First Data Corp. announced an agreement Tuesday with Yahoo Inc. to provide small- and midsize merchants with e-commerce capabilities.

Under the agreement, First Data will provide merchants with point of sale equipment and payment-processing services, and Yahoo will provide Web-based products that will enable small businesses to create online stores.

"In our market research and conversations with our customers, it became apparent that many merchants don't have a Web presence," said Souheil Badran, a senior vice president at First Data and its division manager for e-commerce.

First Data serves more than 5.3 million merchant locations and Yahoo reaches more than 50% of small businesses online, Badran said.