NCR Corp.'s agreement to purchase Digital Insight, announced Monday night, aims to give the ATM and hardware company instant credibility as a provider of mobile and online banking software. The deal gives NCR access to hundreds of new customers to pitch. The $1.65 billion transaction is expected to close in the first quarter of 2014.
"This is a historic day for our company," said Bill Nuti, chairman and chief executive of Duluth, Ga.-based NCR on an investors' call held late Monday night. "Today we are fundamentally and permanently changing [our] largest line of business: financial services."
The purchase is meant to "profoundly reinvent" the company, a journey that has been eight years in the making, said Nuti.
NCR already advertises mobile and online banking products on its company website, but this purchase helps it diversify more broadly in digital banking services. Industry analysts wonder why NCR didn't/couldn't buy Digital Insight from Intuit originally but view the deal as a smart move for NCR. (Thoma Bravo LLC, a private equity fund, bought Digital Insight in August for $1.025 billion).
"It's very complementary," says David Albertazzi, senior analyst at Aite Group. "Many transactions have migrated out of branches into ATMs, and more importantly, digital channels. It's a very timely move by NCR to be undertaking this acquisition."
The purchase should help NCR deliver on its promise of making available the so-called omnichannel experience to bank customers. "To remain competitive in the space, it's a smart move," Albertazzi says. Otherwise, it's integrative work between companies to make channels work with one another, he adds.
On the investor's call, NCR stressed it will cross-sell current Digital Insight customers on its capabilities. The company will have hundreds of sales leads to draw from: more than two-thirds of the 1,000 U.S. customers to be inherited by the Digital Insight acquisition are not NCR customers. All told, Digital Insight counts 12 million online banking users and nearly 4.8 million mobile end users as customers.
NCR will also be able to sell Digital Insight services to current customers.
"I'm not looking forward to the inevitable NCR cross-sell, but that's business - we're banks, we know the drill - maybe we'll be pleasantly surprised what synergies the acquisition brings," says Bradley Leimer, who leads digital strategy at Mechanics Bank, a Richmond-Calif. institution that runs Digital Insight software.
Current Digital Insight and NCR customers could eventually gain valuable integrated features. ATM receipts, for example, could be presented in mobile banking apps or online banking pages more easily while the match could make it simple to let a consumer preorder cash at an ATM with his smartphone. "It will make it a lot easier for NCR to achieve the type of transaction if they own both assets," says Albertazzi.
Jacob Jegher, research director at Celent, likens the NCR purchase to D+H buying core banking software provider Harland earlier this year and identifies the digital asset as a coup for NCR.
"It's interesting to see the landscape shift," says Jegher. "NCR has an opportunity to be a formidable fintech powerhouse. I will be very curious to see what it will do with the Digital Insights assets.
"There are lots and lots of opportunities to tie the suites together."
In transforming the company, NCR will compete with payment companies like ACI Worldwide and core banking vendors to some extent.
It may also shake up the ATM market. "It sure will be interesting to see if other ATM players in the space react to the announcement," says Albertazzi.
Looking ahead, Mechanics' Leimer hopes Digital Insight's software design will better evolve under NCR's parental guidance.
"What's critical is that DI remain focused on addressing very real pain points within their banking applications and infrastructure that caused their leadership position to erode during the time of Intuit ownership," says Leimer. "As a client, I'm a constructive advocate of their solutions, but I'm increasingly impatient in the areas of user experience and product offering promises through this year of ongoing uncertainty. At least now I'm hoping they'll be able to have focus."