             |         |              | 11,580  |        
|                                                | Prepaid expenses and other current assets                                                                                                                     |                           |                                            | 17,589  |             |         |              | 17,865  |        
|                                                | Assets held for sale                                                                                                                                          |                           |                                            | 1,372   |             |         |              | 13,310  |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               | Total current assets      |                                            |         | 241,927     |         |              |         | 225,732 |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|Property and equipment  net                    |                                                                                                                                                               |                           | 49,189                                     |         |             |         | 50,764       |        
|Long-term investments                           |                                                                                                                                                               |                           | 3,676                                      |         |             |         | 3,758        |        
|Intangibles:                                    |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                | Goodwill                                                                                                                                                      |                           |                                            | 113,525 |             |         |              | 114,036 |        
|                                                | Other intangible assets  net                                                                                                                                 |                           |                                            | 58,827  |             |         |              | 61,836  |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               |                           | Total intangibles  net                    |         |             | 172,352 |              |         |         | 175,872 | 
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                | Other non-current assets                                                                                                                                      |                           |                                            | 3,050   |             |         |              | 3,292   |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               | Total non-current assets  |                                            |         | 228,267     |         |              |         | 233,686 |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               |                           | Total assets                               |         | $           | 470,194 |              |         | $       | 459,418 | 
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|Current liabilities:                            |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                | Accounts payable                                                                                                                                              |                           | $                                          | 28,601  |             |         | $            | 32,598  |        
|                                                | Accrued liabilities                                                                                                                                           |                           |                                            | 36,882  |             |         |              | 30,937  |        
|                                                | Accrued contract losses                                                                                                                                       |                           |                                            | 6,575   |             |         |              | 7,578   |        
|                                                | Deferred revenue                                                                                                                                              |                           |                                            | 10,883  |             |         |              | 3,423   |        
|                                                | Long-term debt due within one year                                                                                                                            |                           |                                            | 1,138   |             |         |              | 1,401   |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               | Total current liabilities |                                            |         | 84,079      |         |              |         | 75,937  |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|Long-term debt                                  |                                                                                                                                                               |                           | 1,091                                      |         |             |         | 1,338        |        
|Deferred income taxes                           |                                                                                                                                                               |                           | 9,211                                      |         |             |         | 9,202        |        
|Other long-term liabilities                     |                                                                                                                                                               |                           | 7,118                                      |         |             |         | 9,421        |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                | Total liabilities                                                                                                                                             |                           |                                            | 101,499 |             |         |              | 95,898  |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|Commitments and contingencies (Notes 10 and 11) |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|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: 46,749,608 shares at March 31, 2003 and 46,702,496 at
December 31, 2002) |                           |                                            | 468     |             |         |              | 467     |        
|                                                | Additional paid-in capital                                                                                                                                    |                           |                                            | 411,725 |             |         |              | 411,451 |        
|                                                | Accumulated deficit                                                                                                                                           |                           |                                            | (41,863 | )           |         |              | (46,495 | )      
|                                                | Accumulated other comprehensive loss                                                                                                                          |                           |                                            | (1,635  | )           |         |              | (1,903  | )      
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               | Stockholders equity      |                                            |         | 368,695     |         |              |         | 363,520 |        
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        
|                                                |                                                                                                                                                               |                           | Total liabilities and stockholders equity |         | $           | 470,194 |              |         | $       | 459,418 | 
|                                                |                                                                                                                                                               |                           |                                            |         |             |         |              |        

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                         |                                                                   |                          |         |                              |         |   |         |        |         | 
|---------------------------------------- | ----------------------------------------------------------------- | ------------------------ | ------- | ---------------------------- | ------- | - | ------- | ------ | ------- | 
|                                         |                                                                   |                          |         | Three Months Ended March 31,
|                                         |                                                                   |                          |         |                             
|(in thousands, except per share amounts) |                                                                   | 2003                     |         | 2002                        
|                                         |                                                                   |                          |         |                             
|Net revenue                              |                                                                   | $                        | 130,528 |                              |         | $ | 133,997 |       
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Operating expenses:                      |                                                                   |                          |         |                              |         |   |         |       
|                                         | Processing, communication, and service costs                      |                          |         | 55,706                       |         |   |         | 50,787 |        
|                                         | Employee costs                                                    |                          |         | 46,929                       |         |   |         | 51,018 |        
|                                         | Depreciation and amortization                                     |                          |         | 8,789                        |         |   |         | 9,542  |        
|                                         | Other operating costs                                             |                          |         | 12,527                       |         |   |         | 10,192 |        
|                                         |                                                                   |                          |         |                              |         |   |         |       
|                                         |                                                                   | Total operating expenses |         |                              | 123,951 |   |         |        | 121,539 | 
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Income from operations                   |                                                                   |                          | 6,577   |                              |         |   | 12,458  |       
|Other income- net                        |                                                                   |                          | 244     |                              |         |   | 402     |       
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Income before income taxes               |                                                                   |                          | 6,821   |                              |         |   | 12,860  |       
|Provision for income taxes               |                                                                   |                          | (2,189  | )                            |         |   | (4,334  | )     
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Net income                               |                                                                   | $                        | 4,632   |                              |         | $ | 8,526   |       
|                                         |                                                                   |                          |         |                              |         |   |         |       
|                                         | Weighted average shares outstanding                               |                          |         | 46,703                       |         |   |         | 46,473 |        
|                                         |                                                                   |                          |         |                              |         |   |         |       
|                                         | Weighted average shares and potential dilutive shares outstanding |                          |         | 46,713                       |         |   |         | 47,806 |        
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Net
income per share - basic             |                                                                   | $                        | 0.10    |                              |         | $ | 0.18    |       
|                                         |                                                                   |                          |         |                              |         |   |         |       
|Net
income per share - diluted           |                                                                   | $                        | 0.10    |                              |         | $ | 0.18    |       
|                                         |                                                                   |                          |         |                              |         |   |         |       

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |         |       |        |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------- | ---------------------------- | --------------------------------------------------- | ----- | ------------------ | ------- | ------- | ----- | ------ | ------- | -
|                                                   |                                                                                   |                                             |                              |                                                     |       | Three Months Ended
|                                                   |                                                                                   |                                             |                              |                                                     |       | March 31,         
|                                                   |                                                                                   |                                             |                              |                                                     |       |                   
|(in thousands)                                     |                                                                                   | 2003                                        |                              | 2002                                               
|                                                   |                                                                                   |                                             |                              |                                                    
|Cash flows from operating activities:              |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   | Net income                                                                        |                                             | $                            | 4,632                                               |       |                    | $       | 8,526   |      
|                                                   | Adjustments to reconcile net income to net cash provided by
operating activities: |                                             |                              |                                                     |       |                    |         |         |      
|                                                   |                                                                                   | Depreciation                                |                              |                                                     | 3,686 |                    |         |         | 4,843 |       
|                                                   |                                                                                   | Amortization of intangibles                 |                              |                                                     | 5,103 |                    |         |         | 4,699 |       
|                                                   |                                                                                   | Loss on disposals of property and equipment |                              |                                                     | 255   |                    |         |         | 106   |       
|                                                   |                                                                                   | Deferred income taxes                       |                              |                                                     | 359   |                    |         |         | 248   |       
|                                                   |                                                                                   | Changes in assets and liabilities:          |                              |                                                     |       |                    |         |         |       |       
|                                                   |                                                                                   |                                             | Restricted custodial cash    |                                                     |       | 379                |         |         |       | (2,715 | )      
|                                                   |                                                                                   |                                             | Accounts receivable          |                                                     |       | (11,970            | )       |         |       | 2,301  |        
|                                                   |                                                                                   |                                             | Accounts payable             |                                                     |       | (3,997             | )       |         |       | 4,432  |        
|                                                   |                                                                                   |                                             | Accrued contract losses      |                                                     |       | (1,003             | )       |         |       | (1,208 | )      
|                                                   |                                                                                   |                                             | Deferred revenue             |                                                     |       | 7,460              |         |         |       | 5,626  |        
|                                                   |                                                                                   |                                             | Other assets and liabilities |                                                     |       | 5,912              |         |         |       | (8,966 | )      
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   |                                                                                   |                                             |                              | Net cash provided by operating activities           |       |                    | 10,816  |         |       |        | 17,892  |  
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|Cash flows from investing activities:              |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   | Capital expenditures                                                              |                                             |                              | (4,370                                              | )     |                    |         | (5,372  | )    
|                                                   | Acquisitions                                                                      |                                             |                              |                                                    |       |                    |         | (11,444 | )    
|                                                   | Proceeds from sale of property and equipment                                      |                                             |                              | 11,938                                              |       |                    |         |        |      
|                                                   | Other                                                                             |                                             |                              |                                                    |       |                    |         | 26      |      
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   |                                                                                   |                                             |                              | Net cash provided by (used in) investing activities |       |                    | 7,568   |         |       |        | (16,790 | )
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|Cash flows from financing activities:              |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   | Payments on long-term debt                                                        |                                             |                              | (510                                                | )     |                    |         | (787    | )    
|                                                   | Issuance of common stock                                                          |                                             |                              | 275                                                 |       |                    |         | 2,136   |      
|                                                   |                                                                                   |                                             |                              | Net cash (used in) provided by financing activities |       |                    | (235    | )       |       |        | 1,349   |  
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|Net increase in cash and cash equivalents          |                                                                                   |                                             | 18,149                       |                                                     |       |                    | 2,451   |        
|Cash and cash equivalents at beginning of period   |                                                                                   |                                             | 119,487                      |                                                     |       |                    | 101,871 |        
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|Cash and cash equivalents at end of period         |                                                                                   | $                                           | 137,636                      |                                                     |       | $                  | 104,322 |        
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|Supplemental disclosures of cash flow information: |                                                                                   |                                             |                              |                                                     |       |                    |         |        
|                                                   | Cash paid for income taxes                                                        |                                             | $                            | 941                                                 |       |                    | $       | 1,612   |      
|                                                   |                                                                                   |                                             |                              |                                                     |       |                    |         |        

See Notes to Condensed Consolidated Financial Statements

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eFUNDS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:

eFunds Corporation and its wholly-owned subsidiaries (the Company) provide
transaction processing, risk management and professional services to financial
institutions, retailers, electronic funds transfer networks and government
agencies. The Company has four operating segments: Electronic Payments;
Automated Teller Machine (ATM) Management Services; Decision Support and Risk
Management; and Professional Services. The Electronic Payments segment provides
automated clearinghouse (ACH), electronic funds transfer (EFT) and other
processing services as well as electronic benefit transfer (EBT) services for
government agencies. The ATM Management Services segment provides ATM
deployment, management and branding services. The Decision Support and Risk
Management segment provides risk management based data and other products to
financial institutions, retailers and other businesses that assist in detecting
fraud and assessing the risk of opening a new account or accepting a check. The
Professional Services segment provides EFT software sales, software
applications development, maintenance and installation, and business process
outsourcing services.

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. Previously a wholly-owned subsidiary of Deluxe Corporation (Deluxe), the
Company completed its initial public offering (the IPO) in June 2000, issuing
5.5 million shares of common stock at $13.00 per share for $64.5 million, net
of offering expenses. In December 2000, Deluxe distributed all of its remaining
shares of the Companys common stock to its shareholders through a tax-free
spin-off transaction.

The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, have been prepared
in accordance with accounting principles generally accepted in the United
States of America and are unaudited. All material intercompany accounts and
transactions have been eliminated. These interim statements necessarily rely on
estimates. The results of operations and cash flows for the interim periods
presented are not necessarily indicative of the results of any future period.
In the opinion of management, all adjustments necessary for a fair statement of
results for the interim periods have been made. All such adjustments are of a
normal, recurring nature. The accompanying condensed consolidated financial
statements should be read in conjunction with the Companys 2002 Annual Report
on Form 10-K as filed with the Securities and Exchange Commission. Certain
financial information that is normally included in annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America, but that is not required for interim reporting
purposes, has been condensed or omitted.

NOTE 2  SIGNIFICANT ACCOUNTING POLICIES:

New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
The adoption of SFAS No. 146 did not have a material impact on the Companys
financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45), modifying the recognition and
disclosure requirements of a companys guarantee arrangements. Effective
January 1, 2003, FIN 45 requires a company that enters into or modifies
existing guarantee arrangements to recognize a liability for the fair value of
the obligation undertaken in issuing the guarantee. FIN 45 also requires
disclosure of all guarantees, regardless of when the guarantee originated,
effective December 31, 2002 (See Note 11). The adoption of the accounting
provisions of FIN 45 did not have a material effect on the Companys financial
position or results of operations.

In November 2002, the EITF reached a consensus on EITF Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21
provides guidance on how to account for arrangements that involve the delivery
or performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The Company

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does not
believe that the adoption of EITF Issue No. 00-21 will have a material effect
on its consolidated financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements. Interpretation No. 46 prescribes
how to identify variable interest entities and how an enterprise assesses its
interests in a variable interest entity to decide whether to consolidate that
entity. This interpretation requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if the entities do
not effectively disperse risks among the parties involved. Interpretation No.
46 is effective immediately for variable interest entities created after
January 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. The interpretation applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The Company does not believe the adoption of
Interpretation No. 46 will have a material impact on its financial position or
results of operations.

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. The Company accounts for those plans using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. No
stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provision of SFAS No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.

|                                                                                                                    |                     |      |                    |      |  |   |        |      | 
|------------------------------------------------------------------------------------------------------------------- | ------------------- | ---- | ------------------ | ---- |  | - | ------ | ---- | 
|                                                                                                                    |                     |      | Three Months Ended
|                                                                                                                    |                     |      | March 31,         
|                                                                                                                    |                     |      |                   
|(in thousands, except per share amounts)                                                                            |                     | 2003 |                    | 2002
|                                                                                                                    |                     |      |                    |     
|Net income, as reported                                                                                             |                     | $    | 4,632              |      |  | $ | 8,526  |     
|Total stock-based employee compensation expense
determined under fair value based method for all
awards, net of tax |                     |      | (553               | )    |  |   | (1,771 | )   
|                                                                                                                    |                     |      |                    |      |  |   |        |     
|Pro forma net income                                                                                                |                     | $    | 4,079              |      |  | $ | 6,755  |     
|                                                                                                                    |                     |      |                    |      |  |   |        |     
|Earnings per share:                                                                                                 |                     |      |                    |      |  |   |        |     
|                                                                                                                    | Basic-as reported   |      | $                  | 0.10 |  |   | $      | 0.18 | 
|                                                                                                                    |                     |      |                    |      |  |   |        |     
|                                                                                                                    | Basic-pro forma     |      | $                  | 0.09 |  |   | $      | 0.15 | 
|                                                                                                                    |                     |      |                    |      |  |   |        |     
|                                                                                                                    | Diluted-as reported |      | $                  | 0.10 |  |   | $      | 0.18 | 
|                                                                                                                    |                     |      |                    |      |  |   |        |     
|                                                                                                                    | Diluted-pro forma   |      | $                  | 0.09 |  |   | $      | 0.14 | 
|                                                                                                                    |                     |      |                    |      |  |   |        |     

For purposes of applying SFAS No. 123, the weighted average estimated fair
value of stock options granted during the three months ended March 31, 2003 and
2002 was $3.78 and $7.21, respectively. This value was estimated at the option
grant date using a Black-Scholes option-pricing model with the following
assumptions:

|                        |  |                              |      |         |  |  |      |  
|----------------------- |  | ---------------------------- | ---- | ------- |  |  | ---- | -
|                        |  | Three Months Ended March 31,
|                        |  |                             
|                        |  | 2003                         |      | 2002   
|                        |  |                              |      |        
|Expected volatility     |  |                              | 56.6 | %       |  |  | 57.9 | %
|Expected dividend yield |  |                              | 0.0  | %       |  |  | 0.0  | %
|Risk-free interest rate |  |                              | 2.9  | %       |  |  | 3.2  | %
|Expected life           |  | 5 years                      |      | 5 years

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NOTE 3  INTANGIBLES:

Intangible assets consist primarily of goodwill, capitalized software costs and
acquired contracts. Other intangible assets, both acquired and developed,
subject to amortization were as follows:

|                      |  |              |      |          |  |                |         |     |  |   |          |   |  |   |        | 
|--------------------- |  | ------------ | ---- | -------- |  | -------------- | ------- | --- |  | - | -------- | - |  | - | ------ | 
|                      |  |              |      |          |  | March 31, 2003
|                      |  |              |      |          |  |               
|                      |  | Wtd. Avg.    |      |          |  |                |         |     |  |   |          |   |  |  
|                      |  | Amortization |      | Gross    |  |                |         |     |  |   |          |  
|                      |  | Period       |      | Carrying |  | Accumulated    |         |     |  |  
|(in thousands)        |  | In Years     |      | Amounts  |  | Amortization   |         | Net
|                      |  |              |      |          |  |                |         |    
|Software-internal use |  |              | 3.8  |          |  | $              | 70,389  |     |  | $ | (42,746  | ) |  | $ | 27,643 | 
|Acquired contracts    |  |              | 11.6 |          |  |                | 22,262  |     |  |   | (2,043   | ) |  |   | 20,219 | 
|Other                 |  |              | 4.8  |          |  |                | 74,004  |     |  |   | (63,039  | ) |  |   | 10,965 | 
|                      |  |              |      |          |  |                |         |     |  |   |          |   |  |   |        | 
|                      |  |              |      |          |  | $              | 166,655 |     |  | $ | (107,828 | ) |  | $ | 58,827 | 
|                      |  |              |      |          |  |                |         |     |  |   |          |   |  |   |        | 

|                      |  |              |      |          |  |                   |         |     |  |   |          |   |  |   |        | 
|--------------------- |  | ------------ | ---- | -------- |  | ----------------- | ------- | --- |  | - | -------- | - |  | - | ------ | 
|                      |  |              |      |          |  | December 31, 2002
|                      |  |              |      |          |  |                  
|                      |  | Wtd. Avg.    |      |          |  |                   |         |     |  |   |          |   |  |  
|                      |  | Amortization |      | Gross    |  |                   |         |     |  |   |          |  
|                      |  | Period       |      | Carrying |  | Accumulated       |         |     |  |  
|(in thousands)        |  | In Years     |      | Amounts  |  | Amortization      |         | Net
|                      |  |              |      |          |  |                   |         |    
|Software-internal use |  |              | 3.8  |          |  | $                 | 69,111  |     |  | $ | (39,672  | ) |  | $ | 29,439 | 
|Acquired contracts    |  |              | 11.6 |          |  |                   | 22,262  |     |  |   | (1,455   | ) |  |   | 20,807 | 
|Other                 |  |              | 4.8  |          |  |                   | 73,353  |     |  |   | (61,763  | ) |  |   | 11,590 | 
|                      |  |              |      |          |  |                   |         |     |  |   |          |   |  |   |        | 
|                      |  |              |      |          |  | $                 | 164,726 |     |  | $ | (102,890 | ) |  | $ | 61,836 | 
|                      |  |              |      |          |  |                   |         |     |  |   |          |   |  |   |        | 

For the three month periods ended March 31, 2003 and 2002, amortization expense
for intangible assets was $5.1 million and $4.7 million, respectively. The
estimated future annual amortization expense for intangible assets held at
March 31, 2003 is $19 million, $15 million, $11 million, $6 million and $3
million for the years 2003, 2004, 2005, 2006 and 2007, respectively.

The change in the carrying amount of goodwill for the quarter ended March 31,
2003 is as follows:

|                                |  |            |       |            |  |            |        |              |  |          |       |       |  |   |        |  |  |   |        |  |  |   |         |  
|------------------------------- |  | ---------- | ----- | ---------- |  | ---------- | ------ | ------------ |  | -------- | ----- | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------- | -
|                                |  |            |       |            |  |            |        |              |  | Decision |       |       |  |   |        |  |  |   |        |  |  |  
|                                |  |            |       |            |  | ATM        |        | Support      |  |          |       |       |  |   |        |  |  |   |        | 
|                                |  | Electronic |       | Management |  | And Risk   |        | Professional |  |          |       |       |  |   |        | 
|(in thousands)                  |  | Payments   |       | Services   |  | Management |        | Services     |  | Other    |       | Total
|                                |  |            |       |            |  |            |        |              |  |          |       |      
|Balance as of December 31, 2002 |  | $          | 1,600 |            |  | $          | 75,547 |              |  | $        | 5,724 |       |  | $ | 20,559 |  |  | $ | 10,606 |  |  | $ | 114,036 |  
|Reduction of purchase holdback  |  |            |      |            |  |            | (511   | )            |  |          |      |       |  |   |       |  |  |   |       |  |  |   | (511    | )
|                                |  |            |       |            |  |            |        |              |  |          |       |       |  |   |        |  |  |   |        |  |  |   |         |  
|Balance as of March 31, 2003    |  | $          | 1,600 |            |  | $          | 75,036 |              |  | $        | 5,724 |       |  | $ | 20,559 |  |  | $ | 10,606 |  |  | $ | 113,525 |  
|                                |  |            |       |            |  |            |        |              |  |          |       |       |  |   |        |  |  |   |        |  |  |   |         |  

NOTE 4  RESTRUCTURING AND ASSET IMPAIRMENT CHARGES:

Long-lived assets held for sale

During the third quarter of 2002, the Company initiated a process to sell
certain facilities in Glendale, Wisconsin, and Runcorn, UK. At that time,
pursuant to SFAS No. 144, Accounting for the Impairment of Long-Lived Assets,
the Company recorded a $3.0 million asset write-down to reflect the property
and equipment at Glendale held for sale at its estimated fair value, less
selling costs. During the first quarter of 2003, the Glendale facility was
sold for net proceeds of approximately $12 million. The Company also entered
into an agreement with the buyer for a short-term leaseback. No gain or loss
was recorded on the sale.

Restructuring accruals

The following table summarizes the change in the Companys restructuring
accruals for the three months ended March 31, 2003, including the long-term
portion of approximately $2.9 million at March 31, 2003:

|                                 |  |           |     |           |  |               |       |       |  |   |       |   |  |   |        |  
|-------------------------------- |  | --------- | --- | --------- |  | ------------- | ----- | ----- |  | - | ----- | - |  | - | ------ | -
|                                 |  | Employees |     | Severance |  | Lease-Related |       |       |  |  
|(in thousands, except employees) |  | Affected  |     | Related   |  | Costs & Other |       | Total
|                                 |  |           |     |           |  |               |       |      
|Balance December 31, 2002        |  |           | 142 |           |  | $             | 1,798 |       |  | $ | 5,187 |   |  | $ | 6,985  |  
|Expense provision                |  |           |    |           |  |               |      |       |  |   |      |   |  |   |       |  
|Cash payments                    |  |           | (33 | )         |  |               | (338  | )     |  |   | (793  | ) |  |   | (1,131 | )
|                                 |  |           |     |           |  |               |       |       |  |   |       |   |  |   |        |  
|Balance March 31, 2003           |  |           | 109 |           |  | $             | 1,460 |       |  | $ | 4,394 |   |  | $ | 5,854  |  
|                                 |  |           |     |           |  |               |       |       |  |   |       |   |  |   |        |  

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NOTE 5  ACCRUED CONTRACT LOSSES:

The Companys accrued contract losses pertain to long-term service contracts
for transaction processing in the electronic payments segment.

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

|                                          |  |                    |        |      |  |   |        |  
|----------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                          |  | Three Months Ended
|                                          |  | March 31,         
|                                          |  |                   
|(in thousands)                            |  | 2003               |        | 2002
|                                          |  |                    |        |     
|Beginning balance                         |  | $                  | 7,578  |      |  | $ | 14,777 |  
|Provision for contract losses             |  |                    |       |      |  |   |       |  
|Reversal of provision for contract losses |  |                    |       |      |  |   |       |  
|Charges to reserve                        |  |                    | (1,003 | )    |  |   | (1,208 | )
|                                          |  |                    |        |      |  |   |        |  
|Ending balance                            |  | $                  | 6,575  |      |  | $ | 13,569 |  
|                                          |  |                    |        |      |  |   |        |  

NOTE 6  LONG-TERM DEBT:

Long-term debt was as follows:

|                                |       |      |           |       |              |   |        |       | 
|------------------------------- | ----- | ---- | --------- | ----- | ------------ | - | ------ | ----- | 
|                                |       |      | March 31, |       | December 31,
|(in thousands)                  |       | 2003 |           | 2002 
|                                |       |      |           |      
|Capital leases and other        |       | $    | 2,229     |       |              | $ | 2,739  |      
|Less amount due within one year |       |      | (1,138    | )     |              |   | (1,401 | )    
|                                |       |      |           |       |              |   |        |      
|                                | Total |      | $         | 1,091 |              |   | $      | 1,338 | 
|                                |       |      |           |       |              |   |        |      

Long-term debt consists principally of capital lease obligations related to
equipment. The capital lease obligations bear interest rates of 6.1% to 28.5%
and are due through the year 2007. Carrying value approximates fair value for
these obligations.

NOTE 7  INCOME PER SHARE:

The following table reflects the calculation of basic and diluted income per
share:

|                                         |                                     |                                                                   |  |                    |        |  |  |        |        | 
|---------------------------------------- | ----------------------------------- | ----------------------------------------------------------------- |  | ------------------ | ------ |  |  | ------ | ------ | 
|                                         |                                     |                                                                   |  | Three Months Ended
|                                         |                                     |                                                                   |  | March 31,         
|                                         |                                     |                                                                   |  |                   
|(in thousands, except per share amounts) |                                     | 2003                                                              |  | 2002              
|                                         |                                     |                                                                   |  |                   
|Net income per share  basic             |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Net income                                                        |  | $                  | 4,632  |  |  | $      | 8,526  | 
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|                                         | Weighted average shares outstanding |                                                                   |  | 46,703             |        |  |  | 46,473 |       
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Net income per share  basic                                      |  | $                  | 0.10   |  |  | $      | 0.18   | 
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|Net income per share  diluted           |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Net income                                                        |  | $                  | 4,632  |  |  | $      | 8,526  | 
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Weighted average shares outstanding                               |  |                    | 46,703 |  |  |        | 46,473 | 
|                                         | Dilutive impact of options          |                                                                   |  | 10                 |        |  |  | 1,333  |       
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Weighted average shares and potential dilutive shares outstanding |  |                    | 46,713 |  |  |        | 47,806 | 
|                                         |                                     |                                                                   |  |                    |        |  |  |       
|                                         |                                     | Net income per share  diluted                                    |  | $                  | 0.10   |  |  | $      | 0.18   | 
|                                         |                                     |                                                                   |  |                    |        |  |  |       

NOTE 8  COMPREHENSIVE INCOME:

The Companys total comprehensive income for the three month periods ended
March 31, 2003 and 2002 was $4.9 million and $8.2 million, respectively. The
Companys total comprehensive income consists of net income and foreign
currency translation adjustments.

NOTE 9  BUSINESS SEGMENT INFORMATION:

The Company classifies its business in four segments: Electronic Payments, ATM
Management Services, Decision Support and Risk Management, and Professional
Services. The Company reports segment information consistent with the way
management internally disaggregates its operations to assess performance and to
allocate resources.

The accounting policies of the segments are the same as those applied to the
Company on a consolidated basis. For internal reporting purposes, the Company
groups costs based upon managerial control. The majority of these managed cost
groups are directly assigned to a reportable segment. For cost groups
supporting more than one reportable segment, the costs are assigned based upon
the product line or project benefited. The assignment of costs

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is based upon
estimates of factors considered most appropriate for the cost group such as
transactions, calls, customers, square footage, revenues and headcount. The
Company does not allocate expenses that benefit all segments and are corporate
or administrative in nature. These costs include, but are not limited to,
legal, accounting, human resources, liability insurance and executive expenses.

Information concerning operations in these reportable segments of business is
as follows:

|                               |                                      |                          |   |                              |         |  |   |         |         | 
|------------------------------ | ------------------------------------ | ------------------------ | - | ---------------------------- | ------- |  | - | ------- | ------- | 
|                               |                                      |                          |   | Three Months Ended March 31,
|                               |                                      |                          |   |                             
|(in thousands)                 |                                      | 2003                     |   | 2002                        
|                               |                                      |                          |   |                             
|Net revenue:                   |                                      |                          |   |                              |         |  |   |        
|                               | Electronic payments                  |                          | $ | 37,897                       |         |  | $ | 46,507  |        
|                               | ATM management services              |                          |   | 33,827                       |         |  |   | 20,640  |        
|                               | Decision support and risk management |                          |   | 36,202                       |         |  |   | 37,325  |        
|                               | Professional services                |                          |   | 22,602                       |         |  |   | 29,525  |        
|                               |                                      |                          |   |                              |         |  |   |        
|                               |                                      | Total net revenue        |   |                              | 130,528 |  |   |         | 133,997 | 
|                               |                                      |                          |   |                              |         |  |   |        
|Operating expenses:            |                                      |                          |   |                              |         |  |   |        
|                               | Electronic payments                  |                          |   | 32,250                       |         |  |   | 34,161  |        
|                               | ATM management services              |                          |   | 31,961                       |         |  |   | 20,354  |        
|                               | Decision support and risk management |                          |   | 25,254                       |         |  |   | 31,678  |        
|                               | Professional services                |                          |   | 18,131                       |         |  |   | 21,456  |        
|                               | Corporate                            |                          |   | 16,355                       |         |  |   | 13,890  |        
|                               |                                      |                          |   |                              |         |  |   |        
|                               |                                      | Total operating expenses |   |                              | 123,951 |  |   |         | 121,539 | 
|                               |                                      |                          |   |                              |         |  |   |        
|Income (loss) from operations: |                                      |                          |   |                              |         |  |   |        
|                               | Electronic payments                  |                          |   | 5,647                        |         |  |   | 12,346  |        
|                               | ATM management services              |                          |   | 1,866                        |         |  |   | 286     |        
|                               | Decision support and risk management |                          |   | 10,948                       |         |  |   | 5,647   |        
|                               | Professional services                |                          |   | 4,471                        |         |  |   | 8,069   |        
|                               | Corporate                            |                          |   | (16,355                      | )       |  |   | (13,890 | )      
|                               |                                      |                          |   |                              |         |  |   |        
|                               |                                      | Income from operations   |   | $                            | 6,577   |  |   | $       | 12,458  | 
|                               |                                      |                          |   |                              |         |  |   |        

The Company has not disclosed assets, depreciation, amortization, interest
revenue, interest expense or income taxes by segment because this information
is not reviewed by the chief operating decision maker, produced internally or
practicable to prepare.

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:

|               |                    |      |                              |         |                        |      |              |         |  |   |        |        |  |   |        |        | 
|-------------- | ------------------ | ---- | ---------------------------- | ------- | ---------------------- | ---- | ------------ | ------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|               |                    |      | Total Net Revenue            |         | Property and Equipment
|               |                    |      |                              |         |                       
|               |                    |      | Three Months Ended March 31, |         |                       
|               |                    |      |                              |         | March 31,              |      | December 31,
|(in thousands) |                    | 2003 |                              | 2002    |                        | 2003 |              | 2002   
|               |                    |      |                              |         |                        |      |              |        
|United States  |                    | $    | 119,756                      |         |                        | $    | 121,372      |         |  | $ | 39,763 |        |  | $ | 41,038 |       
|United Kingdom |                    |      | 3,747                        |         |                        |      | 4,751        |         |  |   | 341    |        |  |   | 276    |       
|India          |                    |      | 4,568                        |         |                        |      | 6,000        |         |  |   | 8,430  |        |  |   | 8,713  |       
|Canada         |                    |      | 2,457                        |         |                        |      | 1,874        |         |  |   | 655    |        |  |   | 737    |       
|               |                    |      |                              |         |                        |      |              |         |  |   |        |        |  |   |        |       
|               | Total consolidated |      | $                            | 130,528 |                        |      | $            | 133,997 |  |   | $      | 49,189 |  |   | $      | 50,764 | 
|               |                    |      |                              |         |                        |      |              |         |  |   |        |        |  |   |        |       

NOTE 10  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 Companys financial position,
results of operations, or cash flows.

The Company is currently the subject of an investigation by the Securities and
Exchange Commission (the SEC). In the course of its investigation, the SEC
staff has sought from the Company various documents and information concerning
the financial results and transactions that were the subject of restatement by
the Company in March and December 2002. In January 2003, the SEC staff
received a formal order of investigation, which empowers it to issue subpoenas
to the Company and third parties. The Company has been cooperating fully with
the SEC staff and intends to continue to do so. The Company may, however, be
the subject of additional inquiries or become subject to a fine or other
remedies. The Company has incurred, and may continue to incur, significant
legal expenses in connection with the investigation.

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The Company and its current and former chief executive and chief financial
officers are defendants in three federal securities actions filed in November
and December 2002 in the U.S. District Court for the Eastern District of
Wisconsin (the Federal Securities Actions). The complaints in these actions are
substantially identical and allege, among other things, that during the period
from February 2, 2001 to October 24, 2002 the defendants made false and
misleading statements and omissions of material facts and that the plaintiffs
and other members of a putative class of shareholders suffered damages as a
result. The defendants in the Federal Securities Actions have moved to have
the actions transferred to the District of Arizona and also have moved to
dismiss the actions on various grounds. These motions are pending before the
Court. Also pending before the Court is a motion by one of the plaintiffs to
consolidate the three actions, for his appointment as class representative and
for his selection of lead counsel.

The Company is also a nominal defendant in two substantially identical
shareholder derivative actions filed in the Superior Court of Arizona, Maricopa
County in January 2003 (the Shareholder Derivative Actions). The complaints
allege, among other things, that certain current and former Company directors
named in the complaints as defendants breached their fiduciary duties to the
Company in connection with certain alleged issues involving the Companys
accounting practices and internal controls. The Complaint also names as a
defendant the Companys external auditor. In response to a joint motion by the
parties in the Shareholder Derivative Actions to stay these
proceedings pending the resolution of the motions to dismiss the Federal
Securities Actions, the Court stayed these proceedings through May
30, 2003. Because the motions to dismiss the Federal Securities
Actions will likely still be pending on May 30th, the Company expects the parties
in the Shareholder Derivative Actions to seek an extension of this stay.

The Company believes the Federal Securities and Shareholder Derivative Actions
are without merit and intends to vigorously defend itself. However, the
Company cannot predict with certainty the outcome of these actions.

NOTE 11  COMMITMENTS AND CONTINGENCIES:

Future commercial commitments

In connection with the Companys government services, collection and ATM
placement activities, the Company posts surety bonds with state agencies
guaranteeing its performance of certain obligations related to the relevant
contracts or state requirements. The aggregate amount of such bonds outstanding
at March 31, 2003 was $4.3 million.

At March 31, 2003, the Company provided guarantees of $1.2 million on certain
equipment lease payments for Canadian customers of its subsidiary Access Cash
International (ACI). These guarantees were established prior to the Companys
acquisition of ACI in 2001 and expire through December 2007. The Company would
be required to make payments under these guarantees in the event that the ACI
customers could not meet their own payment obligations. Through March 31,
2003, the Company has been required to make payments of approximately $128,000
pursuant to these guarantees. The customers ATM equipment assets are utilized
as collateral on these guarantees. There are no amounts being carried as
liabilities for the Companys obligations under these guarantees.

The Company has approximately $0.4 million in time deposits, denominated in
Indian rupees, related to the guarantee by its Indian operations of performance
on a customer contract and certain obligations related to local government
requirements.

Contractual cash obligations

As of December 31, 2002, the Company had contractual cash obligations for
operating leases, outsourcing and maintenance obligations in the aggregate
amount of $101.0 million. These contractual cash obligations had not materially
changed from this amount at March 31, 2003.

Other commitments

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 $1.3 million in
Webtel in 2001 and has committed to invest an additional $0.8 million upon the
satisfaction of certain conditions specified in the subscription agreement.

The Company operates a call center in Mumbai, India under a customer contract.
The customer is entitled to acquire a minority interest in, or sole ownership
of, certain assets used by the Company in performing call center operations for
the customer as well as transition assistance. The price at which such
ownership interest may be acquired by the

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customer is to be based on a formula
as set forth in the contract. As of March 31, 2003, the customer had
accumulated a right to acquire up to a 9% ownership interest in these assets.

ACI has vault cash agreements with various financial institutions which provide
cash to certain of the ATMs owned or managed by ACI. Although some portion of
this cash may be physically located in the ATMs owned or managed by ACI, this
cash is not included in cash and cash equivalents on the Companys consolidated
balance sheet because ACI does not take title to the cash under the
bailee/bailor relationship established by the agreements. Based upon the daily
outstanding balance of funds provided to the ATMs, ACI generally pays a monthly
fee ranging from prime, as defined, plus one half percent up to prime plus 5%.
The average monthly rate paid during the first quarter of 2003 approximated
7.3%. The Company indemnifies the financial institutions against any loss of
the cash in the ATMs. One of the agreements requires ACI to maintain a security
account equal to 1% of the daily outstanding balance. The agreements may be
terminated upon notice by either party and have various expiration dates
ranging from January to November 2004. Total cash provided pursuant to these
vault cash agreements was approximately $30 million at March 31, 2003.

As part of its transaction processing business, the Company provides cash
settlement services to financial institutions and state and local governments.
These services involve the movement of funds between the various parties
associated with an ATM, POS or EBT transaction and this activity results in a
balance due to the Company at the end of each business day that it will recoup
over the next few business days. The balances due the Company are included in
cash on its consolidated balance sheets. As of March 31, 2003, approximately
$10 million of settlement payments were due to the Company and it received
these funds in early April 2003. The Company is required to maintain sufficient
cash on hand to fund the daily settlement advances made against the payments
received through the settlement process. The typical overnight settlement
balance due to the Company ranges from $5 million to $20 million. The Company
also seeks to maintain an additional cash balance of approximately $35 million
to ensure that it can advance funds to its processing customers if unusual
circumstances prevent the Company from timely processing their settlement
files. The Company is evaluating means to reduce the need to maintain these
minimum cash balance levels, including the possibility of obtaining an
overnight credit facility to fund these obligations.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion together with our condensed
consolidated financial statements and the notes to those financial statements
included in this Quarterly Report on Form 10-Q and our 2002 Annual Report on
Form 10-K filed with the Securities Exchange Commission. In addition to
historical information, this discussion contains forward-looking statements
as defined in the U.S. Private Securities Litigation Reform Act of 1995. All
forward-looking statements are subject to various risks and uncertainties that
could cause our actual future results to differ materially from those presently
anticipated due to a variety of factors, including those discussed in Item 5 of
this Quarterly Report on Form 10-Q.

OVERVIEW

eFunds Corporation and its wholly-owned subsidiaries (the Company, we or
us) provide transaction processing, risk management and professional services
to financial institutions, retailers, electronic funds transfer networks and
government agencies. The Company has four operating segments: Electronic
Payments; Automated Teller Machine (ATM) Management Services; Decision Support
and Risk Management; and Professional Services. The Electronic Payments segment
provides automated clearinghouse (ACH), electronic funds transfer (EFT), and
other processing services as well as electronic benefits transfer (EBT)
services for government agencies. The ATM Management Services segment provides
ATM deployment, management and branding services. The Decision Support and Risk
Management segment provides risk management based data and other products to
financial institutions, retailers and other businesses that assist in detecting
fraud and assessing the risk of opening a new account or accepting a check. The
Professional Services segment provides EFT software sales, software
applications development, maintenance and installation and business process
outsourcing services.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The 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 that are generally
accepted in the United States of America. 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, reserves and allowances, income taxes and stock-based
compensation. We base our estimates on historical experience and on various
other assumptions that we believe 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 the more
significant judgments and estimates we use in the preparation of our
consolidated financial statements.

Revenue recognition

Our net revenues consist of fees for transaction processing and related
services, decision support, software and data licensing, maintenance and
support, government services, and information technology consulting and
business process management services. 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 and settling the funds with the
financial institutions involved in the transactions. Additionally, these
services include monitoring ATMs 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. Government
services fees are recognized in the period services are provided based on
monthly fees per benefits recipient.                                                   
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | In connection with the provision of services in the ATM management services
segment, we earn surcharge and interchange fees. Surcharge fees are the
fees the user of an ATM pays at the time of the transaction and interchange
fees are paid by that users financial institution. Generally, our
arrangements call for us to pay a fee to the occupants of the property at
which the ATM is physically located. The amount of this fee typically has
some relationship to the surcharge and interchange fees that are collected
by us from that ATM. Based upon the underlying contractual provisions to
our arrangements, we record the surcharge and interchange fees that we

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|  |  | collect at their gross amounts as revenue and the amounts owed to the
occupant of the property at which the ATM is physically located as a
processing, communication and service cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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 net
monthly sales of the retailer using our check verification products or
other similar measures, depending on the product and service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| 
| |  | We also provide professional services consisting of information
technology consulting and business process management services.
Revenue from providing such services is generally recognized under one
of two methods, depending on the relevant contractual terms. Under the
time and materials method, which is applied to nearly all 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 of completion
of the project. If the information technology consulting services
involve the significant customization of software that has been
licensed from us, the license fee is also recognized proportionately
to the percentage of completion of the project.                                                                                                                                                                                         
| 
| |  | 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 license contains customer acceptance criteria for
which significant uncertainties exist, the 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 that we deliver multiple elements,
then upfront fees are recognized as revenue if vendor specific
objective evidence of fair value exists for each of the undelivered
elements. If vendor specific objective evidence of fair value does not
exist, then the total fees of the arrangement are recognized over the
term of the related agreement based upon delivery of all essential
elements.
| 
| |  | Software maintenance and support revenue is recognized ratably over
the term of the contract or as the services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

The process involved in evaluating the appropriateness of revenue recognition
involves judgments about vendor-specific objective evidence of the fair value
of each of the various elements to be delivered in a sale that has multiple
components, collectibility of fees, and projections of costs to complete
projects for our customers.

Intangible Assets

Our intangible assets consist primarily of goodwill, capitalized software costs
and acquired contracts. 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. Software developed or
obtained for internal use is tested for impairment whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable.

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 normally over three years and no longer
than five years. Software developed for resale is carried at the lesser of
amortized cost or net realizable value.

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When we acquire other companies, generally accepted accounting principles
require that we make estimates regarding the fair values of the acquired
companys tangible assets and liabilities and identifiable intangible assets.
Based upon these estimates, we then allocate the purchase price to the assets
and liabilities of the acquired company for the purpose of recording these
items in our financial records. Any unallocated purchase price is considered to
be, and recorded as, goodwill. The distinction between the amount of the
purchase price allocated either to tangible assets and liabilities or
identifiable intangible assets and goodwill is significant because goodwill is
not amortized to our statement of operations but is instead subject to an
annual impairment test. Estimates inherent in this purchase price allocation
process include assumptions regarding the timing and amounts of future cash
inflows and outflows, the saleability of inventories, selection of discount
rates, contract renewal rates and general market conditions. Where appropriate,
we use third-party valuation professionals to assist us in making these
estimates.

The process of evaluating goodwill and other intangible assets, including
capitalized software costs and acquired contracts, 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.

Reserves and Allowances

We maintain a reserve for expected future losses on certain government EBT
contracts. Our estimates of these losses are based on a variety of assumptions
including assumptions about future welfare case levels, number of transactions
per case and the costs related to these processing transactions and providing
support services. These assumptions are subject to significant uncertainties
and may differ substantially from actual results. 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. We develop our estimate
of the allowance based on our experience with specific customers, our
understanding of their current economic circumstances and our own judgment as
to the likelihood of their ultimate payment. We also consider our collection
experience with the balance of our receivables portfolio and make estimates
regarding collectibility based on trends in aging. If the financial condition
of our customers were to deteriorate, thereby impairing their ability to make
payments, an increase in this allowance could be required in a future period.

Income Taxes

Accounting for income taxes requires significant judgments in the development
of estimates used in income tax calculations. Such judgments include, but are
not limited to, the likelihood that the Company will realize the benefits of
net operating loss carry-forwards, the adequacy of valuation allowances, the
rates used to measure transactions with foreign subsidiaries and the
development of valuation models used for measuring the value of certain
transactions. Further, our operations are governed by and subject to government
regulations in the United States and in foreign countries in which we operate,
including laws and regulations relating to taxation and the judgments and
estimates we use are subject to challenge by domestic and foreign taxing
authorities. The Company recognizes tax liabilities at such time as they are
judged to be probable of being incurred and they can be reasonably estimated.
It is possible that either foreign or domestic taxing authorities could
challenge our judgments and estimates and draw conclusions that would cause us
to incur tax liabilities in excess of those currently recorded.

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.
Undistributed earnings of our foreign subsidiaries amounted to approximately
$24.1 million at December 31, 2002.

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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.

Stock-based compensation

We issue stock options to our employees under the terms of the eFunds
Corporation 2000 Stock Option Plan. Generally accepted accounting principles
provide two alternative methods of accounting for stock options issued under
the terms and conditions that we typically issue such options. One alternative
is to estimate the fair value of the stock option at the date of grant and
amortize that value as an expense to operations over the contractual vesting
period. The other option available currently to companies reporting under
generally accepted accounting principles is to estimate the fair value of the
option at the grant date but only reflect the impact of the amortization in a
footnote to the financial statements and to forgo adjusting the statement of
operations. The method a company chooses to apply is a matter of policy.
Consistent with our past practices, we utilize the second of these options and
we reflect the impact of the option amortization in the footnotes to our
financial statements. As illustrated in Note 2 to the financial statements,
were we to change our accounting policy on this matter to reflect the expense
in our statement of operations, or should generally accepted accounting
principles change to require us to reflect this expense in our statements of
operations, our results of operations would be materially and adversely
affected.

RESULTS OF OPERATIONS

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

|                             |                                             |                          |       |                    |      |      |       |      |      | 
|---------------------------- | ------------------------------------------- | ------------------------ | ----- | ------------------ | ---- | ---- | ----- | ---- | ---- | 
|                             |                                             |                          |       | Three Months Ended
|                             |                                             |                          |       | March 31,         
|                             |                                             |                          |       |                   
|                             |                                             |                          |       | 2003               |      | 2002
|                             |                                             |                          |       |                    |      |     
|Net revenue                  |                                             |                          | 100.0 | %                  |      |      | 100.0 | %   
|Operating expenses           |                                             |                          |       |                    |      |      |       |     
|                             | Processing, communication and service costs |                          |       | 42.7               |      |      |       | 37.9 |     
|                             | Employee costs                              |                          |       | 35.9               |      |      |       | 38.1 |     
|                             | Depreciation and amortization               |                          |       | 6.7                |      |      |       | 7.1  |     
|                             | Other operating costs                       |                          |       | 9.6                |      |      |       | 7.6  |     
|                             |                                             |                          |       |                    |      |      |       |     
|                             |                                             | Total operating expenses |       |                    | 94.9 |      |       |      | 90.7 | 
|                             |                                             |                          |       |                    |      |      |       |     
|Income from operations       |                                             |                          | 5.1   |                    |      |      | 9.3   |     
|Other income (expense)  net |                                             |                          | 0.1   |                    |      |      | .3    |     
|                             |                                             |                          |       |                    |      |      |       |     
|Income before income taxes   |                                             |                          | 5.2   |                    |      |      | 9.6   |     
|Provision for income taxes   |                                             |                          | (1.7  | )                  |      |      | (3.2  | )   
|                             |                                             |                          |       |                    |      |      |       |     
|Net income                   |                                             |                          | 3.5   | %                  |      |      | 6.4   | %   
|                             |                                             |                          |       |                    |      |      |       |     

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

Net revenue Net revenue decreased $3.5 million, or 2.6%, to $130.5 million
for the first three months of 2003 from $134.0 million for the same period of
2002.

Electronic Paymentsnet revenue decreased $8.6 million, or 18.5%, to $37.9
million in the first three months of 2003 as compared to $46.5 million for the
same period of 2002. Electronic processing revenues decreased primarily due to
the previously expected revenue declines associated with the discontinuance of
processing services performed for the STAR network following its licensing of
our processing software during 2002 and the expiration of our electronic
Medicaid eligibility verification (EMEVS) contract and an additional state EBT
contract at the end of 2002. The transition of the processing for the STAR
network was completed in September 2002. Revenues derived from this
relationship were approximately $6 million during the first three months of
2002. Revenues were also adversely affected as a result of the negotiation of
a contract extension with a major electronic funds transfer customer during the
first quarter of 2003. This extension resulted in lower per transaction pricing
and reduced revenues from this customer during the quarter. We expect the
effect of this price reduction to be somewhat offset in future quarters by
increased volumes.

The two government contracts that expired at the end of 2002 generated
approximately $4 million in revenue during the first three months of 2002.
This decline in government contract revenue in the first three months of 2003
was

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partially offset with approximately $1 million of additional revenues
generated under an EBT contract in which we were awarded the prime contractor
position as opposed to our prior subcontractor position. Additional EBT
contracts expected to begin or renew will provide incremental revenues of
approximately $3 million for the remainder of 2003. Citibank has been awarded
the new EBT contract for the Western States EBT Alliance (WSEA) and we
currently act as a subcontractor to Citibank servicing this coalition. We
expect, however, that our role as subcontractor to the WSEA will be
discontinued under the new contract. This transition will begin to impact our
business late in the second quarter of 2003 and we expect to see the
significant contracts for this coalition largely roll-off by the end of 2004.

ATM Management Servicesnet revenue increased $13.2 million, or 64.1%, to $33.8
million in the first three months of 2003 from $20.6 million for the same
period in 2002. These increases are primarily due to our acquisition of
independent ATM networks in 2002. In addition, ATM equipment sales increased by
$2.8 million for the first three months of 2003 compared to the same period of
2002. We expect that this level of equipment sales is somewhat higher than we
would expect to occur in future periods.

Decision Support and Risk Managementnet revenue decreased $1.1 million, or
2.9%, to $36.2 million for the first quarter in 2003 from $37.3 million in the
first quarter of 2002. Revenues from our ChexSystemsSM suite of products
increased in the first quarter of 2003 as compared to the same quarter of the
prior year. We also experienced an increased demand in the first three months
of 2003 for our fraud detection services from financial institutions compared
to the same period of the prior year.

These increases were, however, offset
by declines in sales of our SCANSM and
collection products over the prior year period. The decrease in revenues from
SCAN products was attributable to pricing concessions. We expect that revenues
from our ChexSystems suite of products and our fraud protection products will
continue to increase during 2003 and that revenues from sales of our SCAN
product may continue to decline somewhat.

Professional Servicesnet revenue decreased $6.9 million, or 23.4%, to $22.6
million for the first quarter of 2003 from $29.5 million for the same period of
the prior year primarily due to reduced software sales and a decline in the
revenues we received from Deluxe Corporation.

Revenues from software sales declined by $5.2 million in the first three months
of 2003 as compared to the same period of the prior year. The following table
illustrates our revenue generated from software sales:

|                       |  |                    |       |      |  |   |        | 
|---------------------- |  | ------------------ | ----- | ---- |  | - | ------ | 
|                       |  | Three Months Ended
|                       |  | March 31,         
|                       |  |                   
|(in thousands)         |  | 2003               |       | 2002
|                       |  |                    |       |     
|License fees           |  | $                  | 2,712 |      |  | $ | 7,861  | 
|Maintenance            |  |                    | 3,291 |      |  |   | 3,399  | 
|Software modifications |  |                    | 1,339 |      |  |   | 1,271  | 
|                       |  |                    |       |      |  |   |        | 
|                       |  | $                  | 7,342 |      |  | $ | 12,531 | 
|                       |  |                    |       |      |  |   |        | 

Revenues from information technology services provided under our contract with
Deluxe were $8.9 million for the first three months of 2003 as compared to
$10.3 million for the same period in 2002. In accordance with our agreement
with Deluxe, a minimal short-fall fee, based upon a formula in the contract
reflective of our estimated lost profits, will be billed to Deluxe if it fails
to reach the minimum target level of $43 million for software development
services for 2003.

Business process management (BPM) revenues, which include outsourcing and
customer contact center services, remained relatively flat for the first
quarter of 2003 as compared to the same period of the prior year at
approximately $6 million. Future growth in our BPM business will depend on the
acquisition of new clients and the expansion of the services offered to
existing clients.

Processing, communication and service costs This category includes the cost
of processing, telecommunications, computer equipment, promotional services as
well as residual payments we make to the occupants of the property where the
ATMs we own or manage are located. Total category costs increased $4.9 million,
or 9.6%, to $55.7 million for the first three months of 2003 from $50.8 million
for the same period of the prior year. Processing, communication and service
costs were 42.7% of net revenues in the first quarter of 2003, compared to
37.9% in the

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same period of 2002. Third party processing charges have increased
in relation to the increased ATM processing revenues associated with
acquisitions in the ATM management services segment. We provide the processing
for approximately 11,000 of the 15,700 U.S. ATM machines in our network and we
expect the processing for the approximately 4,700 remaining U.S. ATMs will be
transitioned to our networks as existing contractual commitments expire or as
the economics associated with accelerated contract cancellations make it
logical to do so, with approximately 2,300 such conversions expected to occur
in the remainder of 2003. Due to existing contractual commitments, processing
for the approximately 1,400 ATMs we have in Canada will not likely be
transitioned to our networks for a substantial period of time. The increase in
ATM processing costs was partially offset by reductions in costs associated
with the EMEVS contract that expired at the end of 2002, reductions in
equipment rent and related maintenance costs due to data center consolidations
and reductions in services contracts related to our risk products, including
the transitioning of certain contact center operations from subcontractors to
our contact center in India.

Employee costs Expenditures in this category represent employee compensation
and related employee expenses, benefits and travel. These costs decreased $4.1
million, or 8.0%, to $46.9 million for the first quarter of 2003 from $51.0
million for the same period of 2002. As a percentage of net revenue, employee
costs were 35.9% in the first quarter of 2003 compared to 38.1% for the same
period of the prior year. We began to experience costs savings late in 2002
from our restructuring efforts and the curtailment of travel expenditures.

Although we had approximately 160 more full-time equivalent employees at March
31, 2003 than we did at March 31, 2002, we have realized cost savings from our
cost reduction measures, including the re-deployment of certain product
development and business process activities to our India based operations. We
expect this trend to continue in future periods. At March 31, 2003, more than
50% of our full-time equivalent employees are located at our Indian facilities.

Depreciation and amortization These costs represent the depreciation of
facilities and equipment and the amortization of intangible assets, such as
capitalized software costs and acquired contracts. Depreciation and
amortization expense decreased $0.7 million, or 7.4%, to $8.8 million for the
first three months of 2003 from $9.5 million for the same period of 2002. These
costs were 6.7% of net revenue for the first three months of 2003 and 7.1% of
revenue for the same period of the prior year. The decrease is due to a
reduction in depreciable assets during the third quarter of 2002 which resulted
from the reclassification of certain assets as held for sale and a reduction in
amortizable intangible assets due to impairments taken in the second and third
quarters of the prior year. These reductions were partially offset by an
increase in the amortization of contracts acquired with the independent ATM
businesses.

Other operating costs Expenditures in this category include facility costs,
professional, consulting and temporary services, bad debt, and certain
administrative costs. Other operating expenses increased $2.3 million, or
22.5%, to $12.5 million for the first quarter of 2003 from $10.2 million for
the same period of 2002. These expenses were 9.6% of net revenue for the first
three months of 2003 and 7.6% for the same period in the prior year. The
increase is primarily due to increased consulting fees related to the business
performance initiatives we commenced in 2003. These initiatives are focused on
process enhancements that we believe will ultimately result in cost savings
through improved operating efficiencies. We expect to continue to incur
consulting fees related to the initiatives into the third quarter of 2003.

Income from operations Income from operations decreased $5.9 million, or
47.2%, to $6.6 million for the first quarter of 2003 compared to $12.5 million
for the same period of 2002. Income from operations was 5.1% of net revenue for
the first quarter of 2003 compared to 9.3% for the same period of the prior
year. The decrease in operating income is a result of a higher concentration of
software sales in 2002 as opposed to the more recurring, but lower margin, ATM
revenue seen in 2003. An increase in costs for consulting fees related to our
business performance initiatives also contributed to this decline.

Other income  net Other income  net was $0.2 million for the first quarter
of 2003 compared to $0.4 million for the same period of the prior year.
Interest and investment income increased $0.2 million to $0.5 million for the
first quarter of 2003 compared to $0.3 million for the same period of the prior
year as a result of the interest income included in the $5 million tax-related
payment received from Deluxe. This increase was offset by an increase in
interest and investment expense, including foreign currency losses, of $0.4
million.

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Provision for income taxesThe provision for income taxes was $2.2 million
for the first quarter of 2003, resulting in an annualized effective tax rate of
32.1%, which is consistent with our effective tax rate at the end of 2002. Our
effective tax rate is determined largely by the proportional share of our
projected consolidated income earned by our Indian subsidiary. Our Indian
software development and business process management operations qualify for tax
incentives associated with businesses that operate within designated geographic
locations within India. These incentives generally provide us with exemptions
from Indian income tax on certain business income generated from these
operations. As a result of a change in Indian tax law, 10% of this previously
tax-exempt income became subject to Indian income tax at the rate of 36.75%
from April 1, 2002 through March 31, 2003. The remaining tax incentives phase
out through March 2009.

Business Segment Information

The following table presents, for the periods indicated, operating income by
segment as a percentage of segment revenue and the unallocated corporate
expenses and income from operations as a percentage of total revenue:

|                                                             |                                      |  |                              |       |      |  |  |       |  
|------------------------------------------------------------ | ------------------------------------ |  | ---------------------------- | ----- | ---- |  |  | ----- | -
|                                                             |                                      |  | Three Months Ended March 31,
|                                                             |                                      |  |                             
|                                                             |                                      |  | 2003                         |       | 2002
|                                                             |                                      |  |                              |       |     
|Income
from operations
(as a percentage of segment revenue): |                                      |  |                              |       |      |  |  |      
|                                                             | Electronic payments                  |  |                              | 14.9  | %    |  |  | 26.5  | %
|                                                             | ATM management services              |  |                              | 5.5   |      |  |  | 1.4   |  
|                                                             | Decision support and risk management |  |                              | 30.2  |      |  |  | 15.1  |  
|                                                             | Professional services                |  |                              | 19.8  |      |  |  | 27.3  |  
|(as a percentage of total revenue):                          |                                      |  |                              |       |      |  |  |      
|                                                             | Corporate                            |  |                              | (12.5 | )    |  |  | (10.4 | )
|                                                             | Consolidated income from operations  |  |                              | 5.1   | %    |  |  | 9.3   | %

Income from operations in the Electronic Payments business segment decreased to
$5.6 million for the first quarter of 2003 from $12.3 million for the first
quarter of the prior year. As a percent of net segment revenues, operating
margins were 14.9% for the first quarter of 2003, a decrease from the 26.5% for
the same period of the prior year. Margins in the Electronic Payments segment
were adversely affected by the loss of revenues from processing and government
services contracts that expired during 2002. The impact of the loss of these
revenues was slightly mitigated by a savings in telecommunications and
equipment lease and maintenance expenditures.

Income from operations in the ATM Management Services business segment
increased to $1.9 million for the first quarter of 2003 from $0.3 million for
the same period of 2002. As a percent of net segment revenues, operating
margins were 5.5% for the first quarter of 2003, an increase from the margin of
1.4% for the first quarter of the prior year. Revenues in this segment
increased due primarily to acquisitions of independent ATM service
organizations throughout 2002. Margin improvements resulted from a higher mix
of revenue from equipment sales and also due to cost savings from integration
efforts. We are seeking to continue to improve the margins in this business in
future periods through further integration of acquired businesses and the
transition of additional acquired ATMs to our internal processing systems.

Income from operations in the Decision Support and Risk Management business
segment increased to $10.9 million for the first three months of 2003 from $5.6
million for the same period of the prior year. Operating margins were 30.2% of
net segment revenues for the first quarter of 2003, an increase from the 15.1%
for the same period of the prior year. This improvement is the result of
reduced employee and third party processing costs offsetting the reduction in
revenues from our SCAN product line.

Income from operations in the Professional Services business segment decreased
to $4.5 million for the first quarter of 2003 from $8.1 million for the same
period of the prior year. Operating margins were 19.8% of net segment revenues
for the first quarter of 2003, a decrease from the 27.3% seen in same period of
the prior year. Margins decreased due to a decline in higher margin software
sales. These reductions were partially offset by reduced employee costs
resulting primarily from the re-deployment of certain product development and
business process activities to our India based operations.

Corporate expenses include, but are not limited to, legal, accounting, risk
management, and executive expenses. These expenses increased to $16.4 million
for the first quarter of 2003 from $13.9 million for the first quarter of

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2002.
The increase is primarily due to increased consulting fees related to business
improvement initiatives commenced in the fourth quarter of 2002. Professional
fees related to the SEC investigation of certain significant transactions that
occurred in 2000 and 2001 also increased as compared to the prior year period.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

At March 31, 2003, net working capital was $157.8 million, compared to $149.8
million at December 31, 2002. Cash and cash equivalents, including our cash in
ATMs of approximately $5 million, totaled $137.6 million at March 31, 2003, an
increase of $18.1 million from December 31, 2002. This increase was the result
of positive operating cash flow, an approximately $5 million tax settlement we
received from Deluxe and the approximately $12 million in proceeds we received
from the sale of our Glendale facility. At March 31, 2003, we had $2.7 million
of restricted cash that we temporarily hold in custodial accounts on behalf of
clients and $0.2 million of deposits subject to compensating balance
arrangements. Included in cash and cash equivalents at March 31, 2003 was
approximately $11 million held in Indian bank accounts denominated in Rupees or
U.S. Dollars. These funds are available for international operations and
investments. Repatriation of these funds to the United States would, however,
likely have unfavorable tax implications.

As part of our transaction processing business, we provide cash settlement
services to financial institutions and state and local governments. These
services involve the movement of funds between the various parties associated
with an ATM, POS or EBT transaction and this activity results in a balance due
to us at the end of each business day that we recoup over the next few business
days. The balances due us are included in cash on our consolidated balance
sheets. As of March 31, 2003, approximately $10 million of settlement payments
were due to us and we received these funds in early April 2003. We are required
to maintain sufficient cash on hand to fund the daily settlement advances we
make against the payments we receive through the settlement process. The
typical overnight settlement balance due to us ranges from $5 million to $20
million. We also seek to maintain an additional cash balance of approximately
$35 million to ensure that we can advance funds to our processing customers if
unusual circumstances prevent us from timely processing their settlement files.
We are evaluating means to reduce the need for us to maintain these minimum
cash balance levels, including the possibility of obtaining an overnight credit
facility to fund these obligations.

We have vault cash agreements with various financial institutions that provide
cash to certain of the ATMs owned or managed by us. Although some portion of
this cash may be physically located in the ATMs that we own or manage, these
funds are not included in cash and cash equivalents on our consolidated balance
sheet because we do not take title to it under the bailee/bailor relationship
as established by the agreements. Based upon the daily outstanding balance of
funds provided to the ATMs, we generally pay a monthly fee ranging from prime,
as defined, plus one half percent up to prime plus 5%. We indemnify the
financial institutions against any loss of the vault cash in the ATMs. One of
the agreements requires us to maintain a security amount equal to 1% of the
daily outstanding balance. The average monthly rate paid during the first
quarter of 2003 approximated 7.3%. The agreements may be terminated upon notice
by either party and have various expiration dates ranging from January to
November 2004. Total cash provided pursuant to these vault cash agreements was
approximately $30 million at March 31, 2003.

Our operations and our capital expenditure and acquisition requirements are
financed primarily through the cash flow from our operations. Short-term
liquidity needs and long term capital expenditure requirements will be provided
from cash and cash equivalents on hand and cash flow from operations.

Prior to our acquisition of ACI in 2001, we had committed to guarantee up to
approximately $1.8 million of equipment lease payments for its Canadian
customers and as of March 31, 2003, we had guaranteed lease payments amounting
to $1.2 million. Through March 31, 2003, we have been required to make payments
of $128,000 pursuant to these guarantees.

We have pledged $0.4 million of time deposits, denominated in Indian Rupees, as
collateral related to a guarantee of performance on a customer contract and
certain obligations related to local government requirements.

In connection with our government services business, collection and ATM
placement activities, we post surety bonds with state agencies guaranteeing our
performance of certain obligations related to the relevant contracts or state
requirements. The aggregate amount of such bonds outstanding at March 31, 2003
was $4.3 million.

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As of December 31, 2002 our contractual cash obligations for operating leases,
outsourcing and maintenance obligations totaled $101 million through 2006. Our
contractual cash obligations had not materially changed from this amount at
March 31, 2003. Obligations under capital leases at March 31, 2003 totaled $2.2
million and are payable through 2007.

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:

|                                                |  |                              |        |      |  |   |         |  
|----------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------- | -
|                                                |  | Summary of Cash Flows       
|                                                |  | Three Months Ended March 31,
|(dollars in thousands)                          |  | 2003                         |        | 2002
|                                                |  |                              |        |     
|Cash provided by operating activities           |  | $                            | 10,816 |      |  | $ | 17,892  |  
|Cash provided by (used in) investing activities |  |                              | 7,568  |      |  |   | (16,790 | )
|Cash (used in) provided by financing activities |  |                              | (235   | )    |  |   | 1,349   |  
|                                                |  |                              |        |      |  |   |         |  
|Net increase in cash and cash equivalents       |  | $                            | 18,149 |      |  | $ | 2,451   |  
|                                                |  |                              |        |      |  |   |         |  

Cash flows from operating activities were approximately $10.8 million and $17.9
million for the three months ended March 31, 2003 and 2002, respectively. The
decrease in operating cash flow is attributable primarily to lower net income
in 2003, a $12.0 million increase in accounts receivable and a $4.0 million
decrease in accounts payable in 2003. The increase in accounts receivable was
due to changes made in the first quarter of 2003 to our billing process which
resulted in a one-time extension of our billing and collection cycle. We
expect the accounts receivable balance to be normalized by the end of the
second quarter.

Cash provided by investing activities was $7.6 million for the three months
ended March 31, 2003. Our investing activities for this period included net
proceeds of $11.9 million from the sale of our Glendale facility offset by
purchases of fixed assets and expenditures for software of $4.4 million. Cash
used in investing activities was $16.8 million for the three months ended March
31, 2002, primarily related to $11.4 million used in connection with the
acquisition of an independent ATM management company and purchases of fixed
assets and expenditures for software of $5.4 million.

Cash used in financing activities was $0.2 million for the three months ended
March 31, 2003. We received $0.3 million from shares purchased through our
employee stock purchase plan, and we used cash to repay debt of $0.5 million.
Cash provided by financing activities was $1.3 million for the three months
ended March 31, 2002. We used cash to repay debt of $0.8 million during this
period, although these payments were more than offset by the proceeds from the
exercise of stock options and shares purchased through our employee stock
purchase plan of $2.1 million.

RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
The adoption of SFAS No. 146 did not have a material impact on our financial
position or results of operations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45), modifying the recognition and
disclosure requirements of a companys guarantee arrangements. Effective
January 1, 2003, FIN 45 requires a company that enters into or modifies
existing guarantee arrangements to recognize a liability for the fair value of
the obligation undertaken in issuing the guarantee. FIN 45 also requires
disclosure of all guarantees, regardless of when the guarantee originated,
effective December 31, 2002 (See Note 11). The adoption of the accounting
provisions of FIN 45 did not have a material effect on our financial position
or results of operations.

In November 2002, the EITF reached a consensus on EITF Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables. EITF Issue No. 00-21
provides guidance on how to account for arrangements that involve the delivery
or performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. Management

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does not believe that the adoption of EITF Issue No. 00-21 will have a material
effect on our consolidated financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin
No. 51, Consolidated Financial Statements. Interpretation No. 46 prescribes
how to identify variable interest entities and how an enterprise assesses its
interests in a variable interest entity to decide whether to consolidate that
entity. This interpretation requires existing unconsolidated variable interest
entities to be consolidated by their primary beneficiaries if the entities do
not effectively disperse risks among parties involved. Interpretation No. 46 is
effective immediately for variable interest entities created after January 31,
2003 and to variable interest entities in which an enterprise obtains an
interest after that date. The interpretation applies in the first fiscal year
or interim period beginning after June 15, 2003, to variable interest entities
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. We do not believe the adoption of Interpretation No. 46 will
have a material impact on our financial position or results of operations.

FORWARD LOOKING STATEMENTS 

In addition to historical and pro forma information, this Quarterly Report
contains forward-looking statements as defined in the U.S. Private Securities
Litigation Reform Act of 1995. All forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from those described in the statements. Some of the factors that
could cause actual results to differ from those that are presently anticipated
are discussed in Item 5 of this Quarterly Report.

In 2003, our new management team will be building a long-term strategic growth
plan while simultaneously seeking to improve our operating efficiencies,
enhance our business performance and focus on better serving our customers. We
currently expect that the full year 2003 diluted earnings per share and revenue
will be in line with our reported results for 2002.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential for loss due to adverse changes in the
fair value of financial instruments. We operate internationally and are subject
to potentially adverse movements in foreign currency exchange rates and
interest rates. These exposures may change over time as our business evolves
and could have an adverse impact on our financial results. We have not entered
into any derivative instruments or hedging contracts to reduce our exposure to
adverse foreign currency rate or interest rate changes. Currently, we receive
non-U.S. dollar denominated revenues and incur non-U.S. dollar denominated
operating expenses in the United Kingdom, India and Canada. We also have assets
located in these countries. The principal currencies creating foreign exchange
rate risk for us are the British pound, Indian rupee and Canadian dollar. For
the three months ended March 31, 2003, less than 10% of our net revenues and
operating expenses were denominated in non-U.S. dollar currencies. We do not
believe that our net income for the three months ended March 31, 2003 would
have been materially affected if the U.S. dollar had appreciated or depreciated
by 10% against the British pound, the Indian rupee or the Canadian dollar.

Changes in interest rates could impact our anticipated interest income on cash
equivalents and interest expense on variable short-term debt. A 10% adverse
change in interest rates from the interest rates in effect at March 31, 2003
would not, however, have a material adverse effect on our net income for the
three months ended March 31, 2003 or financial condition at March 31, 2003.

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ITEM 4. CONTROLS AND PROCEDURES

The Company seeks to maintain disclosure controls and procedures (as defined in
Rule 15d-14(c) under the Securities Exchange Act of 1934) that are designed to
provide reasonable assurance that information required to be disclosed in the
Companys periodic reports under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms and that such information is accumulated and communicated to the
Companys management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions to be made regarding
required disclosures.

During the 90-day period prior to the date of this report, an evaluation was
performed under the supervision and with the participation of our Companys
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that the Companys
disclosure controls and procedures are reasonably effective. Subsequent to the
date of this evaluation, there have been no significant changes in the
Companys disclosure controls or in other factors that could significantly
affect these controls and no significant deficiencies or material weakness
requiring corrective action with regard to such controls have been identified.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Company is currently the subject of an investigation by the Securities and
Exchange Commission (the SEC). In the course of its investigation, the SEC
staff has sought from the Company various documents and information concerning
the financial results and transactions that were the subject of restatement by
the Company in March and December 2002. In January 2003, the SEC staff
received a formal order of investigation, which empowers it to issue subpoenas
to the Company and to third parties. The Company has been cooperating fully
with the SEC staff and intends to continue to do so. The Company may, however,
be the subject of additional inquiries or become subject to a fine or other
remedies. The Company has incurred, and may continue to incur, significant
legal expenses in connection with the investigation.

The Company and its current and former chief executive and chief financial
officers are defendants in three federal securities actions filed in November
and December 2002 in the U.S. District Court for the Eastern District of
Wisconsin (the Federal Securities Actions). The complaints in these actions are
substantially identical and allege, among other things, that during the period
from February 2, 2001 to October 24, 2002 the defendants made false and
misleading statements and omissions of material facts and that the plaintiffs
and other members of a putative class of shareholders suffered damages as a
result. The defendants in the Federal Securities Actions have moved to have
the actions transferred to the District of Arizona and also have moved to
dismiss the actions on various grounds. These motions are pending before the
Court. Also pending before the Court is a motion by one of the plaintiffs to
consolidate the three actions, for his appointment as class representative and
for his selection of lead counsel.

The Company is also a nominal defendant in two substantially identical
shareholder derivative actions filed in the Superior Court of Arizona, Maricopa
County in January 2003 (the Shareholder Derivative Actions). The complaints
allege, among other things, that certain of its current and former Company
directors, named in the complaints as defendants, breached their fiduciary
duties to the Company in connection with certain alleged issues involving the
Companys accounting practices and internal controls. The Complaint also names
as a defendant the Companys external auditor. In response to a joint motion
by the parties in the Shareholder Derivative Actions to stay these
proceedings pending the resolution of the motions to dismiss the Federal
Securities Actions, the Court stayed these proceedings through May
30, 2003. Because the motions to dismiss the Federal Securities
Actions will likely still be pending on May 30th, the Company expects the parties
in the Shareholder Derivative Actions to seek an extension of this stay.

The Company believes the Federal Securities and Shareholder Derivative Actions
are without merit and intends to vigorously defend itself. However, the
Company cannot predict with certainty the outcome of these actions.

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ITEM 5. OTHER INFORMATION

RISK FACTORS AND CAUTIONARY STATEMENTS.

When used in this Quarterly Report on Form 10-Q and in future filings by the
Company with the Securities and Exchange Commission, in our press releases,
letters and reports to stockholders and in oral statements made by our
representatives, the words or phrases should result, are expected to,
targeted, will continue, will approximate, is anticipated, estimate,
project or similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are necessarily subject to certain risks and
uncertainties, including those discussed below, that could cause our actual
results to differ materially from our historical experience and our present
expectations or projections. Caution should be taken not to place undue
reliance on any such forward-looking statements, which speak only as of the
date made. The factors listed below could affect our financial performance and
could cause our actual results for future periods to differ from any opinions
or statements expressed with respect thereto. Such differences could be
material and adverse. We will not undertake and specifically decline any
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect events or circumstances occurring
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.

WE ARE UNABLE TO PREDICT THE RESULTS OF THE INVESTIGATION WITH THE SEC AND THE
PENDING STOCKHOLDERS LITIGATION.

We are currently the subject of an investigation by the Securities and Exchange
Commission (the SEC). In the course of its investigation, the SEC staff has
sought from us various documents and information concerning the financial
results and transactions that were the subject of restatement by us in March
and December 2002. In January 2003, the SEC staff received a formal order of
investigation, which empowers it to issue subpoenas to us and to third parties.
We have been cooperating fully with the SEC staff and intend to continue to do
so. We may, however, be the subject of additional inquiries or become subject
to a fine or other remedies. We also have incurred, and may continue to incur,
significant legal expenses in connection with the investigation.

Our company and our current and former chief executive and chief financial
officers are defendants in three federal securities actions filed in November
and December 2002 in the U.S. District Court for the Eastern District of
Wisconsin (the Federal Securities Actions). The complaints in these actions are
substantially identical and allege, among other things, that during the period
from February 2, 2001 to October 24, 2002 the defendants made false and
misleading statements and omissions of material facts and that the plaintiffs
and other members of a putative class of shareholders suffered damages as a
result. The defendants in the Federal Securities Actions have moved to have the
actions transferred to the District of Arizona and also have moved to dismiss
the actions on various grounds. These motions are pending before the Court.

Also pending before the Court is a motion by one of the plaintiffs to
consolidate the three actions, for his appointment as class representative and
for his selection of lead counsel. We are also a nominal defendant in two
substantially identical shareholder derivative actions filed in the Superior
Court of Arizona, Maricopa County in January 2003 (the Shareholder Derivative
Actions). The complaints allege, among other things, that certain of our
current and former directors named in the complaints as defendants, breached
their fiduciary duties to the Company in connection with certain alleged issues
involving the Companys accounting practices and internal controls. The
Complaint also names as a defendant the Companys external auditor. In response
to a joint motion by the parties in the Shareholder Derivative
Actions to stay these proceedings pending the resolution of the motions to dismiss
the Federal Securities Actions, the Court stayed these proceedings
through May 30, 2003. Because the motions to dismiss the Federal
Securities Actions will likely still be pending on May 30th, we expect the
parties in the Shareholder Derivative Actions to seek an extension of
this stay.

We believe the Federal Securities and Shareholder Derivative Actions are
without merit and intend to vigorously defend ourselves. However, we cannot
predict with certainty the outcome of these actions. We are likely to incur
significant legal expense in connection with the defense of these claims. In
addition, if we are not successful in our efforts to seek dismissal of these
actions, we could incur substantial other expenses.

ESTIMATES OF FUTURE FINANCIAL RESULTS ARE INHERENTLY UNRELIABLE.

From time to time, our representatives may make public predictions or forecasts
regarding the Companys future results, including estimates regarding future
revenues, expense levels, tax rates, capital expenditures, earnings or earnings
from operations. Any forecast regarding our future performance reflects various
assumptions. These

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assumptions are subject to significant uncertainties, and,
as a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors, including the
considerations specific to our business that are outlined in this discussion as
well as general economic and geopolitical trends that can adversely affect the
market for our products and services. Many of the factors that can adversely
affect our business are beyond our control. As a result, there can be no
assurance that our performance will be consistent with any management forecasts
or that the variation from such forecasts will not be material and adverse.
Investors are cautioned not to base their entire analysis of our business and
prospects upon isolated predictions, but instead are encouraged to utilize the
entire available mix of historical and forward-looking information made
available by us, and other information relating to our Company and its
products, when evaluating our prospective results of operations.

CONSOLIDATION IN THE INDUSTRIES WE SERVE MAY ADVERSELY AFFECT OUR ABILITY TO
SELL OUR PRODUCTS AND SERVICES.

Mergers, acquisitions and personnel changes at financial institutions and
electronic funds transfer networks may adversely affect our business, financial
condition and results of operations. Currently, the banking and EFT industries
are consolidating, causing the number of financial institutions and processing
networks to decline. This consolidation could cause us to lose:



| | - |  | current and potential customers;                                                                                                                                                    
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | market share if the combined entity determines that it is more
efficient to develop in-house products and services similar to ours or
use our competitors product and services; and
|
| | - |  | revenue if the combined institution is able to negotiate a
greater volume discount for, or discontinue the use of, our products
and services.                                       

For example, one of the larger customers of our electronic payments business,
the STAR network, was purchased by one of our competitors, Concord EFS during
2001 and First Data Corporation, which owns a substantial equity interest in
the NYCE Network, has now agreed to purchase Concord EFS. Both the STAR and
NYCE networks utilize our electronic funds transfer software. We cannot predict
what effect the combination of these two companies would have on our business.

OUR EFFORTS TO IMPROVE THE MARGINS OF OUR ATM MANAGEMENT COMPANIES MAY NOT BE
SUCCESSFUL.

Since October 2001, we have been acquiring independent ATM management companies
and we now operate the largest network of off-premise ATMs in North America.
For the quarter ended March 31, 2003, this business segment contributed
revenues of $33.8 million, or 25.9% of our total revenues, at an operating
margin of 5.5%.

Our ability to improve the margins of this business will require us to
effectively integrate the operations of acquired businesses into our
organization, efficiently manage the deployment of the ATMs and generate
additional sources of revenue. A key component of our integration efforts is
the migration of the processing of the transactions generated at our ATMs from
third parties to our own data centers. We provide the processing for 11,000 of
the 15,700 ATMs we have deployed in the United States and we plan to convert
approximately 2,300 of the remaining machines by the end of 2003. Processing
for the approximately 2,400 remaining U.S. ATMs will be transitioned to our
networks as existing contractual commitments expire or as the economics
associated with accelerated contract cancellations makes it logical to do so.
We do not, however, expect to convert the 1,400 ATMs we manage in Canada to our
networks for a substantial period of time, if at all. All of the conversions
require a degree of cooperation from existing third-party processors and so no
assurance can be given that we will be successful in our conversion efforts.

We expect improvement in our ATM business to come from four major sources: (i)
reduced operating costs through the integration of sales, marketing, operations
and facilities, (ii) the elimination of third party processing fees by
migrating the processing of ATM transactions to our data centers, (iii) the
redeployment of under-performing or idle ATMs and (iv) additional revenues from
branding and other value-added services. We are also seeking to market larger
scale ATM programs to financials institutions. If we are not successful in our
effort to improve the revenues and profitability of our ATM business, our
future results of operations will be adversely affected. In addition, the
expansion of the installed base of ATMs may require the application of
increased amounts of cash to keep the machines appropriately supplied with cash
for withdrawal by consumers.

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OUR ABILITY TO EXPAND THROUGH ACQUISITIONS INVOLVES RISKS AND MAY NOT BE
SUCCESSFUL.

We are currently considering possible acquisitions to complement and grow our
existing businesses. Our ability to expand through acquisitions, involves many
risks, including:



| | - |  | the operations, technology and personnel of any acquired
companies may be difficult to integrate;                                                                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | the allocation of management resources to consummate these
transactions may disrupt our day to day business;                                                                                                                           
|
| | - |  | acquired businesses may not achieve anticipated revenues,
earnings or cash flow. Such a shortfall could require us to write-down
the goodwill associated with any acquired company, which would
adversely affect our reported earnings.

WE FACE INTENSE COMPETITION IN ALL AREAS OF OUR BUSINESS, AND IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED.

We face intense competition from a number of companies. Further, we expect that
competition will intensify as the movement towards increasing consolidation
within the financial services industry continues. 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 debit network processors, including First Data
Corporation, VISA Debit Processing Services, Concord EFS, Midwest
Payment Systems and Fiserv;               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | financial institutions that have developed in-house processing
capabilities or services similar to ours, including Wells Fargo, M&I
Bank and Fifth Third National Bank.

In the ATM management services market, our competitors include Concord EFS,
Genpass, certain ATM equipment manufacturers and numerous independent service
organizations (ISOs).

In the decision support and risk management market, our principal competitors
include:



| | - |  | providers of fraud management data and software including Primary
Payment Systems (a subsidiary of Concord EFS), Equifax, Experian and
TransUnion;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | retail check verification and electronic check processing
providers, including Certegy and Telecheck, a subsidiary of First Data
Corporation.     

In the professional services market, our competitors include:



| | - |  | electronic funds transfer software providers, including
Transaction System Architects, S2, Oasis, Mosaic and PaySys;
| | - |  | --------------------------------------------------------------------------------------------------------------------
|
| | - |  | outsourcing solutions companies, including Spectramind/Wipro Ltd,
Daksh and Infosys Technologies.                   

In the market for electronic transaction processing, the principal factors on
which we compete are price and service levels. Following the loss of our
contract with the STAR network, the proportion of our electronic processing
revenues derived from the processing of transactions that originate from ATM
machines has substantially increased due to the loss of the POS debit
transactions that were formerly routed through our switch by the STAR network.
The future growth of our revenues in this market is dependent upon securing an
increasing volume of transactions. If we cannot control our transaction
processing expenses, we may not remain price competitive and our revenues will
be adversely affected. Our revenues can also be adversely affected by pricing
concessions, such as those we made in the first quarter of 2003 to retain a
significant processing customer, we make in order to retain our existing
customers or attract new customers. In addition, some of our competitors have
indicated that they may be prepared to provide customer prospects with up-front
cash incentives to acquire or retain their processing business. Given that
these competitors have substantially greater financial resources than we do, it
will be difficult for us to obtain significant new processing customers, or
retain the customers we have, if this approach becomes a significant
competitive factor.

We have also seen an effort by processors such as First Data, Concord and VISA
that are affiliated with branded networks to seek exclusive processing
relationships with the debit card-issuing financial institutions who subscribe
to their networks. Ownership or control of a branded network may also enable
these competitors to influence the interchange fees financial institutions
receive from retailers who accept debit transactions from the consumers who

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hold debit cards issued by these network participants. We are unable to predict
whether this trend towards an increasing level of vertical integration between
transaction processors and branded debit networks, and the horizontal
integration that could result from the combination of First Data Corporation
and Concord EFS, will have a positive or negative impact upon our processing
business over the long-term.

In the market for ATM deployment, processing and management services, the
primary basis of competition is price and service levels. Our ability to sell
additional machines and processing contracts in this market is dependant on our
ability to control our costs while maintaining effective levels of customer
service. If we are not successful in these efforts we will not achieve the
growth objectives we have for our ATM management or electronic transaction
processing businesses.

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 competitive position in
these markets could be harmed if our competitors were able to compile different
data sources and analytical capabilities that proved to be more effective than
our products. In addition, we continue to experience competitive pressure on
the pricing for our check verification service.

Our software business competes primarily upon the basis of the quality and
reliability of our software and its conformance to the current and future
requirements of our customers. If we do not maintain the technological
relevance of our software offerings or fail to anticipate shifts in customer
requirements, our ability to sell our software products will be impaired. Our
business process outsourcing and professional services offerings compete
primarily on the basis of the quality of service levels and, to some degree,
price. The future growth of this aspect of our business is dependent on
demonstrating to our current and prospective customers that we are a dependable
and efficient service provider.

In addition to our current competitors, it is reasonable to expect that we will
encounter substantial competition from new companies. No assurance can be given
that we will be able to compete effectively against current and future
competitors. Increased competition could result in price reductions, reduced
gross margins or loss of market share.

IF WE EXPERIENCE SYSTEM FAILURES, THE PRODUCTS AND SERVICES WE PROVIDE TO OUR
CUSTOMERS COULD BE DELAYED OR INTERRUPTED, WHICH WOULD HARM OUR BUSINESS AND
REPUTATION AND RESULT IN THE LOSS OF CUSTOMERS.

Our ability to provide reliable service largely depends on the efficient and
uninterrupted operations of our computer and telecommunications network systems
and our data centers. Any significant interruptions could severely harm our
business and reputation and result in a loss of revenue and customers. We could
also be required to apply substantial amounts of our available cash to fund our
settlement obligations and it is possible that we would not have sufficient
resources in the event of a severe and persistent outage. Our systems and
operations could be exposed to damage or interruption from fire, natural
disaster, unlawful acts, power loss, telecommunications failure, unauthorized
entry and computer viruses. Although we have taken steps to prevent system
failures, we cannot be certain that our measures will be successful and that we
will not experience service interruptions. Further, our property and business
interruption insurance may not be adequate to compensate us for all losses or
failures that may occur.

LEGISLATION COULD HARM OUR ABILITY TO COLLECT AND USE DATA, INCREASE OUR
OPERATING COSTS OR OTHERWISE HARM OUR BUSINESS.

Existing and new laws and regulations relating to consumer privacy protection
could harm our ability to collect and use consumer data, increase our operating
costs or otherwise harm our business. We collect personal data about consumers
for use in our decision support and risk management products. Due to the
increasing public concern over consumer privacy rights, Congress and state
legislatures have adopted and are considering adopting laws and regulations
restricting the purchase, sale and sharing of personal information about
consumers. For example, some states have restricted the sale of motor vehicle
records, including drivers license lists, and some states refuse to disclose
this information at all.

The federal financial modernization law, known as the Gramm-Leach-Bliley Act,
imposes significant consumer information privacy requirements on any entity
engaged in the business of providing financial services, including entities
that provide services to financial institutions. Federal agencies, such as the
Comptroller of the Currency and

25



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the Federal Trade Commission, have issued
regulations to implement these requirements. The Act requires covered companies
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
thereafter. In addition, the Act requires covered companies to give an opt-out
notice to consumers before sharing consumer information with third parties. The
opt-out notice requirement in the Act is subject to several exceptions for
credit reporting and fraud prevention purposes. Although we believe these
exceptions apply to our business, government agencies could interpret their
regulations in a manner that could expand the scope of the Act in ways which
could adversely affect our business. In addition, even if the regulations do
not affect us directly, uncertainty over the scope of the regulations could
make financial institutions unwilling or reluctant to share consumer-related
information with us.

The Gramm-Leach-Bliley Act does not prohibit state legislation or regulations
that are more restrictive on our collection and use of data. More restrictive
legislation or regulations have been introduced in the past and could be
introduced in the future in Congress and the states. For example, in the past
legislation has been proposed which would require consumers to opt in to any
plan which would allow their nonpublic personal information to be disclosed. We
are unable to predict whether more restrictive legislation or regulations will
be adopted in the future. Any future legislation or regulations could have a
negative impact on our business.

The pre-emptive provisions of the Federal Fair Credit Reporting Act, which
governs our SCAN(SM) and ChexSystems businesses, are currently scheduled to
expire in January 2004. The expiration of these provisions means that state
governments could also seek to issue legislation or regulations in this area.
The creation of additional state regulations could complicate our compliance
efforts and otherwise have a negative impact on our business. We are unable to
predict whether the Federal pre-emptive provisions will be continued or whether
any state would thereafter seek to implement more stringent requirements if
they are not so continued.

In addition, regulations are currently being considered regarding the
application of the Americans with Disabilities Act to ATM networks. Although
any regulations could result in increased opportunities for ATM sales by us,
they could also require us to retire or retrofit portions of the ATM base we
own and could motivate some of our customers to elect to retire their ATMs. It
is also possible that existing ATM networks will be exempted from any future
regulations. We are unable at this time to determine whether, and to what
extent, any final regulations will impact our business.

IF THE SECURITY OF OUR DATABASES IS COMPROMISED, OUR REPUTATION COULD SUFFER
AND CUSTOMERS MAY NOT BE WILLING TO USE OUR PRODUCTS AND SERVICES.

If the security of our databases is compromised, our business could be
materially adversely affected. In our electronic payments and risk management
businesses, we collect personal consumer data, such as names and addresses,
social security numbers, drivers license numbers, checking and savings account
numbers and payment history records. Unauthorized access to our database could
result in the theft or publication of personal confidential information and the
deletion or modification of personal records or otherwise cause interruptions
in our operations. These concerns about security are increased when we transmit
information overseas or over the Internet. A security or privacy breach may:



| | - |  | deter customers from using our products and services;                          
| | - |  | -------------------------------------------------------------------------------
|
| | - |  | harm our reputation;                                                           
|
| | - |  | expose us to liability;                                                        
|
| | - |  | increase our operating expenses to remediate problems caused by the breach; and
|
| | - |  | decrease market acceptance of electronic commerce transactions in general.     

WE ARE DEPENDENT ON DELUXE FOR A SIGNIFICANT PORTION OF OUR REVENUE. During the
first quarter of 2003, net sales to Deluxe represented 7.9% of our total
revenues before reimbursed expenses. On a quarter over quarter basis, however,
total revenues from Deluxe declined by 16.4% to $9.7 million during the first
three months of 2003 from $11.6 million during the comparable period in 2002.
Although Deluxe has established minimum spending targets of $43 million per
year through March 31, 2005 for software development and maintenance services
it obtains from us, further efforts at expense reduction 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. Our current contract with Deluxe expires
in March, 2005.

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WE MAY EXPERIENCE SOFTWARE DEFECTS, DEVELOPMENT DELAYS AND INSTALLATION
DIFFICULTIES, WHICH WOULD HARM OUR BUSINESS AND REPUTATION AND EXPOSE US TO
POTENTIAL LIABILITY.

Our services and products are based on sophisticated software and computing
systems and we often encounter delays when developing new products and
services. Further, the software underlying our products and services has
occasionally contained and may in the future contain undetected errors or
defects when first introduced or when new versions are released. In addition,
we may experience difficulties in installing or integrating our products and
technologies on platforms used by our customers or in new environments, such as
the Internet. Defects in our software products, errors or delays in the
processing of electronic transactions or other difficulties could result in:



| | - |  | delays in market acceptance;               
| | - |  | -------------------------------------------
|
| | - |  | additional development costs;              
|
| | - |  | diversion of technical and other resources;
|
| | - |  | loss of customers;                         
|
| | - |  | negative publicity; or                     
|
| | - |  | exposure to liability claims.              

Although we attempt to limit our potential liability for warranty claims
through disclaimers and limitation-of-liability provisions in our license and
client agreements, we cannot be certain that these measures will be successful
in limiting our liability.

THERE ARE A NUMBER OF RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES AND
OPERATIONS THAT COULD HARM OUR BUSINESS.

Because we currently sell some of our products and services in Europe,
Australia and Canada and provide outsourcing services from India, our business
is subject to risks associated with doing business internationally. Also, we
may not be successful in selling our services outside of the United States. For
the three months ended March 31, 2003, we generated approximately 8.3% of our
net sales outside of the United States. Our future results could be harmed by a
variety of factors, including:



| | - |  | changes in foreign currency exchange rates;                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| | - |  | changes in a specific countrys or regions political and
economic conditions, particularly in emerging markets;
|
| | - |  | potentially unfavorable tax rules;                                                                              
|
| | - |  | tariffs, duties and other trade barriers;                                                                       
|
| | - |  | reduced protection for intellectual property rights;                                                            
|
| | - |  | challenges in managing widespread operations;                                                                   
|
| | - |  | changes in foreign laws and regulatory requirements or in foreign policy; and                                   
|
| | - |  | varying business practices in foreign countries.                                                                

In addition, the process of selling our outsourcing services typically involves
visits to our sites in India by prospective customers. Increased levels of
international tension can result in prospective clients postponing or canceling
plans to visit our facilities, lengthening the sales cycle and otherwise
inhibiting our ability to grow this business.

CHANGES IN INDIAN TAX LAWS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our Indian software development and business process management operations
qualify for tax incentives associated with businesses which operate within
designated geographic locations. These incentives generally provide us with
exemptions from Indian tax on certain business income generated from these
operations and phase out through March 2009. We cannot assure you that these
tax benefits will be continued in the future at their current levels or at all.
For example, the Indian tax laws were changed, effective April 1, 2002 through
March 31, 2003, to subject 10% of our previously tax exempt income to a 36.75%
tax. If our Indian tax benefits are further reduced or eliminated, our taxes in
future periods would increase. Such an increase could reduce our profits.

WE FACE TERMINATION AND COMPLIANCE RISKS WITH RESPECT TO OUR GOVERNMENT
CONTRACTS.

All of our government contracts can be terminated at any time, without cause,
by the contracting governmental entity. We realized 7.7% of our net sales in
the first quarter of 2003 (before reimbursed expenses) pursuant to

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contracts of
this type. If a government contract is so terminated, we are generally entitled
only to receive compensation for the services provided or costs incurred at the
time of termination and a reasonable profit on the contract work performed
prior to the date of termination. In addition, all of our government contracts
require us to comply with various contract provisions and procurement
regulations, and in some cases, accounting requirements. Violations of some of
these provisions could, if not cured, result in termination of the contract and
fines.

There will be a decline in the revenues of the government services business in
2003 due to the expiration of existing contracts. Our Medicaid eligibility
verification contract with the state of New York expired in December 2002. The
approximate annual revenue from this contract was $12 million. An EBT contract
that generated approximately $4 million in revenue in 2002 also expired at the
end of 2002. Although we have obtained and continue to seek additional EBT
contracts, these new contracts will not generate sufficient revenues in 2003 to
offset the approximately $16 million decline in revenues we will experience due
to the contract expirations described above.

In addition, Citibank has been awarded the EBT contract for the Western States
EBT Alliance (Arizona, Alaska, Colorado, Guam, Hawaii, Idaho and Washington).
We currently act as a subcontractor to Citibank for this alliance and this
relationship generated approximately $5.6 million in revenues (excluding
revenues derived from reimbursed expenses) in 2002. We expect that, as a result
of Citibank being awarded this EBT contract, our role as a subcontractor will
be discontinued. This transition will begin to impact our business in 2003 and
we expect to see the significant contracts for this coalition largely roll-off
by the end of 2004.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.

Despite our efforts to protect our intellectual property rights, third parties
may infringe or misappropriate our intellectual property rights, or otherwise
independently develop substantially equivalent products and services. The loss
of intellectual property protection or the inability to secure or enforce
intellectual property protection could harm our business and ability to
compete. We rely on a combination of trademark and copyright laws, trade secret
protection and confidentiality and license agreements to protect our
trademarks, software and know-how. We have also applied for patent protection
on some of the features of our newer products. We may be required to spend
significant resources to protect our trade secrets and monitor and police our
intellectual property rights.

Third parties may assert infringement claims against us in the future. In
particular, there has been a substantial increase in the issuance of business
process patents, which may have broad commercial implications. Claims for
infringement of all types of patents are becoming an increasing source of
litigation. If we become subject to an infringement claim, we may be required
to modify our products, services and technologies or obtain a license to permit
our continued use of those rights. We may not be able to do either of these
things in a timely manner or upon reasonable terms and conditions. Failure to
do so could seriously harm our business and operating results. In addition,
future litigation relating to infringement claims could result in substantial
costs to us and a diversion of management resources. Adverse determinations in
any litigation or proceeding could also subject us to significant liabilities
and could prevent us from using some of our products, services or technologies.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT A
CHANGE IN CONTROL.

Provisions of our certificate of incorporation and bylaws and Delaware law may
delay or prevent a change in control of our Company that you may consider
favorable. These provisions include the following:



| | - |  | no cumulative voting by stockholders for directors;                                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | a classified board of directors with three-year staggered terms;                                                                                      
|
| | - |  | the ability of our board to set the size of the board of
directors, to create new directorships and to fill vacancies;                                
|
| | - |  | the ability of our board to issue preferred stock, without
stockholder approval, with rights and preferences that may be superior
to our common stock;
|
| | - |  | the ability of our board to amend our bylaws;                                                                                                         
|
| | - |  | a prohibition of stockholder action by written consent;                                                                                               
|
| | - |  | advance notice requirements for stockholder proposals and for nominating candidates to our board;                                                     
|
| | - |  | restrictions under Delaware law on mergers and other business
combinations between us and any holder of 15% or more of our
outstanding common stock;  

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| | - |  | a requirement that 66-2/3% of our stockholders and 66-2/3% of our
directors approve certain corporate transactions, including mergers
and consolidations, sales of assets or amendments to our certificate
of incorporation; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | we have adopted a stockholder rights plan, which discourages the
unauthorized acquisition of 15% or more of our common stock or an
unauthorized exchange or tender offer.                                                       

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following exhibits are filed as part of this report:

|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------
|Exhibit |  |                                                                                                                                                                                                                                                                                     |  |                 
|No.     |  | Description                                                                                                                                                                                                                                                                         |  | Method of filing
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|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
the Securities and Exchange Commission (the 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 Designation 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)                                                                                  |  | *               
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.1    |  | Schedule identifying additional Transition Assistance
Agreements omitted pursuant to Instruction 2 to Item 601 of
Regulation S-K                                                                                                                                                    |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.2    |  | Schedule identifying other Change in Control Agreements
omitted pursuant to Instruction 2 to Item 601 of Regulation
S-K                                                                                                                                                             |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.3    |  | Amendment No. 2, dated January 21, 2003, to Change in Control
Agreement by and between the Company and Steven F. Coleman                                                                                                                                                            |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.4    |  | Amendment No. 2, dated January 21, 2003, to change in Control
Agreement by and between the Company and Colleen McKeown
Adstedt                                                                                                                                                      |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.5    |  | Restricted Stock Right Award Agreement, dated February 14,
2003 by and between the Company and Steven F. Coleman                                                                                                                                                                    |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.6    |  | Restricted Stock Right Award Agreement, dated February 14,
2003 by and between the Company and Colleen McKeown Adstedt                                                                                                                                                              |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.7    |  | Mutual Release, dated February 7, 2003, by and between the
Company and Michael A. Spilsbury                                                                                                                                                                                         |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.8    |  | Release, dated January 2, 2003, by and between the Company
and Paul W. Finch                                                                                                                                                                                                        |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.9    |  | Employment Agreement, dated February 14, 2003, by and between
the Company and Thomas S. Liston                                                                                                                                                                                      |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.10   |  | Description of Compensation Program for Non-Employee Directors                                                                                                                                                                                                                      |  | Filed herewith  
|        |  |                                                                                                                                                                                                                                                                                     |  |                 
|10.11   |  | Purchase Agreement, dated January 16, 2003, by and between
the Company and Wheaton Franciscan Services, Inc.                                                                                                                                                                        |  | Filed herewith  

30



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|        |  |                                       |  |                 
|------- |  | ------------------------------------- |  | ----------------
|Exhibit |  |                                       |  |                 
|No.     |  | Description                           |  | Method of filing
|        |  |                                       |  |                 
|99.1    |  | Written statement by Paul F. Walsh    |  | Filed herewith  
|        |  |                                       |  |                 
|99.2    |  | Written statement by Thomas S. Liston |  | Filed herewith  

*Incorporated by reference



|(b) |  | Reports on Form 8-K
|--- |  | -------------------

The Company filed a report on Form 8-K on March 31, 2003 containing an Item 4
disclosure regarding a change in accountants for the audit of the financial
statements of its consolidated subsidiary iDLX Holdings BV.

31



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SIGNATURES

Pursuant to the requirements 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.

|                   |  |                                     
|------------------ |  | ------------------------------------
|                   |  | eFunds Corporation                  
|                   |  | (Registrant)                        
|                   |  |                                     
|                   |  |                                     
|Date: May 15, 2003 |  | /s/ Paul F. Walsh                   
|                   |  |                                     
|                   |  | Paul F. Walsh                       
|                   |  | Chief Executive Officer and Chairman
|                   |  |                                     
|                   |  |                                     
|Date: May 15, 2003 |  | /s/ Thomas s. Liston                
|                   |  |                                     
|                   |  | Thomas S. Liston                    
|                   |  | Chief Financial Officer             

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CERTIFICATION

I, Paul F. Walsh, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of eFunds Corporation;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                    
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                                          
|------------------ |  | -----------------------------------------
|Date: May 15, 2003 |  | /s/ Paul F. Walsh                        
|                   |  |                                          
|                   |  | By: Paul F. Walsh                        
|                   |  | Its: Chief Executive Officer and Chairman

33



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CERTIFICATION

I, Thomas S. Liston, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of eFunds Corporation;                                                                                                                                                                                                                                                     
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                    
|
| |  | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                             
|------------------ |  | ----------------------------
|Date: May 15, 2003 |  | /s/ Thomas S. Liston        
|                   |  |                             
|                   |  | By: Thomas S. Liston        
|                   |  | Its: Chief Financial Officer

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Index to Exhibits

|        |  |                                                                                                                                  |  |             |  | 
|------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | 
|Exhibit |  |                                                                                                                                  |  |             |  | 
|No.     |  | Description                                                                                                                      |  | Page Number
|        |  |                                                                                                                                  |  |            
|10.1    |  | Schedule identifying additional Transition Assistance
Agreements omitted pursuant to Instruction 2 to Item 601 of
Regulation S-K
|        |  |                                                                                                                                 
|10.2    |  | Schedule identifying other change in Control Agreements
omitted pursuant to Instruction 2 to Item 601 of Regulation
S-K         
|        |  |                                                                                                                                 
|10.3    |  | Amendment No. 2, dated January 21, 2003, to Change in Control
Agreement by and between the Company and Steven F. Coleman        
|        |  |                                                                                                                                 
|10.4    |  | Amendment No. 2, dated January 21, 2003, to change in Control
Agreement by and between the Company and Colleen McKeown
Adstedt  
|        |  |                                                                                                                                 
|10.5    |  | Restricted Stock Right Award Agreement, dated February 14,
2003 by and between the Company and Steven F. Coleman                
|        |  |                                                                                                                                 
|10.6    |  | Restricted Stock Right Award Agreement, dated February 14,
2003 by and between the Company and Colleen McKeown Adstedt          
|        |  |                                                                                                                                 
|10.7    |  | Mutual Release, dated February 7, 2003, by and between the
Company and Michael A. Spilsbury                                     
|        |  |                                                                                                                                 
|10.8    |  | Release, dated January 2, 2003, by and between the Company
and Paul W. Finch                                                    
|        |  |                                                                                                                                 
|10.9    |  | Employment Agreement, dated February 14, 2003, by and between
the Company and Thomas S. Liston                                  
|        |  |                                                                                                                                 
|10.10   |  | Description of Compensation Program for Non-Employee Directors                                                                  
|        |  |                                                                                                                                 
|10.11   |  | Purchase Agreement, dated January 16, 2003, by and between
the Company and Wheaton Franciscan Services, Inc.                    
|        |  |                                                                                                                                 
|99.1    |  | Written statement by Paul F. Walsh                                                                                              
|        |  |                                                                                                                                 
|99.2    |  | Written statement by Thomas S. Liston                                                                                           

35