This morning I was hit with the news that Visa acquired Cybersource, one of the largest Internet Payment Gateways, for a whopping $2 billion. This is a very unusual move – first time I know of that a card network went into the Internet Payment acquiring business. The two have worked together since 1999 on fraud detection and the partnership worked well, allowing Cybersource to maintain its card brand independence while benefiting from Visa’s fraud detection know-how and data.
So why this move now?
a) Visa must be feeling the heat from mobile carriers getting into mobile payments around the world. Largely under the radar, some of them are finally making significant progress in undermining Visa’s presence in some countries by offering their own mobile payment systems building off of their prepaid cards and/or billing systems.
With the Cybersource acquisition, Visa now has the ability and channel to directly interface with merchants around the world, rather than having to rely on moving its acquiring banks and their processors into action.
b) Visa must be taking some heat too on the growth in ecommerce fraud, especially in Chip (and PIN) countries, where the fraud migrates from in-country plastic/counterfeit fraud to ecommerce and cross-border fraud. (Check out APACS numbers on this for the UK).
Acquring Cybersource gives Visa visibility into much-needed merchant ecommerce transactions which will enable it to better detect fraud and pinpoint points of compromise (where cards are stolen).
I think the mobile payments piece is the most interesting piece to watch here. I believe that Visa is finally facing significant threats from mobile carriers in this emerging area.
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