In April, Visa Inc. acquired Cybersource, a provider of electronic payment, risk management and payment security solutions to online merchants, in a deal worth $2 billion, or $26 a share. Through this purchase Visa is lining itself up to venture further into the e-commerce and mobile — or m-commerce — worlds as well as secure a stronger position in emerging markets. Purchasing Cybersource will do just that, as the company represents 25 percent of all e-commerce transactions in the United States alone as well as an international network of 295,000 merchants. The success of other players in the e-commerce field was also a decisive factor in Visa's purchase. Paypal, for example, which is a unit of eBay, has been hugely successful as an online payment service. Joseph W. Saunders, chairman and CEO of Visa Inc., said in a statement on the acquisition of Cybersource, “We're paying attention to what PayPal as well as other companies are getting into the e-commerce space.” He continued, “We're obviously concerned [how this] will have an effect on our market share over a matter of the longer-term period of time. …It also happens to be consistent with what we think our long-term strategies are to be able to grow these.” The acquisition is part of Visa's drive for further and deeper international market penetration, but the decision was also driven by a perceived need to strengthen the company's anti-fraud capabilities. Oliver Jenkyn, global head of strategy and corporate development of Visa Inc., said, “We have been able to combine the detailed deep merchant specific information that Cybersource would have with the network-wide information that Visa has.” Both companies have already been working together to “enhance fraud capabilities…But what we want to be able to do now is integrate much more closely, make it much more real time” to reinforce Visa's capacity for preventing and tackling electronic fraud. Visa acquisition will enhance its presence in emerging markets. In Egypt, although internet penetration is only between 16-17 percent, according to some estimates, it is growing at an impressive rate when considering that in 2000 the figure stood at 0.7 percent. It is safe to assume that this will catch the attention of players in the field of e-commerce. Tarek Elhousseiny, Visa's general manager of North and West Africa, said, “Internet penetration levels are rapidly increasing in Egypt and it is a strong indication of the positive direction we are witnessing in Egypt in terms of e-commerce.” Still, basic infrastructure is still lacking in some areas, especially for credit card payments in general. Consequently, mobile phones have become the solution, where consumers are able to make payments, creating a new marketplace dynamic called m-commerce. Elhousseiny said that mobile phones will be an integral part of e-commerce and Visa's strategy in this rapidly accelerating field. “[They] will play a much greater role in Egypt in terms of e-commerce,” he said. When referring to consumer-to-business, known as C2B, Elhousseiny said: “The direction toward e-commerce is rapidly growing and we are working with acquirer banks to develop the necessary infrastructure.” Equally, Elhousseiny thinks that business-to-business, or B2B, e-commerce in Egypt has a few hurdles to overcome. “I believe most of the challenges lie in terms of training and preparing vendors and merchants to provide online payments. Essentially, that is an export opportunity for the market which needs to be looked at within that context,” he explained. When asked whether this acquisition is part of a larger trend in which financial sector's applications and hardware could become integrated into the telecommunications sector and or vice versa, Elhousseiny was doubtful, asserting that rather than integration, interoperability would be the more realistic trend for the foreseeable future as we are seeing today. “Interoperability and collaboration is the name of the game with all the technology available in the market. I do not necessarily believe integration of platforms will happen as such, rather interoperability for the broader benefit for free consumer choice,” he said. Visa's acquisition of Cybersource is slated to come to a close by the end of the fourth fiscal quarter. Michael Walsh, Cybersource's president and CEO, will maintain his position as a subsidiary of Visa, while William S. McKiernan, Cybersource's executive chairman and founder, will become an executive advisor at Visa to help transition integration of the company.
