(May 3, 2007) ViVOtech Inc., the Santa Clara, Calif.-based maker of contactless point-of-sale card readers and mobile-wallet applications, is raising $20 million in its third round of venture-capital funding. The lead investor in this latest round announced this week is none other than First Data Corp., the No. 1 payment-card processor.

ViVOtech, First Data, and San Francisco-based Financial Technology Partners LP, the boutique investment bank that handled the deal, all refused to disclose First Data’s share of the investment. In the wake of other recent partnerships and investments, however, it’s clear that First Data is trying to stay ahead of the technological curve by pairing up with promising young companies. First Data in particular is trying to ramp up in contactless payments, having recently licensed patents from Newbury Park, Calif.-based PrivaSys Inc. that could enhance its offerings in an emerging payments niche (Digital Transactions News, April 5). First Data and ViVOtech already worked together, a First Data spokesperson tells Digital Transactions News via e-mail. Now they plan to further extend ViVOtech’s near-field communications (NFC) technology used in contactless terminals and mobile-phone-based payment services. “Via ViVOtech’s NFC capabilities, First Data will ensure that its financial institutions and merchants can offer their customers new, convenient ways to pay; a choice of payment options; robust security features and rewards,” the spokesperson says.

ViVOtech will use the new funding to further develop its POS contactless readers as well as its software supporting gift card and prepaid applications, and its over-the-air systems for cell phones, chief executive Michael Mullagh tells Digital Transactions News. “We intend to put a significant amount of money into those products,” he says.

Besides product development, the funding will support ViVOtech’s international expansion, especially its sales and sales-support staffs. “Asia is our next growth market and Europe is not far behind,” Mullagh says.

ViVOtech’s current investors—Alloy Ventures, Draper Fisher Jurvetson, and Nokia Growth Partners—also are participating in the funding round, according to FT Partners.

Publicly-held First Data recently struck an agreement with private-equity firm Kohlberg Kravis Roberts & Co. to go private (Digital Transactions News, April 2). If the $29 billion deal goes through as planned, New York City-based KKR would have a stake in ViVOtech. But Mullagh says KKR’s share would be small, and he downplayed the possibility that KKR would play a major role in the company’s operations.