Yesterdays announcement by American Express that they are purchasing Accertify, a web fraud detection vendor (covered in our Web Fraud Detection Magic Quadrant) for $150M came to me as a bit of a shock, even though it’s just a repeat of earlier news we have had this year. After all, Amex, Visa, Mastercard, and other card brands have not traditionally been in the business of selling ecommerce software or services directly to merchants.
But that’s all changed. Visa and MasterCard each bought companies that provide ecommerce payment and fraud detection services in the last few months. Visa bought Cybersource last April for around $2 billion; MasterCard bought DataCash last month for just over a half a billion US$, and yesterday American Express announced it is buying Accertify.
What’s the impetus? My view is that the card brands and the banks that issue credit and debit cards are scared silly that new alternative (mainly mobile) payment players on the block – e.g. Bling Nation, mobile operators, Apple (see our research note on Apple making moves in the NFC payment market), and PayPal as it continues to go mobile – will erode their monopoly like hold on the electronic consumer payments market.
By acquiring vendors that service merchants directly, the card brands undoubtedly think they will be able to retain their foothold and stronghold with the all-important payment acceptors (i.e. the merchants) who help drive consumer choice at the payment terminal so that they choose more of the plastic payment cards and less of the alternative emerging payments.
I don’t think this strategy is going to work for the card brands. The only thing that will work is lower merchant rates and more merchant-friendly service. That’s what the newcomers provide and that’s why they will take market share away from the entrenched card brand behemoths. Frankly, it’s called good ole innovation coupled with good prices and good service. It seems to work every time.
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