Here are some quick observations about NCR’s acquisition of Digital Insight, the implications for the industry and rivals, and why I remain hopeful -- but skeptical -- that NCR can unlock the value of its new $1.65 billion bauble. It’s hugely important to NCR from a strategic standpoint. NCR positions this a “profoundly” transformative. The company increasingly is shifting its focus from hardware to software. NCR points to previous software investments in other large divisions such as hospitality and retail. “From a corporate standpoint this is the next step in a deliberate strategy of reinvention of the company.” It’s an omnichannel opportunity. NCR boasts – but I think the marketplace will be skeptical until it’s proven – that it stands alone, or at least has few rivals, that can match its potential for providing an omnichannel experience. It points not only to its ATMs and branches, but to global POS penetration. It helps NCR’s financial mix. NCR reports about $5.5 billion in revenue, with nearly $3 billion coming from financial services. The purchases of Digital Insight and Alaric, whose $84 million purchase was announced the same day, will push fin services over $3 billion.

  • Digital Insight and Alaric report about $315 million in recurring revenue. This will take NCR to more than $1.1 billion in annual software revenue. This does not include its professional services group, which also has a software emphasis.
  • “Most guys don’t realize how big a software business NCR has.”

NCR + DI = a good fit for products and clients – on paper. DI and Alaric feel “gaps” in NCR’s portfolio of capabilities. DI provides digital channels that can manage online and mobile, providing NCR with access to core banking systems. It also opens the door for NCR to cross-sell to community banks and credit unions, expanding NCR’s opportunities beyond its traditional focus on larger FIs.

  • NCR: “We’re seeing an appetite for FIs to replace these legacy systems” from the likes of Fiserv and FIS.

What’s remains to be proven is whether NCR execute on the vision and fill market needs. Among the questions, many of which NCR can’t address now because it is limited in what it can say until the deal is finalized and the company actually starts the hard work of integrating the companies:

What can NCR do to unlock Digital Insight’s potential? On paper, Intuit was an ideal owner, with deeper pockets and a history that includes basically defining Personal Finance Management with Quicken. DI learned some things from Intuit about innovation and how to “Mint-ify” personal finance, but it has struggled to bring PFM out of the tab and it was late to mobile banking. Does NCR add an innovation spark? Can it fuel innovation with large and loud investments that Intuit was reluctant to make?

What can NCR do – quickly – to build momentum? NCR must move quickly to counter the distraction and doubts that have arisen as Digital Insight has spun from Intuit to Thoma Bravo to NCR in a matter of months. Rivals are looking for vulnerability, particularly signs that current Digital Insight clients are frustrated or worried by the M&A upheaval.

Will the cross-sell concept pay off? Will larger FIs will be open to swapping in Digital Insight’s online and mobile banking suite, and will smaller FIs will perceive enough value from the omnichannel approach that NCR promises?

Does NCR have a plan to extract the value of Digital Insight’s PFM transaction data? NCR rightfully says it can now enable financial institutions to sell products in multiple channels, potentially starting with an offer on an ATM that a consumer researches online or on a mobile device, then perhaps completes in a branch. But for my money it’s just as important to mine that PFM data so bankers can determine the right product to pitch to the right customer at the right time in the right channel on the right device.

How can NCR make a compelling pitch to community banks that cater to small businesses? Small business appears to be an afterthought at the moment, at least in a conversation I had today with NCR executives. They say that market is important, but they had nothing to add on this point and seemed to accept my inference that the focus initially will be on retail banking.

Author

About Mark Schwanhausser

Mark Schwanhausser is JAVELIN’s Director of Omnichannel Financial Services. Mark strategizes how financial institutions (FIs) can track and serve customers across whatever channels they use, and provide a consistent, integrated brand and user experience. Mark helps banks and credit unions profitably enable customers to monitor and manage their money more intelligently through technology such as online banking, mobile banking, personal finance management, financial alerts, and technologies on the horizon like wearables.

Mark led the development of JAVELIN’s Financial Journey Model, which builds digital banking on a foundation of 10 time-tested personal finance principles, and JAVELIN’s holistic segmentation, which enables FIs to prioritize their investments to serve the critical needs of the profitable Moneyhawks™, high-value Traditionalists, and up-and-coming Emergents. His other work in 2015 has focused on how banks and billers can turn off paper statements by closing the “digital commitment gap,” why digital account opening has reached a tipping point, and how FIs can use alerts and notifications to initiate daily “conversations” with customers.

Before joining JAVELIN in April 2008, Mark worked for nearly 26 years at the San Jose Mercury News, mostly as a personal finance reporter writing about money and emerging trends in financial services and payments technology.

Mark has a bachelor’s degree in journalism from the University of Missouri at Columbia and attended Antioch College.

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