<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                    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 ending March 31, 2001

                                       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                      (IRS Employer
    of incorporation or organization)                Identification Number)

 7272 East Indian School Road, Suite 420
           Scottsdale, Arizona                               85251
(Address of principal executive offices)                   (Zip Code)

        Registrant's telephone number, including area code: 602-659-2135


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, 2001 was 45,670,546.

================================================================================
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

                       eFUNDS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>

<CAPTION>
                                                                              March 31,
                                                                                2001     December 31,
  (dollars in thousands)                                                    (unaudited)      2000
                                                                            -----------  ------------
<S>                                                                          <C>          <C>
Current Assets
  Cash and cash equivalents ..............................................   $  70,473    $  78,731
  Time deposit subject to compensating balance arrangement ...............       1,500       10,000
  Restricted custodial cash ..............................................       6,312        3,787
  Accounts receivable - net ..............................................      76,901       57,825
  Deferred income taxes ..................................................      12,589       12,589
  Prepaid expenses and other current assets ..............................      11,787        7,111
                                                                             ---------    ---------
    Total current assets .................................................     179,562      170,043
                                                                             ---------    ---------
Property and equipment - net .............................................      76,520       77,355
Long-term investments ....................................................      18,167       18,500
Restricted cash ..........................................................      24,325       27,734
Intangibles
  Goodwill - net .........................................................      42,042       43,019
  Software - net .........................................................      35,076       33,150
  Other intangible assets - net ..........................................      14,327       15,004
                                                                             ---------    ---------
    Total intangibles - net ..............................................      91,445       91,173
                                                                             ---------    ---------
Other non-current assets .................................................       3,361        3,302
                                                                             ---------    ---------
        Total non-current assets .........................................     213,818      218,064
                                                                             ---------    ---------
         Total assets ....................................................   $ 393,380    $ 388,107
                                                                             =========    =========
Current Liabilities
  Accounts payable .......................................................   $  29,829    $  29,163
  Accrued liabilities
    Accrued compensation and employee benefits ...........................      10,045       18,703
    Accrued contract losses ..............................................      21,462       22,247
    Other ................................................................      36,623       20,953
  Borrowings on line of credit ...........................................        --          5,303
  Long-term debt due within one year .....................................       2,221        2,100
                                                                             ---------    ---------
    Total current liabilities ............................................     100,180       98,469
Long-term debt ...........................................................       1,624        2,244
Deferred income taxes ....................................................          50           24
Other long-term liabilities ..............................................          50           50
Commitments and contingencies (Notes 4, 5, 7 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: 45,529,778 shares at March 31, 2001 and 45,500,000 at
     December 31, 2000) ..................................................         455          455
  Additional paid-in capital .............................................     392,073      391,699
  Accumulated deficit ....................................................     (99,150)    (103,233)
  Accumulated other comprehensive loss ...................................      (1,902)      (1,601)
                                                                             ---------    ---------
    Stockholders' equity .................................................     291,476      287,320
                                                                             ---------    ---------
      Total liabilities and stockholders' equity .........................   $ 393,380    $ 388,107
                                                                             =========    =========
</TABLE>

See Notes to Unaudited Consolidated Financial Statements


                                       2
<PAGE>

                       eFUNDS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Quarter Ended March 31,
                                                                          -----------------------
(dollars and shares in thousands, except per share amounts)                  2001         2000
                                                                          ---------    ---------
<S>                                                                       <C>          <C>
Net Revenue ...........................................................   $ 124,498    $ 100,255
                                                                          ---------    ---------
  Cost of revenue, excluding loss contract and asset impairment charges      79,650       58,757
  Loss contract and asset impairment charges ..........................        --           --
                                                                          ---------    ---------
    Total cost of revenue .............................................      79,650       58,757
                                                                          ---------    ---------
Gross Margin ..........................................................      44,848       41,498
                                                                          ---------    ---------
  Selling, general and administrative expense .........................      38,808       38,757
                                                                          ---------    ---------
  Income from operations ..............................................       6,040        2,741
Other Income (Expense)
  Interest expense ....................................................        (290)      (1,174)
  Interest and other income (expense) .................................         835          386
                                                                          ---------    ---------
Income before income taxes ............................................       6,585        1,953
Provision for income taxes ............................................      (2,502)        (737)
                                                                          ---------    ---------
Net income ............................................................   $   4,083    $   1,216
                                                                          =========    =========
  Weighted average shares outstanding .................................      45,506       40,000
                                                                          =========    =========
  Weighted average shares and potential dilutive shares outstanding ...      46,249       40,000
                                                                          =========    =========
Net income per share - basic and diluted ..............................   $    0.09    $    0.03
                                                                          =========    =========
</TABLE>

See Notes to Unaudited Consolidated Financial Statements


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         Quarter Ended March 31,
                                                                         -----------------------
 (dollars in thousands)                                                     2001        2000
                                                                          --------    --------
<S>                                                                       <C>         <C>
Cash Flows from Operating Activities
  Net income ..........................................................   $  4,083    $  1,216
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities
      Depreciation ....................................................      4,438       2,900
      Amortization of intangibles .....................................      5,351       3,639
      Loss on disposals of property and equipment .....................         71          69
      Deferred income taxes ...........................................         26           9
      Changes in assets and liabilities
            Restricted cash ...........................................        884       3,651
            Accounts receivable .......................................    (19,076)     (8,649)
            Accounts payable ..........................................        666       4,507
            Income taxes receivable/payable ...........................      3,134       8,450
            Accrued contract losses ...................................       (785)     (1,058)
            Other assets and liabilities ..............................     (1,045)     (1,108)
                                                                          --------    --------
                    Net cash provided by (used in) operating activities     (2,253)     13,626
                                                                          --------    --------
Cash Flows from Investing Activities
  Capital expenditures ................................................     (9,077)     (8,797)
  Payments for investments ............................................       --       (20,000)
  Other ...............................................................       --           (49)
                                                                          --------    --------
                Net cash used in investing activities .................     (9,077)    (28,846)
                                                                          --------    --------
Cash Flows from Financing Activities
  Net borrowings on line of credit ....................................     (5,303)        739
  Proceeds from issuance of long-term debt ............................       --             7
  Payments on long-term debt ..........................................       (499)       (477)
  Release of loan guarantee collateral ................................      8,500        --
  Proceeds from exercise of stock options .............................        374        --
  Capital contributions by Deluxe .....................................       --        23,905
  Dividends paid to Deluxe ............................................       --       (13,800)
                                                                          --------    --------
                Net cash provided by financing activities .............      3,072      10,374
                                                                          --------    --------
Adjustment for lag in financial reporting (Note 9) ....................       --        (4,127)

Net decrease in cash and cash equivalents .............................     (8,258)     (8,973)
Cash and cash equivalents at beginning of period ......................     78,731      35,849
                                                                          --------    --------
Cash and cash equivalents at end of period ............................   $ 70,473    $ 26,876
                                                                          ========    ========
</TABLE>


See Notes to Unaudited Consolidated Financial Statements


                                       4
<PAGE>

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   The consolidated balance sheet as of March 31, 2001, the consolidated
     statements of operations for the quarters ended March 31, 2001, and 2000,
     and the consolidated statements of cash flows for the quarters ended March
     31, 2001, and 2000 are unaudited. In the opinion of management, all
     adjustments necessary for a fair presentation of such financial statements
     are included. Other than those discussed in the notes below, such
     adjustments consist only of normal recurring items. Interim results are not
     necessarily indicative of results for a full year. The consolidated
     financial statements and notes are presented in accordance with
     instructions for Form 10-Q, and do not contain certain information included
     in the Company's annual consolidated financial statements and notes. The
     consolidated financial statements and notes appearing in this report should
     be read in conjunction with the Company's audited consolidated financial
     statements and related notes incorporated by reference in the Company's
     Annual Report on Form 10-K for the year ended December 31, 2000.

2.   The Company was incorporated in Delaware in December 1984 and changed its
     name from Deluxe Electronic Payment Systems, Inc. to eFunds Corporation in
     September 1999. The Company was formerly a wholly owned subsidiary of
     Deluxe Corporation (Deluxe). In January 2000, Deluxe announced that its
     board of directors had approved a plan to combine its electronic payments,
     professional services and government services businesses under the Company
     and to undertake a series of transactions designed to establish the Company
     as an independent, publicly traded company.

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

     In October 2000, Deluxe announced its plans to distribute all of Deluxe's
     shares of the Company's common stock to its shareholders through a spin-off
     transaction and in November 2000, Deluxe declared a dividend of all the
     40,000,000 common shares of the Company held by Deluxe. This dividend was
     distributed on December 29, 2000 in the amount of approximately 0.5514 of
     an eFunds share for each Deluxe share. Deluxe received a ruling from the
     Internal Revenue Service that the distribution qualified as tax-free to
     Deluxe and its shareholders for U.S. federal income tax purposes, except to
     the extent that cash was received in lieu of fractional shares.

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

     Deluxe has been, and is expected to continue to be, a significant client
     for the Company's professional services business. Beginning in 2000, the
     Company's software services to Deluxe were formalized into a five-year
     software development outsourcing agreement. If Deluxe fails to spend a
     minimum of $43 million under this agreement in any year, it will be
     obligated to make payments for a portion of the Company's fees based on
     estimates of the Company's lost profits. This agreement also calls for the
     Company to provide business process management services, including accounts
     receivable, accounts payable and other general accounting services as well
     as data entry services to Deluxe. Deluxe's annual minimum spending target
     for business process


                                       5
<PAGE>

     management services ranges from $8.1 million in 2000 to $4.2 million in
     2004. The provision of services by the Company under the agreement is
     non-exclusive, and Deluxe may contract with any third party for the
     provision of professional services. Revenue from Deluxe for information
     technology and business process management services was $14.3 million in
     the first quarter of 2001 and $15.4 million in the first quarter of 2000.

     Deluxe contributed the ownership of various subsidiaries and certain assets
     and liabilities of business operations (the Transferred Businesses) to the
     Company on March 31, 2000. As the Company and the Transferred Businesses
     were under common control, the consolidated financial statements of the
     Company include all of the assets, liabilities, revenues and expenses of
     the businesses conducted through the payment systems and services and
     government services segments.

     Because the Transferred Businesses were under common control, the
     accompanying consolidated financial statements have been retroactively
     restated to reflect the historical consolidated results of operations and
     cash flows for the quarter ended March 31, 2000, as if the contribution of
     the Transferred Business described above had occurred and been operating as
     a stand-alone business throughout the periods presented on an
     "as-if-pooled" basis.

     The historical financial information the Company has included in the
     consolidated financial statements may not be reflective of what the results
     of operations, financial condition and cash flows would have been had the
     Company been a separate, stand-alone entity during the periods presented.
     As a result, the historical financial information may not necessarily be
     indicative of what the results of operations, financial condition and cash
     flows will be in the future. The Company has not made adjustments to
     reflect changes that may occur to its cost structure, funding and
     operations as a result of the spin-off.

3.   The Company's total comprehensive income for the quarters ended March 31,
     2001 and 2000 was $3.8 million and $0.8 million, respectively. The
     Company's total comprehensive income consists of net income and foreign
     currency translation adjustments.

4.   In March 2000, the Company paid cash of $20.0 million for an approximately
     24% interest in a limited liability company that provides automated teller
     machine (ATM) management services. This investment is being accounted for
     under the equity method of accounting and is included in long-term
     investments in the Company's consolidated balance sheet as of March 31,
     2001. The difference of $20 million between the carrying value of the
     investment and the underlying equity in the net assets of the limited
     liability company is being accounted for in the same manner as goodwill and
     is being amortized over 15 years and is included in the Company's
     consolidated financial statements in interest and other income (expense)
     along with the Company's share of the limited liability company's losses.
     The carrying value of the investment is $18.2 million at March 31, 2001.

     The Company has agreed to make up to $35 million of cash available for
     supplying ATMs managed by the limited liability company and had supplied
     $24.3 million of cash for this purpose as of March 31, 2001. This cash is
     classified as long-term restricted cash in the accompanying balance sheet.
     The Company has also agreed to guarantee up to $3.0 million (Canadian) face
     value of equipment leases for Canadian customers of this company and has
     indicated that, subject to the mutual agreement of the parties upon
     definitive terms and conditions, it would be willing to work towards an
     arrangement under which the Company would loan the limited liability
     company up to $12.0 million to enable it to undertake mutually agreed-upon
     acquisitions. No such loans have been extended through March 31, 2000. In
     September 2000, the Company entered into an ATM deployment agreement with
     this Company under which the Company receives fees paid by customers
     utilizing ATM machines deployed by it and interchange fees from their
     banks. The limited liability company manages this network of ATM machines
     in exchange for a management fee determined by reference to the number of
     ATM's deployed.


                                       6
<PAGE>

5.   The Company has incurred significant charges for losses relating to its
     government services business in prior periods. A roll-forward of the
     Company's loss reserve for losses on government services contracts is as
     follows:

                                                     Quarter Ended March 31,
                                                     -----------------------
                                                        2001        2000
                                                      --------    --------
          Balance, December 31, 2000 ..............   $ 22,247    $ 20,599
          Provision for contract losses ...........       --          --
          Reversal of provision for contract losses       --          --
          Charges to reserve ......................       (785)     (1,057)
                                                      --------    --------
          Balance at March 31, 2001 ...............   $ 21,462    $ 19,542
                                                      ========    ========

     Deluxe has agreed to indemnify the Company for certain future losses
     arising from litigation based on the conduct of the government services
     business prior to the IPO as well as incremental future losses on contracts
     of the government services segment which were in a loss position at April
     30, 2000. The Company plans to record any amounts received from Deluxe
     under the indemnification agreement as a reduction of expense when any
     additional contract or litigation losses are recognized. Deluxe's total
     indemnification obligations to the Company are limited to $14.6 million. No
     such indemnification payments have been required through March 31, 2001.

6.   The Company's consolidated balance sheets reflect restructuring accruals of
     $3.4 million and $0.4 million as of March 31, 2001 and December 31, 2000,
     respectively, for employee severance and other costs. During the first
     quarter of 2001, additional restructuring accruals of $3.2 were recorded
     relating to the planned closure of the Company's operations in Bothell,
     Washington. These new restructuring charges are reflected in selling,
     general and administrative (SG&A) expenses in the consolidated statement of
     operations for the quarter ended March 31, 2001.

     The following table summarizes the change in the Company's restructuring
     accruals for the quarter ended March 31, 2001:

                                                       Number
                                                    of employees
          (dollars in thousands):                     affected      Amount
                                                    ------------   -------
          Balance, December 31, 2000 ...............        9      $   378
          Severance paid ...........................       (7)        (177)
          Adjustments ..............................     --            (40)
          Provision for restructuring...............      224        3,200
                                                      -------      -------
          Balance, March 31, 2001 ..................      226      $ 3,361
                                                      =======      =======

7.   On December 29, 2000, the Company secured a $15.0 million revolving credit
     facility with a term of nine months. Each borrowing thereunder will bear
     interest at either the lender's base or offshore rate at the Company's
     discretion. Although the Company did not borrow any funds under this
     facility through March 31, 2001, it posted an irrevocable standby letter of
     credit in the amount of $4.0 million to guarantee its performance under a
     government services contract with the state of New York. The issuance of
     this letter of credit reduced the Company's borrowing capacity under the
     facility to $11.0 million. The facility is guaranteed by certain of the
     Company's subsidiaries and requires the Company to comply with certain
     financial and non-financial covenants.


                                       7
<PAGE>

     As of March 31, 2001, the Company's India operations had a $10.0 million
     credit facility, denominated in Indian rupees, available at the lender's
     prime interest rate. Borrowings under this facility are due on demand. The
     Company repaid the outstanding balance of the facility in March 2001. The
     Company guarantees this facility and $8.5 million of a time deposit account
     maintained by the Company to support this guaranty was returned to the
     Company when the loan was repaid. The average amount drawn on this credit
     facility during the first quarter of 2001 was $5.3 million at a weighted
     average interest rate of 15.5%. The average amount drawn on this line
     during 2000 was $4.5 million at a weighted average interest rate of 15.4%.

     The Company also issues letters of credit in the ordinary course of
     business under this facility. At March 31, 2001 the aggregate value of
     outstanding letters of credit amounted to $1.0 million. These letters of
     credit are collateralized by a $1.5 million time deposit account maintained
     with the lender.

8.   The Company has organized its business units into two operating segments
     based on the nature of the customers served by each segment. These segments
     are payment systems and services and government services. The payment
     systems and services segment provides the financial services and retail
     industries with a comprehensive suite of payment management and decision
     support products as well as information technology consulting, software
     development and business process outsourcing services. The government
     services segment provides online electronic benefit transfer (EBT) services
     under entitlement programs on behalf of state and local governments and
     Medicaid eligibility verification services. The Company previously
     organized its business units into three segments. Prior periods have been
     restated to conform to the current period presentation.

     The Company's segments operate primarily in the United States. The payment
     systems and services segment also has international operations. No single
     customer of the Company accounted for more than 10% of total net revenues
     for the quarters ended March 31, 2001 and 2000 other than Deluxe, which
     accounted for 11.6% and 15.6% of the Company's total net revenues in those
     periods, respectively.

     The accounting policies of the segments are the same as those described in
     Note 2 to the Company's audited consolidated financial statements
     incorporated by reference in the Company's Annual Report on Form 10-K. In
     evaluating segment performance, management focuses on income from
     operations. The income from operations measurement utilized by management
     excludes special charges (e.g., restructuring charges, asset impairment
     charges, certain one-time charges that management believes are not
     reflective of on-going operations, etc.). Special charges in the first
     quarter of 2001 were $3.2 million related to the closure of the Company's
     operations in Bothell, Washington. These costs were recorded in selling,
     general and administrative expense in the payment systems and services
     segment. No special charges were recorded in the first quarter of 2000.

                                                 Quarter Ended March 31, 2001
                                            ------------------------------------
                                              Payment
                                            systems and  Government    Total
(dollars in thousands)                        services    services  Consolidated
                                            -----------  ---------- ------------
Total net revenues .......................... $113,765    $ 10,733    $124,498
Gross margin excluding special charges ......   40,985       3,863      44,848
Operating income excluding special charges...    6,226       3,014       9,240
Special charges .............................    3,200        --         3,200
Gross margin including special charges ......   40,985       3,863      44,848
Operating income  including special charges..    3,026       3,014       6,040
Depreciation and amortization expense .......    9,789        --         9,789
Segment assets ..............................  371,228      22,152     393,380
Capital purchases ...........................    9,077        --         9,077


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                        Quarter Ended March 31, 2000
                                                                (Restated)
                                                   ---------------------------------------
                                                     Payment
                                                   systems and   Government       Total
 (dollars in thousands)                             services      services    Consolidated
                                                   -----------   ----------   ------------
<S>                                                 <C>           <C>          <C>
Total net revenues ................................ $ 88,465      $ 11,790      $100,255
Gross margin excluding special charges ............   37,915         3,583        41,498
Operating income excluding special charges ........      706         2,035         2,741
Special charges ...................................     --            --            --
Gross margin including special charges ............   37,815         3,583        41,498
Operating income (loss) including special charges..      706         2,035         2,741
Depreciation and amortization expense .............    6,539          --           6,539
Segment assets ....................................  289,663        26,087       315,750
Capital purchases .................................    8,797          --           8,797
</TABLE>


Revenues are attributed to geographic areas based on the location of the assets
and employees producing the revenues. The Company's operations by geographic
area are as follows (in thousands):

                                      Total Net Sales to
                                      External Customers  Property and Equipment
                                     -------------------  ----------------------
                                                             Quarter Ended
                                            March 31,           March 31,
                                     -------------------  ----------------------
                                       2001       2000       2001        2000
                                     --------   --------  ---------    --------
United States ....................   $113,850   $ 94,158  $  67,160    $ 64,490
United Kingdom ...................      5,004      3,783      1,721       1,952
India ............................      5,644      2,314      7,620       3,984
Other foreign countries...........       --         --           19          34
                                     --------   --------  ---------    --------
Total consolidated ...............   $124,498   $100,255     76,520    $ 70,460
                                     ========   ========  =========    ========

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

10.  In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133 Accounting for Derivative
     Instruments and Hedging Activities, which provides guidance on accounting
     for derivatives and hedge transactions. The statement was effective for the
     Company on January 1, 2001. The effects of this pronouncement did not have
     a material effect on reported operating results or financial position of
     the Company.

11.  In connection with the Company's EBT and collection's activities, the
     Company posts surety bonds with state agencies guaranteeing its performance
     of certain obligations related to contracts or state requirements. The
     aggregate amount of such bonds outstanding at March 31, 2001 was $9.0
     million.


                                       9
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations:
         -------------

Overview: We provide transaction processing and ATM outsourcing services,
decision support and risk management products as well as information technology
consulting and business process management services to financial institutions,
retailers, electronic funds transfer networks, e-commerce providers and
government agencies. Our payment system and services segment offers all of our
products and services to all of our customers other than government agencies.
Our government services segment provides online electronic transfer of benefits
(EBT) under entitlement programs on behalf of state and local governments and
Medicaid eligibility verification services. We operate primarily in the United
States, although our payment systems and services segment has international
operations. We previously organized our business into three segments. Prior
period segment data have been restated to conform to the current period
presentation.

We previously announced our intention to exit the government services business
when our current contractual commitments expire in 2006. Although revenues in
this segment may continue to decline, we will now consider the extension or
renewal of existing contracts when such extensions or renewals can be
accomplished on a profitable basis. We renewed one such contract for a term of
five years in January 2001. We intend to continue to take steps to improve
profitability of our existing government services business and we are now
willing to consider EBT contracts that extend beyond 2006.

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

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


                                       10
<PAGE>

Results of Operations - Quarter ended March 31, 2001 Compared to Quarter Ended
March 31, 2000

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

<TABLE>
<CAPTION>
                                                                           ----------------
                                                                            Quarters Ended
                                                                               March 31,
                                                                           ----------------
                                                                            2001      2000
                                                                           ------    ------
<S>                                                                        <C>       <C>
Net revenue
  Payment systems and services .........................................    91.3%     88.2%
  Government services ..................................................     8.7      11.8
                                                                           -----     -----
    Total net revenues .................................................   100.0     100.0
                                                                           -----     -----

Cost of revenue
  Payment systems and services .........................................    58.5      50.4
  Government services
    Cost of revenue excluding loss contract and asset
      impairment charges ...............................................     5.5       8.2
    Loss contract and asset impairment charges .........................    --        --
                                                                           -----     -----
      Total cost of revenue ............................................    64.0      58.6
                                                                           -----     -----

Gross margin ...........................................................    36.0      41.4
                                                                           -----     -----

Selling, general and administrative expense ............................    31.1      38.7
                                                                           -----     -----

Income from operations .................................................      4.9       2.7
                                                                           -----     -----

Other income (expense)
  Interest expense .....................................................    (0.2)     (1.2)
  Interest and other income (expense) ..................................     0.6       0.4
                                                                           -----     -----

Income before income taxes .............................................     5.3       1.9

Provision for income taxes .............................................    (2.0)     (0.7)
                                                                           -----     -----

Net income .............................................................     3.3%      1.2%
                                                                           =====     =====
</TABLE>


Net revenue - Net revenue increased $24.2 million, or 24.2%, to $124.5 million
in the first quarter of 2001 from $100.3 million in the first quarter of 2000.

Payment systems and services net revenue increased $25.3 million, or 28.6%, to
$113.8 million in the first quarter of 2001 from $88.5 million in the first
quarter of 2000. This increase was primarily due to the opening of a new call
center in Mumbai, India and an ATM management and deployment agreement that we
entered into in September 2000. We also saw growth due to increased sales of new
account opening products and royalties arising from an agreement signed in the
second quarter of 2000 with an information solutions provider to allow it to use
the Company's DebitBureau(TM) database. Offsetting these factors was a decline
in the Company's check authorization business due to the loss of several retail
customers due to closures and price reductions associated with the execution of
longer term contracts.

Increases in transaction processing volumes of 26.7%, in the first quarter of
2001 over 2000, also contributed to our increase in revenue, although the
revenue increases related to increased transaction processing volumes were
offset, to some extent, by the effect of pricing structures for certain of our
larger customers and by the fact that the processing agreements also provide for
fixed fees that are not dependant upon the number of transactions processed.


                                       11
<PAGE>

Deluxe has been, and is expected to continue to be, a significant customer for
our payment systems and services business. Total net revenue from Deluxe was
$14.4 million, or 11.6% of our total net revenues in the first quarter of 2001
compared to $15.6 million, or 15.6% of our total net revenues in the first
quarter of 2000.

Government services net revenues decreased $1.1 million, or 9.0%, to $10.7
million during the first quarter of 2001 from $11.8 million in the first quarter
of 2000. The decrease was primarily due to the expiration of an electronic
benefit-switching contract in the second quarter of 2000. This decline was
partially offset by increased revenues from Medicaid eligibility verification
services. There may be a continuing decline in the revenues of this segment,
although we will now consider the renewal or extension of contracts where the
same can be accomplished on a profitable basis.

Cost of revenue - Cost of revenue increased $20.9 million, or 35.6%, to $79.7
million in the first quarter of 2001 from $58.8 million in the first quarter of
2000. As a percentage of net revenue, cost of revenue was 64.0% in the first
quarter of 2001, compared to 58.6% in the first quarter of 2000. The increase in
cost of revenue was driven primarily by the incremental costs associated with
the ATM management and deployment agreement and, to a lesser extent, the costs
associated with the operation of the Mumbai call center and increased
transaction processing activity. Excluding the effect of the ATM management and
deployment agreement, cost of revenue as a percentage of net revenue was 58.3%.
The Company is continuing to evaluate the performance of this agreement and may
exit this arrangement in future periods if it does not achieve expected levels
of profitability.

Payment systems and services cost of revenue increased by $22.2 million, or
44.0%, to $72.8 million in the first quarter of 2001 from $50.6 million in the
first quarter of 2000. As a percentage of payment systems and services net
revenue, cost of revenue increased to 64.0% in the first quarter of 2001 as
compared to 57.1% in the first quarter of 2000. The quarter over quarter
increase in cost of revenue as a percentage of net sales is due to the ATM
management and deployment agreement, under which the cost of revenue currently
approximates the associated net revenues.

Government services cost of revenue decreased $1.3 million, or 16.3%, to $6.9
million in the first quarter of 2001 from $8.2 million in the first quarter of
2000. As a percentage of government services net revenue, cost of revenue
decreased to 64.0% in the first quarter of 2001 compared to 69.6% in the first
quarter of 2000. The reduction in cost of revenue on a percentage basis for the
quarter ended March 31, 2001 is a reflection of continuing efforts to reduce the
cost of supporting a declining revenue stream and reduced costs due to the
expiration of an electronic benefit switching contract in the second quarter of
2000.

Gross margin - Gross margin increased $3.3 million, or 8.1%, to $44.8 million
during the first quarter of 2001 from $41.5 million in the first quarter of
2000. As a percentage of net revenue, gross margin decreased to 36.0% during the
first quarter of 2001 as compared to 41.4% in the first quarter of 2000. The
decrease in gross margin as a percentage of net revenue is due to the ATM
deployment agreement, which continues to exhibit a slight negative gross margin.
This decrease was partially offset by positive margin contributions by the new
call center operation in Mumbai, India and a one-time fee from an existing
customer.

Selling, general and administrative (SG&A) expenses - SG&A expenses were $38.8
million in the first quarter of both 2001 and 2000. We incurred $3.2 million of
expense in the first quarter of 2001 primarily for severance costs related to
the closure of our operations in Bothell, Washington. No similar costs were
incurred in the first quarter of 2000. As a percentage of net revenue, SG&A
expenses decreased to 31.2% during the first quarter of 2001 compared to 38.7%
in the first quarter of 2000. Excluding the $3.2 million incurred in the first
quarter of 2001 for costs related to the closure of our Bothell operations, SG&A
expense as a percentage of net revenue decreased to 28.6% in the first quarter
of 2001 from 38.7% in the first quarter of 2000. Factors contributing to the
decrease were lower levels of spending in 2001 for promotional advertising and
continued integration and consolidation efforts.


                                       12
<PAGE>

Other income (expense) - Other income was $0.5 million during the first quarter
of 2001 compared to other expense of $(0.8) million for the first quarter of
2000. Other income in the first quarter of 2001 includes the interest earned on
cash and cash equivalents, including the remaining proceeds of our initial
public offering, offset by interest expense on our India line of credit and
goodwill amortization related to our investment in a limited liability company.
Other expense in the first quarter of 2000 includes interest earned on a lower
cash and cash equivalent balance than in 2001, offset by interest expense
related to our intercompany balance payable to Deluxe, which was settled at the
spin-off, and interest expense on our India line of credit.

Provision for income taxes - The provision for income taxes was $2.5 million in
the first quarter of 2001 compared to $0.8 million in the first quarter of 2000
resulting in effective tax rates of 38.0% and 37.7%, respectively. Our Indian
software development and business process management operations qualify for tax
incentives associated with businesses that operate within designated geographic
locations. Such incentives generally provide us with exemptions from Indian tax
on certain business income generated from these operations. These incentives
phase out through the end of 2008.

Liquidity, Capital Resources and Financial Condition - At March 31, 2001, cash
and cash equivalents were $70.5 million. We had $6.3 million of restricted cash
that we temporarily hold in custodial accounts on behalf of clients and had
supplied $24.3 million in restricted cash to ATMs deployed by us. We have agreed
with the company who manages this ATM base to make up to $35 million of cash
available for this purpose. We have also agreed to guarantee up to $3.0 million
(Canadian) face value of equipment leases for Canadian customers of this company
and we have indicated that, subject to the mutual agreement of the parties upon
definitive terms and conditions, we would be willing to work towards an
arrangement under which we would loan this company up to $12.0 million to enable
it to undertake mutually agreed-upon acquisitions. No such loans have been
advanced through March 31, 2001.

As of March 31, 2001, the Company's India operations had a $10.0 million credit
facility, denominated in Indian rupees, available at the lender's prime interest
rate. Borrowings under this facility are due on demand. The Company repaid the
outstanding balance of the facility in March 2001. The Company guarantees this
facility, but $8.5 million maintained in a time deposit account to support this
guaranty was returned to the Company when the loan was repaid. The average
amount drawn on this credit facility during the first quarter of 2001 was $5.3
million at a weighted average interest rate of 15.5%. The average amount drawn
on this line during 2000 was $4.5 million at a weighted average interest rate of
15.4%.

The Company also issues letters of credit in the ordinary course of business
under this facility. At March 31, 2001 the aggregate value of outstanding
letters of credit amounted to $1.0 million. These letters of credit are
collateralized by a $1.5 million time deposit account maintained with the
lender.

We obtained an additional $15.0 million revolving credit facility on December
29, 2000. The new facility has a term of nine months and borrowings thereunder
will bear interest at either the lender's base or offshore rate at our
discretion. Although we did not borrow any funds under this facility through
March 31, 2001, we posted an irrevocable standby letter of credit in the amount
of $4.0 million to guarantee our performance under a government services
contract with the state of New York. The issuance of this letter of credit
reduced our borrowing capacity under the facility to $11.0 million. The facility
is guaranteed by certain of our subsidiaries and requires us to comply with
certain financial and non-financial covenants.

We intend to replace the $15.0 million facility with a larger credit facility
with one or more financial institutions prior to maturity. If we are unable to
secure a replacement credit facility prior to maturity, we will repay any
outstanding borrowings from available cash and cash equivalents.

In connection with our EBT and collection activities, we post surety bonds with
state agencies guaranteeing our performance of certain obligations related to
contracts or state requirements. The aggregate amount of such bonds outstanding
at March 31, 2001 was $9.0 million.


                                       13
<PAGE>

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

                                                       Summary of Cash Flows
                                                       Quarter Ended March 31,
                                                       -----------------------
(dollars in thousands)                                    2001       2000
                                                        --------    --------
Cash provided by (used in) operating activities......   $ (2,253)   $ 13,626
Cash used in investing activities ...................     (9,077)    (28,846)
Cash provided by financing activities ...............      3,072      10,374
Adjustment for lag in financial reporting ...........       --        (4,127)
                                                        --------    --------
Net decrease in cash and cash equivalents ...........   $ (8,258)   $ (8,973)
                                                        ========    ========

Cash flows from operating activities were $(2.3) million and $13.6 million for
the quarters ended March 31, 2001 and 2000, respectively. The decrease in
operating cash flow reflects the payment of employee profit sharing and bonus
plan obligations relating to 2000 and an increase in accounts receivable, which
is reflective of the growth of the company.

Cash used in investing activities was $9.1 million for the quarter ended March
31, 2001, due to purchases of capital assets and expenditures for software
investments. Cash used in investing activities was $28.8 million for the quarter
ended March 31, 2000, primarily due to the investment of $20.0 million to
purchase a 24% interest in a provider of ATM management services and purchases
of capital assets and software investments of $8.8 million.

Cash provided from financing activities was $3.1 million for the quarter ended
March 31, 2001. We used cash to repay debt of $5.8 million including the
repayment of $5.3 million under our Indian credit facility. In connection with
that repayment, the lender returned $8.5 million of the $10.0 million that we
had placed in a time deposit account as collateral to support our guarantee of
this facility. The remaining $1.5 million remains on deposit with the lender as
collateral for letters of credit issued under this facility. Cash provided from
financing activities was $10.4 million for the quarter ended March 31, 2000.
Deluxe provided $10.1 million to increase the capitalization of the Company in
preparation for the spin-off and we used cash to repay debt of $0.5 million. In
addition, we borrowed $0.7 million against our credit facility in India.

The adjustment for the lag in financial reporting during December 1999
represents the net cash flows of our Indian operations. Previously, this
business reported its results of operations and financial position on a
one-month lag. In January 2000, this business changed its reporting period to
coincide with the rest of our Company.

We believe that cash generated from operations, borrowings under our credit
facilities and the remaining net proceeds from our initial public offering will
provide sufficient funds for our operations for the foreseeable future.

Recently Issued Accounting Standards - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, which provides
guidance on accounting for derivatives and hedge transactions. The statement was
effective for us on January 1, 2001. The effects of this pronouncement have not
had a material impact on our reported operating results or financial position.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

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

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


                                       14
<PAGE>

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


Forward Looking Statements
The Company has also announced its expectations for 2001 and provided guidance
for its second quarter:

     -    Revenues for 2001 are targeted to reflect year over year growth in the
          range of 25 to 30 percent;
     -    Operating income for 2001 is expected to be approximately 10 to 12
          percent of revenue (excluding special charges);
     -    Basic earnings per share for 2001 are targeted at $0.86 per share
          (excluding special charges);
     -    The effective tax rate for 2001 is expected to average approximately
          38 percent, which includes the negative impact of non-deductible
          goodwill amortization charges;
     -    Capital spending for 2001 is expected to be approximately $50 million
          reflecting product development and enhancement costs, customer service
          improvements and data center consolidation initiatives as well as
          infrastructure needs to support continued growth;
     -    Depreciation and amortization expense for 2001 is expected to be
          approximately 7 to 8 percent of total revenues;
     -    Because of the varying timing and types of contracts the Company is
          now signing, particularly in the business process outsourcing area,
          the Company is no longer giving specific guidance on its gross margin
          and SG&A expectations; and
     -    Second quarter revenues are expected to be approximately $130 million,
          with basic earnings per share approximating $0.18.


                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings
        -----------------

On May 14, 1999, we filed a trademark infringement action against Citizen
Advisers, Inc. in the United States district Court for the Central District of
California. The complaint alleged false designation of origin and trademark
infringement, trade name infringement and unfair competition under California
law regarding the use of the "E FUND" mark and efund.com Internet domain by
Citizen Advisers. We sought injunctive relief to prevent Citizen Advisers from
using the "E FUND" mark and damages and expenses, including attorneys' fees.
Citizen's asserted claims against us based on our use of the mark "eFunds". We
have settled this litigation without payment by either side to the other and we
and Citizens's have agreed to guidelines regarding the use of our respective
marks.

On June 2, 2000, James Stern in the Los Angeles Superior Court sued us, Deluxe
and a number of financial institutions. Mr. Stern alleged that our ChexSystems
product racially profiles and discriminates against minorities and prevents
customers from living above the poverty level. We removed this case to the
United States District Court for the Central District of California on June 30,
2000. On September 12, 2000, the District Court dismissed Mr. Stern's case for
failure to state a claim. The District court gave Mr. Stern leave to amend and
refile his complaint and he did so on September 19, 2000 in the District Court
alleging unfair business practices and civil rights violations by all
defendants. The case was subsequently remanded to the Los Angeles Superior
Court. We consider this amended complaint to be frivolous and wholly without
merit and the Superior Court issued an order for Mr. Stern to show cause why his
case should not be dismissed on April 9, 2001. Mr. Stern's reply to this order
is due on or before June 5, 2001.

Item 2. Changes in Securities and Use of Proceeds
        -----------------------------------------

The Registration Statement on Form S-1 (Registration No. 333-33992) related to
our initial public offering of shares of our common stock (together with certain
associated preferred stock purchase rights) was declared effective on June 26,
2000, and the related offering commenced on June 27, 2000. We sold 5,500,000
shares at a price of $13.00 per share on June 30, 2000 for an aggregate public
offering price of $71,500,000.


                                       15
<PAGE>

The net offering proceedings to the Company after deducting the total expenses
associated with the offering was estimated to be $64,459,370. The following
table summarizes the amount of these net-offering proceeds that were used during
the period from the effective date of the offering through March 31, 2001 for
the purposes shown:



Infrastructure and cost savings initiatives ...................   $ 8,800,000*
Product development expenditures ..............................     9,200,000*
Construction of plants, buildings and facilities ..............     7,400,000*
Purchase and installation of machinery and equipment ..........     8,600,000*
Purchases of real estate ......................................             0
Acquisition of other businesses ...............................             0
Repayment of indebtedness .....................................     5,303,000
Working capital ...............................................             0
Temporary investments (money market funds and commercial
  paper having a maturity of two weeks or less) ...............    25,156,370
                                                                  -----------
    Total .....................................................   $64,459,370
                                                                  ===========
* Estimated


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 (the "Commission"), in the
Company's press releases, letters and reports to stockholders and in oral
statements made by the Company's 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 actual results to differ materially from the Company's historical
experience and its 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 the Company's
financial performance and could cause the Company's actual results for future
periods to differ from any opinions or statements expressed with respect
thereto. Such differences could be material and adverse. The Company will not
undertake and specifically declines 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.

Estimates of future financial results are inherently unreliable.

From time to time, representatives of the Company may make public predictions or
forecasts regarding the Company's future results, including estimates regarding
future revenues, expense levels, earnings or earnings from operations. Any
forecast regarding the Company's future performance reflects various
assumptions. These 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 those
described in this discussion), many of which are beyond the Company's control.
As a result, there can be no assurance that the Company's 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 the Company's 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 the Company, and
other information affecting the Company and its products, when evaluating the
Company's prospective results of operations.


                                       16
<PAGE>

In addition, representatives of the Company may occasionally comment publicly on
the perceived reasonableness of published reports by independent analysts
regarding the Company's projected future performance. Such comments should not
be interpreted as an endorsement or adoption of any given estimate or range of
estimates or the assumptions and methodologies upon which such estimates are
based. Undue reliance should not be placed on any comments regarding the
conformity, or lack thereof, of any independent estimates with the Company's own
present expectations regarding its future results of operations. The
methodologies employed by the Company in arriving at its own internal
projections and the approaches taken by independent analysts in making their
estimates are likely different in many significant respects. Although the
Company may presently perceive a given estimate to be reasonable, changes in the
Company's business, market conditions or the general economic climate may have
varying effects on the results obtained through the use of differing analyses
and assumptions. The Company expressly disclaims any continuing responsibility
to advise analysts or the public markets of its view regarding the current
accuracy of the published estimates of outside analysts. Persons relying on such
estimates should pursue their own independent investigation and analysis of
their accuracy and the reasonableness of the assumptions on which they are
based.

Consolidation in the banking industry 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 ATM networks
to decline. This consolidation could cause us to lose:

     o    current and potential customers;

     o    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

     o    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 transaction
processing business, the STAR Network, has been purchased by one of our
competitors, Concord EFS. Although we have a multi-year processing contract with
STAR, we cannot presently predict the possible long-term impact of this
acquisition on our business with certainty. The loss of STAR as a processing
customer would have an adverse effect on our business

We have only a limited history with our current business plan.

Our business model is still developing. In April 1999, we began the process of
combining five of Deluxe's former operating units into an integrated electronic
debit payment business. The businesses we combined were Deluxe Electronic
Payment Systems, Inc., DebitBureau(TM), ChexSystems, Inc., Deposit Payment
Protection Systems, Inc. and an electronic check conversion company that was
acquired in February 1999. Deluxe Electronic Payment Systems, Inc. and the
electronic check conversion company primarily process debit transactions. The
other companies maintain databases that help financial institutions and
retailers to determine whether to open a new checking or savings account for or
accept a check from a consumer. We combined these businesses in order to couple
our risk management products with our transaction processing capabilities in an
effort to create more products and services than the businesses would have
created as independent operating units. In January 2000, we decided to combine
our professional services business with our electronic payments and risk
management businesses because the addition of the information technology
expertise of this business would enhance our ability to develop, customize,
install and maintain our products. We may not be able to realize the anticipated
strategic and other benefits of these combinations in a timely manner, or at
all. Our management has been and will continue to be required to devote
substantial attention to the process of integrating our operations, technologies
and personnel and consolidating our infrastructure. The diversion of
management's attention and any difficulties encountered during the transition
could have an adverse impact on our on-going business activities and limit our
growth.


                                       17
<PAGE>

Our ATM deployment initiative may not be successful.

In September 2000, we entered into a new ATM deployment agreement with a limited
liability company in which we hold a 24% interest. Under this agreement, we have
assumed responsibility for ATM placement strategies and the expansion of the
limited liability company's former ATM base and the limited liability company is
responsible for managing and servicing the ATM base in exchange for a monthly
fee determined by reference to the number of ATMs under management. Our revenues
under this contract are received from the fees paid by consumers utilizing the
machines and interchange fees paid by their banks. Although this contract is
expected to generate significant revenue growth in 2001, if we are not
successful in deploying the ATM base in high volume locations, we will not
generate sufficient fee income to offset the costs associated with the
management of the ATMs. In addition, if the agreement is not extended beyond its
initial one-year term, the revenues derived from this contract would not
continue into future periods.

Currently, this business operates at a slight loss. Improvement in the future
will depend upon our ability to efficiently manage the deployment of the ATMs
and to generate additional revenues from the installed ATM base and the
placement of new machines. This is a relatively new business and so no assurance
can be given that we will be successful in these efforts. 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. We are continuing to monitor the performance of this
agreement and may exit this arrangement in future periods if our expectation of
improved performance is not realized.

Our government services business has not been profitable and Deluxe's
indemnification may not be adequate.

Our government services business contributed operating losses of approximately
$106,000 during 2000, $6.6 million in 1999 and $47.7 million in 1998. These
amounts include losses we recognized in 2000, 1999 and 1998 that represent
probable future losses from unprofitable long-term service contracts and the
write-off of assets associated with this business. The losses on the long-term
service contracts result from the revenues from the contracts being lower than
expected and the expenses to service the contract being higher than anticipated.
The assets associated with the government services business were written off
because this business has a negative overall cash flow and its assets have no
resale value.

Deluxe has agreed to indemnify us for future losses arising from any litigation
based on the conduct of the business prior to our initial public offering and
future losses on identified loss contracts in excess of our $29.2 million loss
contract reserves as of April 30, 2000. This indemnification obligation does not
apply to losses contemplated by the existing reserve and is subject to a $14.6
million limit. In addition, Deluxe's indemnification does not apply to any
contract that was not in a loss position as of April 30, 2000 and so if any of
these profitable contracts were to become unprofitable, no indemnification would
be available. Our loss contract reserves are based on estimates of the future
performance of identified contracts, and the estimated results may not be
realized. As a result, we may incur losses beyond our current reserves and
Deluxe's indemnification. For example, a reduction in the a number of welfare
recipients below our current expectations could increase our projected future
losses. These excess losses would be recognized in future periods and decrease
our earnings for those future periods.

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.


                                       18
<PAGE>

In the electronic payment management market, our principal competitors include:

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

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

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

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

     o    electronic funds transfer software providers, including Transaction
          Systems Architects, SLMsoft, Oasis, Mosaic and PaySys; and

     o    national information database companies and other content providers,
          including Equifax, Experian and Trans Union.

In the market for electronic transaction processing, the principal factors on
which we compete are price and service levels. 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.

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, competitive pressure on our check verification
business is increasing and may require us to make significant investments to
maintain our customer base and acquire new customers.

In addition to our current competitors, we expect substantial competition from
established and new companies. We cannot assure you 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.

We may not sustain profitability.

We had net losses of $8.2 million in 1999, $14.6 million in 1998 and $34.1
million in 1997, and, although we had net income of $4.6 million for the year
ended December 31, 2000 and $4.1 million for the quarter ended March 31, 2001,
we may not maintain profitability. Our ability to maintain profitable operations
will depend on growth in electronic debit payments, our ability to attract new
clients, the continued market acceptance of our products and services and our
ability to control further losses on government services contracts.

We are substantially dependent upon continued growth in the market for
electronic debit payment services.

If the electronic debit payments market does not grow or grows more slowly than
expected, our business will suffer. Several factors could inhibit the acceptance
and growth of electronic debit payments, including:

     o    these types of payments are relatively new alternatives to the more
          familiar cash, check and credit card payment options. Consumers and
          businesses may be unwilling to change their established payment
          preferences and adopt these new forms of payment as quickly as we
          expect; and

     o    consumers may be concerned that these newer payment options are not as
          safe or reliable as more traditional payment methods. Consumers may
          also believe that these payment technologies offer a lower level of
          privacy.


                                       19
<PAGE>

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 network systems and data centers. Any
significant interruptions could severely harm our business and reputation and
result in a loss of customers. Our systems and operations could be exposed to
damage or interruption from fire, natural disaster, power loss,
telecommunications failure, unauthorized entry and computer viruses. Although we
have taken steps to prevent a system failure, we cannot be certain that our
measures will be successful and that we will not experience system failures.
Further, our property and business interruption insurance may not be adequate to
compensate us for all losses or failures that may occur.

If we fail to develop and introduce new and enhanced products and services, we
will not be able to compete effectively and our ability to generate revenues
will suffer.

Our success will depend in part on our ability to continue to develop and
introduce new and enhanced payment and risk management products and services
that keep pace with competitive introductions, technological changes and
changing customer preferences. If we fail to anticipate or respond adequately to
new developments, we may lose opportunities for business with both current and
potential customers.

Legislation relating to consumer privacy protection 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 drivers license lists, and some states refuse to disclose
this information at all.

The new federal financial modernization law, known as the Gramm-Leach-Bliley
Act, imposes significant new 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 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 to share consumer-related information with us.

The 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.


                                       20
<PAGE>

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 business, 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 over the Internet. A security or privacy breach may:

     o    deter customers from using our products and services;

     o    harm our reputation;

     o    expose us to liability;

     o    increase our operating expenses to remediate problems caused by the
          breach; and

     o    decrease market acceptance of electronic commerce transactions in
          general.

We are dependent on Deluxe for a significant portion of our revenue.

In 2000, net sales to Deluxe represented 14.2% of our total net revenues and
sales to Deluxe represented 11.6% of our total net revenues for the first
quarter of 2001. Deluxe has established minimum spending targets of $43 million
per year through March 31, 2005 for software development, maintenance and
support services from our professional services business. We will also provide
Deluxe with business process outsourcing services during this period. The loss
of Deluxe as a customer or a material reduction in the amount of services it
orders from us would materially adversely affect our future results of
operations and financial condition.

The success of our strategy to expand our Internet delivery channels depends on
product development efforts and increased adoption by businesses and consumers
of the Internet as a means for commerce.

We believe that the Internet will become an increasingly important means by
which consumers and businesses buy and sell products and services. Accordingly,
developing the means to process debit-based Internet transactions is an
important factor in our ability to increase sales of our electronic payment
services. In order to be successful with this initiative, we must develop
efficient ways for participants in Internet-based transactions to send and
receive debit payments with a minimum level of risk or inconvenience. We cannot
assure you that our Internet applications will be widely accepted in the market.
In addition, the success of our Internet strategy depends on the continued
growth and use of the Internet as a means of commerce. If commerce over the
Internet does not become more accepted and widespread, our business and results
of operations could suffer.


                                       21
<PAGE>

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:

     o    delay in market acceptance;

     o    additional development costs;

     o    diversion of technical and other resources;

     o    loss of customers;

     o    negative publicity; or

     o    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.

We depend on the continued services of our key officers.

Our future success depends upon the continued services of a number of key
officers, including John Blanchard, our Chairman and Chief Executive Officer,
Paul Bristow, our Executive Vice President and Chief Financial Officer, and Dr.
Nikhil Sinha, our Executive Vice President, Business Enterprise Group. The loss
of the technical knowledge and industry expertise of any of these officers could
seriously harm our business.

Our attempts to expand by means of acquisitions and strategic alliances may not
be successful.

Tax requirements related to our spin-off from Deluxe will restrict our ability
to complete significant acquisitions through the issuance of our common stock.
Further, our ability to expand in this manner involves many risks, including:

     o    the operations, technology and personnel of any acquired companies may
          be difficult to integrate;

     o    the allocation of resources to consummate these transactions may
          disrupt our business;

     o    acquired businesses may not achieve anticipated revenues, earnings or
          cash flow;

     o    strategic alliances may not be successful or we may not realize
          anticipated benefits in a timely manner, or at all; and

     o    our relationships with existing customers and business partners may be
          weakened or terminated as a result of these transactions.


                                       22
<PAGE>

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 South and Latin America, 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. In the first quarter of 2001, we
generated approximately 8.6% of our net sales outside of the United States. Our
future results could be harmed by a variety of factors, including:

     o    changes in foreign currency exchange rates;

     o    changes in a specific country's or region's political and economic
          conditions, particularly in emerging markets;

     o    potentially unfavorable tax rules;

     o    tariffs, duties and other trade barriers;

     o    reduced protection for intellectual property rights;

     o    challenges in managing widespread operations;

     o    changes in foreign laws and regulatory requirements or in foreign
          policy; and

     o    varying business practices in foreign countries.

Conditions in India could adversely affect our operations.

We maintain software development and business process management facilities in
India. Political and economic conditions in India could adversely affect our
operations.

The Company's Indian software development and business process management
operations qualify for tax incentives associated with businesses which operate
within designated geographic locations. Such incentives generally provide us
with exemptions from Indian tax on certain business income generated from these
operations and phase out through the end of 2008. We cannot assure you that
these tax benefits will be continued in the future at their current levels or at
all. If these tax benefits were reduced or eliminated, our taxes in future
periods would likely increase.

We face collection risks on some payments.

A debt collection service we commenced in 2000 exposes us to collection risks.
For a limited number of clients of our check authorization service, we purchase
returned checks at a discounted price to the stated check amount and assume the
collection risk on the checks. We base our discounted purchase price on the
collection history of each client. We plan to introduce a check guarantee
program in 2001 pursuant to which we will purchase certain checks presented at
the point of sale at a discount from their face value and assume the subsequent
risk of collection. If we are unable to collect on checks at the expected rates
or if the payment quality of our portfolio of returned checks deteriorates, we
may incur a loss on the checks we purchase.


                                       23
<PAGE>

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 8.6% of our net sales in the
first quarter of 2001 pursuant to contracts of this type. If a government
contract is so terminated, the contractor generally is entitled to receive
compensation only 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.

Our government services business could be harmed by cost overruns on fixed-price
contracts.

In the first quarter of 2001, approximately 8.6% of our net sales were derived
from fixed-price, variable volume contracts of our government services business.
Under these contracts, we agree to perform services for an agreed unit price and
we bear the entire risk of cost overruns and changing volumes. If we do not
successfully manage these project and contract risks or if our original contract
estimates turn out to be inaccurate, we could suffer cost overruns and penalties
and our reputation and results of operations could be harmed. We recorded
charges of $40.9 million, $8.7 million and $9.7 million in 1998, 1999 and 2000,
respectively, as a result of these risks. We cannot assure you that we will not
incur additional charges of this type or that the indemnification Deluxe has
agreed to provide us with respect to our existing contracts will be sufficient.

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 for Internet-related business processes, which may have broad
implications for all participants in Internet commerce. Claims for infringement
of these 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.

Our historical financial information may not necessarily reflect our results as
a separate company.

We have only a limited operating history as an independent company. Some of the
historical financial information we have included in this Quarterly Report on
Form 10-Q has been carved out from Deluxe's consolidated financial statements
and may not necessarily reflect what our results of operations, financial
condition and cash flows would have been had we been a separate, stand-alone
entity during the periods presented. As a result of the IPO and the Spin-Off, we
are now required to provide our own financial, administrative and other
resources to operate as an independent public company and to replace other
services provided by Deluxe to us. As a result, the historical financial
information is not necessarily indicative of what our results of operations,
financial condition and cash flows will be in the future.


                                       24
<PAGE>

There are tax risks associated with the Spin-Off.

Deluxe has received confirmation from the Internal Revenue Service that, for
U.S. federal income tax purposes, the Spin-Off was generally tax-free to Deluxe
and to its shareholders. This confirmation was premised on a number of
representations and undertakings made by eFunds and Deluxe to the Internal
Revenue Service, including representations with respect to each company's
intention not to engage in certain transactions in the future. The Spin-Off may
be held to be taxable to Deluxe and to its shareholders who received eFunds
shares if the Internal Revenue Service determines that any of the
representations made were incorrect or untrue in any respect, or if any
undertakings made are not complied with. If, notwithstanding the confirmation of
the Internal Revenue Service, the Spin-Off is held to be taxable, both Deluxe
and its shareholders who received eFunds shares could be subject to a material
amount of taxes. We will be liable to Deluxe for any such taxes incurred by
Deluxe to the extent such taxes are attributable to specific actions or failures
to act by us, or to specific transactions involving us following the Spin-Off.
In addition, we will be liable to Deluxe for a portion of any taxes incurred by
Deluxe if the Spin-Off fails to qualify a tax-free as a result of a retroactive
change of law or other reasons unrelated to the action or inaction of either us
or Deluxe.

Deluxe generally has sole authority to respond to and conduct all tax
proceedings and tax audits relating to our operations prior to the Spin-Off and
to file all related returns on our behalf. The tax sharing agreement also
determines the amount of our liability to, or entitlement to payment from,
Deluxe with regard to taxes and tax refunds for these periods. This arrangement
may result in conflicts between Deluxe and us. Under the tax-sharing agreement,
Deluxe may choose to contest, compromise or settle any adjustment or deficiency
proposed by the relevant taxing authority in a manner that may be beneficial to
Deluxe and detrimental to us.

Tax limitations on issuance of our shares will restrict our ability to undertake
acquisitions.

We may be limited in the amount of shares that we can issue because the issuance
of our shares may cause the Spin-Off to be taxable to Deluxe under Section
355(e) of the Internal Revenue Code. As a result of such possible adverse tax
consequences, we may be restricted in our ability to effect certain acquisitions
or to enter into other transactions that would result in a change of control of
us.

Provisions in our charter documents and Delaware law and tax considerations
related to the spin-off 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 the Company that you may consider
favorable. These provisions include the following:

     o    no cumulative voting by stockholders for directors;

     o    a classified board of directors with three-year staggered terms;

     o    the ability of our board to set the size of the board of directors, to
          create new directorships and to fill vacancies;

     o    the ability of our board to issue preferred stock, without stockholder
          approval, with rights and preferences that may be superior to our
          common stock;

     o    the ability of our board to amend the bylaws;

     o    a prohibition of stockholder action by written consent;

     o    advance notice requirements for stockholder proposals and for
          nominating candidates to our board;


                                       25
<PAGE>

     o    restrictions under Delaware law on mergers and other business
          combinations between us and any holder of 15% or more of our
          outstanding common stock; and

     o    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.

In addition 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. Our tax sharing agreement with Deluxe also provides
that we will indemnify Deluxe for any taxes due if the Spin-Off or some of the
related transactions fail to qualify as tax-free because of our actions or
inactions. An acquisition of us by a third party could have such an effect. As a
result, these tax considerations may delay or prevent a third party from
acquiring us in a transaction you may otherwise have considered favorable or
reduce the amount you receive as part of the transaction.

Item 6.  Exhibits and Reports on Form 8-K

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


<TABLE>
<CAPTION>

Exhibit No.                                         Description                                     Method of Filing
----------------    ----------------------------------------------------------------------------    ------------------
<S>                 <C>                                                                             <C>
      2.1           Initial Public Offering and Distribution  Agreement,  dated as of March 31,             *
                    2000,  by and  between  Deluxe and eFunds  (incorporated  by  reference  to
                    Exhibit 2.1 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).
      3.1           Amended  and  Restated   Certificate  of  Incorporation   (incorporated  by             *
                    reference to Exhibit 3.1 to the S-1)
      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  Change in  Control  Agreement  omitted  pursuant  to      Filed herewith
                    Instruction 2 to Item 601 of Regulation S-K.
     10.2           Letter  Agreement,  dated as of  February  14,  2000,  by and  between  the      Filed herewith
                    Company and Colleen M. Adstedt.
</TABLE>

*Incorporated by reference


(b) Reports on Form 8-K: None


                                       26
<PAGE>

                                   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 10, 2001                     /s/ J. A. Blanchard III
                                       -----------------------------------------
                                       J. A. Blanchard III,
                                       Chief Executive Officer and Chairman
                                       (Principal Executive Officer)



Date: May 10, 2001                     /s/ Paul H. Bristow
                                       -----------------------------------------
                                       Paul H. Bristow
                                       Executive Vice President and
                                       Chief Financial Officer
                                       (Principal Financial Officer)


                                       27
<PAGE>

Index to Exhibits

<TABLE>
<CAPTION>


 Exhibit No.                                       Description                                       Page Number
---------------    ----------------------------------------------------------------------------    ----------------
<S>                <C>                                                                             <C>
     10.1          Schedule identifying Change in Control Agreement
                   omitted pursuant to Instruction 2 to Item 601 of Regulation
                   S-K.

     10.2          Letter  Agreement,  dated as of  February  14,  2000,  by and  between  the
                   Company and Colleen M. Adstedt.

</TABLE>


                                       28