Avivah LitanThis 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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2 responses so far ↓
1 Reed Taussig April 23, 2010 at 3:00 pm
Avivah,
There are at least two credit card companies, American Express and Discover Card, that do process their own transactions. They derive many benefits from vertically integrating the transaction not the least of which is improved fraud detection due to the fact that they have a closed loop system.
Having said this, I think that you are spot on as to the real reason behind Visa’s acquisition of CyberSource which is alternative payments. In China, for example, alternative payments have already outstripped traditional credit card usage. It also just so happens that CyberSource has a strong and very well run operation in China.
CyberSource is a key business partner to ThreatMetrix and we very much value our relationship with them. We are very hopeful that the acquisition of CyberSource by Visa will enable CyberSource to rapidly expand their already impressive customer list and in so doing expand the use of their fraud product, Decision Manager.
However, the real message here is that purchases of products and services continue to move to the net and are gaining more and more momentum in doing so. With that change in purchasing behavior come new tools and products to clear the transaction and both Visa and CyberSource have decided to take a leadership position to capitalize on this opportunity. I congratulate them for doing so.
Reed Taussig
President and CEO
ThreatMetrix
2 Avivah Litan April 27, 2010 at 3:43 pm
Thanks for your thoughtful comments Reed. It will be interesting to see what new tools Visa comes out with as a result of this acquisition. Thanks also for the insight on China – that’s got to have the card networks on alert.