First Data, NCR Flex Technology Muscle in Grocery, Fuel Deal

First Data and NCR Corp. are flexing their scale muscles in an agreement that brings the technology strength of both companies to the grocery, petroleum and convenience store industries and expands NCR's ATM footprint.

Calling it a "strategic commercial agreement," First Data will provide tokenization security and payment processing to NCR customers in those markets, while NCR will become a preferred provider of ATM hardware and services to First Data's financial institution database.

The timing falls in line with the grocery, petroleum and convenience store markets seeking card data security strategies and pondering mobile wallet technology, while facing different EMV chip card liability shifts — this year for the grocery and conveniences stores, 2017 for the fuel pumps at gas stations.

Indicating these markets are currently attractive to payment companies, the First Data/NCR agreement announcement comes a week after Heartland Payment Systems and Pinnacle Corp. said they were teaming up to address EMV chip-card enablement concerns at gas station convenient stores.

The partnership between First Data and NCR will include payment card acceptance and technology software, especially First Data's TransArmor tokenization and encryption service, which will be integrated with NCR Epsilon and Connected Payments Gateway. The companies will provide tokenization and transaction routing in a software-as-a-service solution.

"As merchants are adopting EMV and working to develop solutions in that space, what we are also seeing is a lot merchants looking more holistically at modernizing their payments acceptance platforms," said Steven Petrevski, senior vice president and general manager of technology partnerships, security and fraud solutions at First Data. "They are addressing EMV, but also considering how they will work with mobile wallets and support a more secure transaction process."

The companies will concentrate first on the in-store terminals and integrate into the fuel pumps after manufacturers upgrade in preparation for new payment form acceptance, Petrevski said.

That type of playing field makes First Data's TransArmor service a key component of the deal. "We don't see too many merchants who are cryptographers or computer science majors, so we do our best to highlight the benefits of TransArmor," Petrevski said.

Because TransArmor operates with various encryption codings, it works on many different terminals, which First Data is likely to encounter in these particular markets.

Ultimately, there are two primary concerns for merchants, Petrevski said. "They want to have the most secure solution and that it works within the context of their business."

The agreement also includes an enterprise license for NCR CxBanking software becoming available for First Data's 4,000 financial institution clients. CxBanking software addresses all aspects of a customer banking experience from security to branch services, digital banking and transaction processing.

The companies did not disclose financial terms of the partnership, saying only they will "jointly explore" opportunities to package respective payment software and value-added services for clients.

The grocery and petroleum industries are becoming increasingly attractive to payment services providers also because they represent "high-volume, low-margin" businesses that typically get better interchange rates from the major card brands, said Brian Riley, principal executive advisor with CEB TowerGroup.

But First Data and NCR have established reputations and large customer bases, and likely began thinking more aggressively about a partnership since both companies are now located in the Atlanta, Ga., region, Riley added.

NCR has been on "a big journey" of its own the past few years through a series of acquisitions that have strengthened the company's core ATM and banking service offerings and allows it to "step aggressively into payments," Riley said.

While the agreement stresses security and POS software capabilities more than hardware, both companies have been targeting small business owners with POS systems aggressively the past year.

NCR has positioned its cloud- and tablet-based NCR Silver Register point-of-sale system as one geared toward small businesses, while First Data has done the same with the Clover Mini.

The deal with NCR continues First Data's mission to develop more partnerships with market leaders to deliver products to customers, Petrevski said.