Why ClearCommerce Opted to Join Forces with eFunds

ClearCommerce Corp.'s hopes to better its chances of winning business by becoming part of a publicly held company played a major role in its decision to merge with eFunds Corp., according to a senior executive at ClearCommerce. The Austin, Texas-based provider of transaction gateway and anti-fraud services to Internet merchants announced last week it is being acquired by Scottsdale, Ariz.-based eFunds for $19.4 million in cash (Digital Transactions News, Jan. 12). Julie Fergerson, vice president of emerging technologies and a cofounder, says the 9-year-old company's status as a private entity was holding it back. “A lot of the reason we lost deals lately was because we weren't invited to participate because we're not a publicly held company,” she says, attributing the sentiment to the conservatism of bank and merchant clients regarding the financial structure of vendors in the wake of the Internet bust. “During the Internet boom, they were willing to work with a privately held company, but a lot of [potential clients] have become more conservative about vendors,” she says. CyberSource Corp., Mountain View, Calif., is publicly traded, as is the U.K.-based parent of Hazlet, N.J.-based Retail Decisions Inc., ClearCommerce's two biggest competitors in the business of rooting out fraud for online retailers, a factor that Fergerson says also worked against the company. ClearCommerce controls 20% of the market for online risk management software and services, compared to 24% for ReD and 57% for CyberSource, according to Celent Communications, whose statistics show. ClearCommerce has built most of its share in the past four years. It clients include Apple Computer Inc., CardService International, Orbitz, PetsSmarts.com, and Staples Inc. The deal with eFunds, which is traded on the New York Stock Exchange under the symbol EFD, is expected to close by the end of March. “This is a good fit,” says Fergerson, pointing out that ClearCommerce brings strengths in card-not-present transaction processing currently lacking at its new owner, most particularly its FraudDetect database. At the same time, eFunds maintains major transaction databases related to checking-account transactions, including the Shared Check Authorization Network, or SCAN, a database of returned-check information, and DebitBureau, a collection of data on checking-account openings and closings, overdrafts, and the like. These could prove helpful to ClearCommerce, either in the online market or even in the world of physical stores, Fergerson says. “We're still working that out, ” says Fergerson.