by Avivah Litan | April 3, 2017 | Comments Off on Fraud Detection market’s Continous Consolidation Cycle; MasterCard acquires NuData
The late-March announcement that MasterCard is acquiring NuData Security leaves more room for fraud detection upstarts to gain market share in the online fraud detection market.
NuData is certainly one of the most innovative privately owned vendors in this space, and emerged as a strong competitor following years of large company acquisitions of similarly privately owned vendors such as Accertify, Cyota, Easy Solutions, The 41st Parameter, Trusteer, Silvertail Systems, and more.
The online (and mobile) fraud detection market is a fertile breeding ground for innovation. Vendors need to use state-of-the-art advanced analytics in order to help their customers fend off constant online fraudster attacks perpetrated by the most sophisticated hackers out there (See How to make Russian Hacker Attribution Useful to Active Defense ). In the online services space, service providers don’t have the luxury of managing end-user devices and must use fraud detection applications that customers can’t see and which certainly don’t inconvenience them. The vendors must tune their models carefully so that they can stay ahead of fraudsters’ constantly improving evasion techniques, whilst not intruding on the all-important customer experience.
NuData was strong in each of Gartner’s five fraud detection layers ( Market Guide for Online Fraud Detection ) and boasts a cadre of blue-chip ecommerce customers who appreciate its strengths. NuData was little known in the banking world until recently, although they had good success in ecommerce before that. Just when they were ready to take off, imho, they got acquired by MasterCard.
But there are plenty of startups and a few privately owned mid-sized players left standing that no doubt will keep improving and growing market share until they get acquired. Other markets, including enterprise security have much to learn from fraud detection technology and techniques which continue to improve and stay ahead of the criminals as time marches on. Techniques just starting to go mainstream in enterprise security, such as machine learning, adaptive access authentication, device id, and velocity analysis, have long been circumvented in the online consumer services world by advanced hackers. Fraud Detection must employ ever-increasingly clever modeling and behavioral analysis methods to stay effective in the arena of consumer cybercrime.
The NuData acquisition is good news for the independent online fraud detection players left standing, such as Cleafy, DataVisor, Distil Networks, Forter, Kount, ThreatMetrix, Sift Science, and Signifyd. I haven’t seen online fraud detection vendors grow their annual revenues beyond $100M – and that kind of number is very rare – so these remaining innovators shouldn’t expect to get big on their own. But they can expect to get acquired at healthy multiples should their innovation rise to the head of the class. Lots of companies can use their expertise…
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