In a press release dated 19… In April, Mastercard (NYSE: MA) announced that it had acquired identity verification company Ekata for $850 million. In its announcement, Mastercard stressed the importance of security in an ever-expanding digital world. Combining global expertise and machine learning, Ekata has developed a product that enables real-time identity verification and decision-making for a wide range of businesses. Mastercard described the acquisition as crucial to meeting the data, payment and open banking needs of consumers, banks, merchants, FinTechs (financial technology companies) or governments. Ekata’s identity verification software, which serves 2,000 companies in more than 100 countries, is likely to bolster Mastercard’s already impressive security posture.
Building on existing system
Ekata will be seamlessly integrated into Mastercard’s existing security and fraud prevention system. In 2019, Mastercard has developed a system that takes into account security and anti-fraud concerns. In this context, Mastercard has created a vision of digital payments that are simple, smart and secure. Whether accessing financial services, conducting business transactions or interacting with government services, digital identity is becoming an increasingly important part of everyday life. From this point of view, the acquisition of Ekata makes perfect sense for Mastercard.
Ekata describes its product as a way to help companies identify the right consumers and companies and the wrong players in the market in real time. The company, which split from Whitepages in 2019, is based in Seattle and has offices in Amsterdam, Singapore and Budapest. More than 2,000 companies currently use their platform, including major companies like Lyft, Alaska Air, and Postmates. By streamlining the digital identity process, Ecata’s clients can increase revenue by approving more good customers and reducing chargebacks from fraudulent customers. By using machine learning to crunch large amounts of data, Ekata can leverage an existing database to predict the risk of potential customers based on their behavioral data. With its database of more than 6 billion data points, Ekata uses online ID data to create scores that predict how likely a person is to be who they say they are. Links between individuals, company names, phone numbers and many other relationships are part of the database and allow for an accurate assessment of whether a transaction is potentially fraudulent.
Overview of regulation
The transaction is expected to close in 6 months, subject to regulatory review prior to closing. While no major hurdles are expected, it doesn’t always pay to support fintech startups. Such is the case for Visa, which announced that it will acquire processing company Plaid in the early 2020s. After a year of regulatory scrutiny, the Justice Department filed a lawsuit in late 2020 to block the acquisition. Visa could have gone through with the deal, but ultimately renounced it and abandoned its plan to acquire Plaid in January 2021. Although this failure involved only one transaction, it was feared that fear of government intervention would create further uncertainty and devalue high-tech start-ups.
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