Lessons from NCR's Purchase of Digital Insight, One Year On

When you are a company that started out 125 years ago as National Cash Register, you've had to reinvent yourself a few times.

The modern-day NCR, based in Duluth, Ga., is doing just that. It is one of a number of automated teller machine manufacturers that seeks to transform itself into a software and services provider in a world where banking is going mobile. It is also creating more advanced ATMs that blend old and new technologies.

Crucial to NCR's overhaul was its $1.65 billion purchase nearly a year ago of Digital Insight, an online and mobile-banking software provider. It has made progress absorbing the acquisition, but it still has a lot of work to do to fulfill the vision behind the deal — all of which says a lot about the challenges that lie behind the transformations of tech vendors.

NCR knew it needed to adjust to the times: it couldn't keep relying on ATM sales when banks are clamoring for options that connect physical and digital channels together as branch transactions decline.

"It is not just traditional ATMs in one silo and digital in another," said Andy Heyman, the president of NCR Financial Services. "More and more [financial institutions] are trying to integrate digital and physical."

"We are very focused on omnichannel," Heyman said.

NCR shares a vision with many vendors: technology that lets consumers easily start a transaction online and complete it in a branch. Heyman said NCR is in active conversations with banks to help them rate their omnichannel services against other banks and establish improvement plans. At the same time, it is running some experiments. They include technology that authenticates ATM users through their mobile phones instead of making them type in a PIN code; services that alert branch employees about the arrival of certain customers; a single user interface that works across multiple channels; and cross-channel marketing.

David Albertazzi, a senior analyst with Aite Group, said the addition of Digital Insight should eventually help NCR deliver on the promise of a seamless experience regardless of channel — a feat that's easier to accomplish when a vendor owns a wide range of technologies, so a bank doesn't have to integrate products from different providers.

Already, NCR has been able to offer financial institutions a way to consolidate the number of firms they work with at a time when regulators are demanding better vendor management.

The Digital Insight deal also gave NCR new sales leads. "There is little overlap between the two customer bases," Albertazzi said.

Yet the results of those leads won't truly be known for some time as financial institutions typically have multiyear contracts with technology providers.

"People are locked into long-term decisions they made," said Sam Ditzion, the chief executive of Tremont Capital Group, a consulting firm that advises the payments industry on strategy. "[Financial institutions] are not willing to make changes overnight or without many months of analytical review and testing."

Smaller financial institutions could find it compelling to use one provider for their mobile, online and ATM software needs as NCR builds toward its longer-term goal of diversifying into the software business, Ditzion said. However, larger banks typically want customized solutions.

NCR declined to break out cross-selling results to date. It did, however, offer details on the talent it brought on board. Attrition has been in the single digits for Digital Insight and another acquisition NCR announced at the same time: Alaric Systems, a London company that provides transaction switching and fraud prevention software.

Heyman told American Banker about a year ago that people are key assets in NCR's acquisitions.

Meanwhile, other ATM manufacturers are expanding their financial services lines by adding talent and products, too.

Diebold, one of NCR's biggest U.S. ATM rivals, is selling consulting services that help banks update their branches as a way to diversify its business. It is also expected to make a big business announcement in late January.

But Tremont's Ditzion said the diversification does not imply expectations of the ATM's demise. Just as call centers and tellers have continued to have a role in banking, he believes ATMs are here to stay.

"All of these channels are important and remain intact and continue to be both expected and wanted by customers," Ditzion said.