This week, global payments technology company Mastercard announced its entrance into a binding agreement to acquire Toronto-based fintech firm Ethoca. Founded in 2005, Ethoca provides technology solutions to merchants and card issuers in order to detect and prevent fraud in real time.
The acquisition is part of Mastercard’s ongoing efforts to combat fraud, which firm Juniper Research estimates will cost the retail sector alone in excess of US$130bn by 2024.
Bringing together over 5,000 merchants and 4,000 financial institutions around the world, Ethoca’s client network detects fraudulent transactions in near real time, sending information to the merchant and allowing them to confirm the transaction, stop delivery or reverse the transaction to avoid the chargeback process. As a result, both merchants and card issuers benefit from lower operational costs by reducing fraud at the source.
Mastercard intends to further scale these capabilities and combine Ethoca with its current security activities, data insights and artificial intelligence solutions to help merchants and card issuers more easily identify and stop potentially fraudulent purchases and false declines. According to research firm Aite Group, false declines that result from card issuers declining transactions from good customers due to a perceived fraud risk cost the industry $331bn in 2018 in the United States alone.
“Advancements in technology are enabling us to transform the experience for our customers,” said Ajay Bhalla, president of cyber and intelligence solutions for Mastercard. “Ethoca is a strong addition to our multilayered cyber strategy, helping customers take immediate action against fraud and eliminate chargebacks before they can occur. In turn, consumers are provided with a better checkout experience every time they shop at a participating site.”
“Mastercard is a natural home for Ethoca,” said Andre Edelbrock, CEO of Ethoca. “For more than a decade, we’ve connected e-commerce businesses with banks to make the payments system simpler and more secure. We are excited to have the opportunity to bring our services to more places and people, ultimately contributing to the best possible online payment experience.”
The deal is expected to close in Q2, 2019.