What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-30 compared with 2020-03-30 · 39 added, 122 removed, 250 unchanged (39% of the section changed)

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to Usio, Inc.

Our principle offices are located at 3611 Paesanos Parkway, Suite 300, San Antonio, TX 78231.

Our principal offices are located at 3611 Paesanos Parkway, Suite 300, San Antonio, TX 78231.

Our telephone number is (210) 249-4100.

Our website is located at www.usio.com.

Information contained on our website does not constitute part of this prospectus.

Information contained on our website does not constitute part of this report.

We provide integrated payment processing services to merchants and businesses, including all types of Automated Clearing House, or ACH, processing, credit, prepaid card and debit card-based processing services.

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In our over 20-year history, we have created a loyal customer base that relies on us for our convenient, secure, innovative and adaptive services and technology, and we have built long-standing and valuable relationships with premier banking institutions such as Fifth-Third Bank, Sunrise Bank, and Wells Fargo Bank.

Through our new PayFac-in-a-Box technology we offer a comprehensive money disbursement platform that allows businesses to pay their contractors, employees, or other recipients by choosing between a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check.

Through our Akimbo Now technology we offer a comprehensive money disbursement platform that allows businesses to pay their contractors, employees, or other recipients by choosing between a prepaid debit Mastercard, real-time deposit to a checking account, traditional ACH, direct deposit or paper check.

With the acquisition of the assets of Information Management Solutions, LLC in December 2020, we now offer additional services relating to electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions.

Through the acquisition, we acquired new customers and their sales force.

We provide integrated electronic payment processing services to merchants and businesses, including credit and debit card-based processing services and transaction processing via the ACH network.

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E-checks are processed using the ACH network.

We are one of seven companies that hold the prestigious NACHA certification for Third-Party Senders, and were only the second company to receive the certification.

We are one of seven companies that hold the prestigious NACHA certification for Third-Party Senders, and were the second company to receive the certification.

Our card-based processing services enable merchants to process both traditional card-present, or "swipe" transactions, as well as card-not-present transactions.

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Our strategy is to drive growth through a leveraged, one to many, distribution model in the software development marketplace.

Following the completion of the Singular Payments acquisition, we launched our payment facilitation, PayFac, platform called "PayFac-in-a-Box" in late 2018 targeting partnership opportunities with app and software developers in bill-centric verticals, such as healthcare, property management, utilities and insurance verticals.

Following the completion of the Singular Payments acquisition, we launched our payment facilitation, PayFac, platform called "PayFac-in-a-Box" in late 2018 targeting partnership opportunities with app and software developers in bill-centric verticals, such as legal, healthcare, property management, utilities and insurance.

The PayFac-in-a-Box platform 'integration layer' offers a simple integration experience for technology companies who are looking to monetize payments within an existing base of downstream clients.

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We develop and manage a variety of Mastercard-branded prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general disbursement and corporate expense cards.

Through our December 2014 acquisition of the assets of Akimbo Financial, Inc., we also added a highly talented technical staff of industry subject matter experts and an innovative cardholder service platform including cardholder web and

mobile applications.

These cardholder web and mobile applications have been fully integrated into FiCentive’s prepaid card core processor, and now support all program types and brands offered by FiCentive and its clients.

Singular Payments:

On September 1, 2017, we acquired Singular Payments, LLC, a Fintech payments provider that relies upon innovative technology to process payments for merchants in healthcare and other niche markets nationwide.

Singular Payments is primarily focused on custom software integrations of their flat rate payment processing offerings and their proprietary, simple-to-use electronic bill payment presentment and payment platform that allows merchants to streamline the costly and labor-intensive process of invoicing and collections.

Through the Singular Payments acquisition, we acquired an existing portfolio of customers with a significant revenue stream and a talented sales force with significant experience in the credit card industry.

Our websites are www.usio.com, www.singularpayments.com, www.payfacinabox.com, www.singularbillpay.com, www.ficentive.com, www.akimbocard.com, and www.zbill.com.

Output Solutions :

On December 15, 2020, we acquired the assets of Information Management Solutions, LLC ("IMS") in the business of electronic bill presentment, document composition, document decomposition and printing and mailing services serving hundreds of customers representing a wide range of industry verticals, including utilities and financial institutions.

Through the acquisition, we acquired new customers and their sales force.

We bought an existing portfolio of customers with a significant revenue stream.

This acquisition increased our ability to grow new revenue streams and allows us to reenter the electronic bill presentment and payment revenue stream.

The success of the IMS will continue to depend on our ability to realize the anticipated growth opportunities.

We cannot assure you that we will be able to realize the anticipated growth opportunities.

Our websites are www.usio.com, www.singularpayments.com, www.payfacinabox.com, www.singularbillpay.com, www.ficentive.com, www.akimbocard.com, and www.usiooutput.com.

Information contained on our websites does not constitute part of this annual report.

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Chip authenticated payments accounted for more than half of the value of in-person general-purpose card payments in 2018, compared with 2.0% in 2015.

Figure 1 (below) illustrates the overall growth in key non-cash metrics since the Federal Reserve Payments Study was first

reported for the year 2000 and reflects the acceleration of growth in recent years.

Figure 1 (below) illustrates the overall growth in key non-cash metrics since the Federal Reserve Payments Study was first reported for the year 2000 and reflects the acceleration of growth in recent years.

All estimates are on a triennial basis.

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More consumers are beginning to use card-based and other electronic payment methods for purchases at an earlier age.

These consumers have witnessed the wide adoption of card products, technology innovations such as mobile phone payment applications, and widespread adoption of the Internet.

These consumers have witnessed the wide adoption of card products, technology innovations such as mobile phone payment applications, widespread adoption of the Internet and a significant increase in card not present transactions and on-line shopping during COVID-19 work from home mandates.

As younger consumers comprise an increasing percentage of the population and as they enter the work force, we expect purchases using electronic payment methods will become a larger percentage of total consumer spending.

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We utilize secure sockets layer architecture so that connections and information are secure from outside inspection.

We also use 128-bit

encryption for all electronic transactions that we process to make information unreadable as it passes over the Internet.

We also use 128-bit encryption for all electronic transactions that we process to make information unreadable as it passes over the Internet.

Our systems’ infrastructure allows us to work with our customers to build a customized electronic payment service offering tailored to the customer's specific needs.

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In addition, we offer an Interactive Voice Response telephone system to companies that accept payments directly from consumers over the telephone using e-checks or credit cards.

In October 2015, we introduced e-check verification technology, which helps merchants prevent returns before processing and reduces return check transactions.

This service utilizes our proprietary returns database that contains records for any transaction that we had previously attempted to process and if a transaction was unsuccessful for account closed, invalid account, non-sufficient funds, payment stopped, frozen account, unauthorized account, and others.

Merchants query this database in advance of submitting a transaction for processing and settlement.

Merchants utilize this data to make their own determination if they wish to process a payment or not.

We charge a transaction fee for each query and for each account that a query returns data.

Significant innovations to our payment systems have included launching a brand new client facing web application that allows customers to more easily manage their payments;

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and a new PINless debit service that allows merchants to debit and credit accounts in real time.

In 2017, our product and service enhancements included upgrading our customer service portal by adding two-factor authentication, improving reporting, enhancing the transaction file upload process and improving fraud / return transaction monitoring, implementing and enhancing our payment facilitator model, and continuing to update and enhance our Akimbo Card website and mobile app modules, which also enhanced our new card order and fulfillment module.

In 2018, our product and service enhancements included adding a batch load payment facilitator enrollment platform marketed to integrated software vendors, ISVs, for quickly onboarding mass merchant accounts simultaneously, integrating two new payment facilitator gateways for credit cards and one new gateway for our PINless debit cards, enhancing our merchant services API with new methods and speed enhancements and introducing Text-2-Give and Text-2-Pay products for texting payments targeted at our tithing and recurring payment merchants.

In 2019, our platform expanded to include remotely created check, or RCC, processing.

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It reduces the chances of fraud by validating account information upfront and is compliant with the Uniform Commercial Code, Regulation CC, Regulation J and the Check 21 Act.

Largely due to our NACHA certification, Usio obtained a sponsoring bank and implemented a direct connection into the FedACH system.

In 2020 (and into 2021), we are transitioning from a traditional data center to a cloud provider.

The transition provides greater speed and capacity, allowing the Company to process transactions faster per second.

We developed process improvements with a focus on new tools designed to grow sales while improving our internal reporting capabilities.

On the client facing front, we developed enhancements to our hosted payment pages, enrollment and onboarding tools for resellers and monthly reporting and new transaction reporting.

For ACH processing, we developed our direct connection terminal into the FED.

Through this direct connection terminal, we control the entire data flow and allows a later window for data transmission.

Largely due to our NACHA certification, we obtained a sponsoring bank and implemented a direct connection into the Fed ACH system and the sole use of a bank routing number.

This connection allows us to lower overall processing costs, offer later cut off times, speed up the boarding process for merchants, and increase oversight into our ACH processing traffic.

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and Metropolitan Commercial Bank.

We develop and manage a variety of prepaid card program types, including consumer reloadable, consumer gift, incentive, promotional, general disbursement and corporate expense cards, primarily on behalf of our corporate clients.

We exclusively issue Mastercard branded cards currently, but our platform also supports the issuance of Visa and Discover branded card programs.

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This is highlighted by the fact that several large / Fortune 500 tech and payments companies currently use our platform for research and developments purposes.

Output Solutions .

Through the acquisition, we acquired new customers and their sales force.

Relationships with Sponsors and Processors

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Through the Singular Payments acquisition, we also acquired an existing portfolio of customers with a significant revenue stream and a talented sales force with significant experience in the credit card industry.

We also market and sell our prepaid card program directly to corporations and to consumers through the Internet.

We also market and sell our prepaid card program directly to government entities, corporations and to consumers through the Internet.

A major initiative will be the packaging and cross selling of our platform of payment options across our portfolio of merchants.

As a part of this major initiative, we will continue to analyze our sales and marketing efforts to optimize productivity, increase sales force effectiveness, broaden our reach through reseller initiatives and advantageous alliances and effectively optimize sales and marketing expenses while meeting our revenue and profit objectives.

Through the acquisition, we acquired new customers and their sales force and the ability to cross-sell existing service offerings to IMS customers and new Output Solutions services to existing Usio customers.

Our customers are merchants and businesses that use our Automated Clearing House and/or card-based processing services in order to provide their consumers with the ability to pay for goods and services without having to use cash or a paper check.

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Most of our merchant customers have signed long-term contracts, generally with three-year terms, that provide for volume-based transaction fees.

Our merchant accounts decreased slightly to 1,913 customers at December 31, 2019 from 1,958 customers at December 31, 2018 .

Our customers are consumers geographically dispersed throughout the United States.

Our merchant accounts increased 30% to 4,984 customers at December 31, 2020 from 3,830 customers at December 31, 2019 .

Our customers are geographically dispersed throughout the United States.

No customer accounted for more than 10% of revenues in 2020 or 2019 .

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There are a number of large transaction processors, including Fiserv, Inc., Elavon Inc., WorldPay, Stripe and Square that serve a broad market spectrum from large to small merchants and provide banking, automatic teller machine, and other payment-related services and systems in addition to card-based payment processing.

There are also a large number of smaller transaction processors that provide various services to small and medium-

sized merchants.

There are also a large number of smaller transaction processors that provide various services to small and medium- sized merchants.

Many of our competitors have substantially greater capital resources than us and operate as subsidiaries of financial or bank holding companies, which may allow them on a consolidated basis to own and conduct depository and other banking activities that we do not have the regulatory authority to own or conduct.

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We own federally registered trademarks on the marks “Payment Data Systems, Inc.,” “Akimbo,” “FiCentive Innovations in Prepaid Card Solutions,” “Don’t change your bank, just your card” and “ZBILL” and their respective designs.

We have also secured, among others, domain name registrations for:

gogreenmastercard.com;

securepds.com;

akimbocard.com;

innovatewithpurpose.com;

secureusio.com;

akimbodeals.com;

iremotepay.com;

singularbillpay.com;

akimbodebit.com;

iremotepay.net;

singularbillpay.net;

akimboit.com;

iremotepayments.com;

singularpayments.biz;

akimbonews.com;

iremotepayments.net;

singularpayments.com;

akimbonow.com;

itshotcard.com;

singularpayments.info;

akimboprepaid.com;

iwanttopaynow.com;

singularpayments.net;

singularpayments.org;

billdelivery.com;

stardebit.com;

billhelp.com;

iwpconference.com;

stocktelevision.com;

billserv.com;

kindhand.com;

streamprepaid.com;

merchantmastercard.com;

streamprepaidcard.com;

billxpress.com;

merchantchamp.com;

thatshotcard.com;

britneycard.com;

merchantchampion.com;

cardbillpay.com;

mipromesa.com;

carddeposit.com;

myakimbo.com;

usioach.info:

carmencard.com;

nataliecard.com;

celeripay.com;

nsfdebit.com;

celeripay.net;

omegabill.com;

cityofdawson.net;

oneflatratemerchantaccount.com;

usiocard.info;

clinicpay.com;

parishiltoncard.com;

usiocard.net;

creditcardgateway.com;

patientpaytoday.com;

usiocard.org;

payfacinabox.com;

usiogive.com;

danicacard.com;

paymentdata.com;

debitmax.com;

paymentdata.org;

usiopay.info;

debitpin.com;

paymentrecovery.com;

debitservice.com;

paymentrecoverysystems.com;

doctorezpay.com;

paywithceleri.com;

usioprepaid.com;

ficentive.com;

paywithceleri.net;

usioprepaid.info;

fotogiftcards.com;

pdsadmin.com;

usioprepaid.net;

pdsnetwork.com;

usioprepaid.org;

getusio.info;

pftgateway.com;

prepaidload.com;

givecarmen.com;

primacard.com;

Some of our material websites are www.usio.com, www.singularpayments.com, www.payfacinabox.com, www.singularbillpay.com, www.ficentive.com, www.akimbocard.com, and www.usiooutput.com.

We rely on a combination of copyright, trademark and trade secret laws, employee and third-party nondisclosure agreements, and other intellectual property protection methods to protect our services and related products.

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federal, state and local laws, regulations, card network rules or other industry standards affecting our business may require significant development efforts or have an unfavorable impact to our financial results.

Failure to comply with these laws and regulations may result in the suspension or revocation of licenses or

registrations, the limitation, suspension or termination of services and/or the imposition of civil and criminal penalties, including fines.

Failure to comply with these laws and regulations may result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services and/or the imposition of civil and criminal penalties, including fines.

Certain of our services are also subject to rules set by various payment networks, such as Visa and Mastercard.

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On September 29, 2017, the Financial Crimes Enforcement Network, or FinCEN, amended the Customer Due Diligence Rule, or CDD Rule, requiring the collection and verification of beneficial owners holding equal to or greater than 25% equity interest.

The CDD Rule states that sole proprietorships-individual or spousal-and unincorporated associations are not legal entity customers as defined by the Rule, even though such businesses may file with the Secretary of

State in order to register a trade name or establish a tax account.

This is because neither a sole proprietorship nor an unincorporated association is a separate legal entity from the associated individual(s), and therefore beneficial ownership is not inherently obscured.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business