With a pair of deals this week, First Data Corp. underscored its interest in buying technology that can broaden its payment processing services to merchants and financial institutions.
The Denver company, the nation's largest payment processor, announced Wednesday that it had purchased the assets of Datawire Communication Networks Inc., which operates a secure transaction-transmission system using Internet protocol. On Tuesday evening, First Data announced a deal to acquire Intelligent Results Inc., a maker of decision-management software.
First Data did not provide the price on either transaction.
Barry McCarthy, the president of product innovation at First Data Commercial Services, said the Datawire assets would help his company support things like the First Data POS Value Exchange, a point of sale terminal introduced last month for small merchants.
The device, which First Data produced in conjunction with Microsoft Corp. and Hewlett-Packard Co., is designed to process a variety of card and check payments, help merchants track inventories, and prompt clerks to pitch additional products or services to customers at the checkout line.
Mr. McCarthy said Internet connectivity is built into the terminal.
Most merchants transmit card data over dial-up telephone connections to the processor and ultimately to the bank for payment authorization, but Internet connectivity is growing rapidly, he said. "We believe" the Datawire purchase "will accelerate IP adoption."
Jacob Jegher, a senior analyst in Celent LLC's banking group, said First Data is acknowledging the shift in data processing operations to the open Internet from closed networks. "But security is going to have to be right at the forefront of all this technology not just the physical security, but the marketing of the security."
An Internet-based network "should be cheaper for the merchant," he said. "It may also enable First Data to achieve greater margins on the payment."
Mr. McCarthy said that unlike a dial-up connection, which requires a dedicated telephone line, a single Internet hookup can be used for sales terminals as well as for other data communications needs. "The connection provides other utility to that merchant."
Datawire says on its Web site that it has carried hundreds of millions of transactions on its Datawire VXN global transaction delivery network since mid-2002. The Toronto company says it serves tens of thousands of merchant locations, with monthly transaction volume in the tens of millions.
In addition to North America, Datawire says, it provides services to Europe, Australia, and southeast Asia. It lists First Data as a customer.
Mr. McCarthy said his company has worked with Datawire "for some time," using its data encryption and networking.
First Data said it expected its deal for Intelligent Results to close this quarter. The privately held Bellevue, Wash., company is funded by three venture capital firms: Ignition Partners, Menlo Ventures, and OVP Venture Partners.
Donna Pennington, a First Data spokeswoman, said that institutions can use Intelligent Results' Predigy software to analyze patterns of card use for risk reduction, marketing, or customer relationship management.
"These are the types of tools our financial institution customers have been asking for," Ms. Pennington said. "We're going to be bringing the expertise in-house."