Visa pays $2 billion for CyberSource

Visa has continued its push into online payments and e-commerce by agreeing to buy electronic payments company CyberSource for $2 billion.  The deal comes just a week after rival MasterCard launched a new division dedicated to accelerating the development of different forms of payment. Mountain View, California-based CyberSource, which was founded in 1994, is essentially the online equivalent of terminals used to swipe credit and debit cards at physical stores. It also helps retailers using its software to protect themselves against fraud. CyberSource processes about a quarter of all US e-commerce transactions by dollar value. The company expanded its presence among small businesses when it acquired Authorize.net in 2007 and now works with more than 295,000 merchants using both brands. Its clients include British Airways, Home Depot and Facebook. Last year, it had revenues of $265 million and a net income of $11 million. Around eight percent of CyberSourceÔÇÖs revenues came from outside the US in the fourth quarter of last year. The deal with Visa will help to further drive its international growth, with emerging markets such as Asia and Latin America expected to be early priorities. San Francisco-based Visa currently relies on the United States for 59 percent of its revenue; but international sources should account for more than half by 2015, according to executives. Cell phone payments could soon prove particularly profitable for Visa in emerging markets, where the infrastructure for credit card payments is less developed but the use of cell phones is increasing. Commenting on the deal, VisaÔÇÖs chairman and CEO Joseph W. Saunders said: "Online commerce continues to grow rapidly, and this acquisition will enable Visa to offer new and enhanced services that will better meet the growing demand among merchants globally for robust, secure online payment processing capabilities which in turn will grow the entire eCommerce category. "The acquisition of CyberSource aligns with Visa's long-term strategic plan to identify and invest in opportunities today that will drive future growth and deliver enhanced value to Visa and our clients.ÔÇØ Michael Walsh, president and CEO of CyberSource, added:┬á"By joining forces with the world's foremost payments company, we will have the opportunity to utilize Visa's regional expertise and global presence to drive international adoption of CyberSource in key geographies.ÔÇØ CyberSource receives a small transaction fee for providing its servicesÔÇörevenues that Visa intends to increase as the smaller company expands. Visa hopes this expansion will encourage consumers to use Visa cards more, by allowing for easy access to loyalty programs and Rightcliq, VisaÔÇÖs application that speeds online transactions and allows for comparison shopping. The deal reflects the steps being taken by traditional payment processors to ensure their position is not eclipsed by emerging technology and online rivals such as PayPal. Last year, American Express announced it was buying Revolution Money, an online processor, for $300 million. However, VisaÔÇÖs acquisition of CyberSource now leaves few equivalent businesses for rivals also seeking to accelerate in electronic payments. PayPal, for example, is already owned by Ebay and is rapidly developing its presence away from the online auction site. The price being paid by Visa amounts to a premium of nearly 34 percent over CyberSource's closing share price on Tuesday. The transaction, which has been approved by the Visa and CyberSource boards of directors, is expected to close in Visa's fourth fiscal quarter of 2010.┬á