MasterCard’s $100 Million Orbiscom Deal Points to New Markets

In a deal that could better position MasterCard Inc. as a provider of transaction services for mobile and online commerce, the Purchase, N.Y.-based card network announced on Monday it is buying Orbiscom Ltd., a Dublin-based software company, for $100 million. MasterCard, which has been working with Orbiscom for the past two years and used the Irish company's technology as the underpinnings for a hosted transaction-services product it launched in September 2007, will use the acquisition to penetrate new markets, Wendy Murdock, chief product officer at MasterCard, said during a conference call Monday morning with reporters and analysts. “We viewed the acquisition as providing us with the underlying capability to enter new payment spaces globally,” she said. Some observers see the deal as an effort by MasterCard to set itself apart from its chief rival, Visa Inc., now that both networks are publicly held entities. The play for Orbiscom “is not a game-changer or bet-the-franchise acquisition, but Orbiscom enriches and extends MasterCard's value proposition,” says Eric Grover, principal of Intrepid Ventures, a Menlo Park, Calif.-based advisory firm, in an e-mail message to Digital Transactions News. “It's a step in what will be a slow and relentless effort by the two global card payment networks to differentiate from each other.” Bruce Cundiff, director of payments research and consulting at Javelin Strategy & Research, Pleasanton, Calif., sees the acquisition furthering a transformation of MasterCard from a card company into a vendor of hosted payments solutions. With Wall Street now looking over the bank card networks' shoulders, Cundiff says, deals like the one for Orbiscom are coming to be expected by both investors and network clients. “I'm wondering why it's taken so long for them to jump in the waters with the acquisition of a solutions provider,” he notes. “This is something investors and other stakeholders are looking for.” MasterCard worked with Orbiscom to introduce MasterCard inControl, a hosted solution that lets card issuers more readily set specific routing and authorization instructions for both commercial and consumer card transactions. The product also gives issuers a tool to send alerts about transactions to cardholders, and allows them to create so-called one-time account numbers, or proxy numbers, for use with e-commerce transactions. Proxy numbers lose validity after one use, and so are useless to hackers. MasterCard signed its first client for inControl, Royal Bank of Scotland, last year. Company officials on Monday said other issuers around the world have shown interest in the platform. MasterCard also collaborated with Orbiscom to help PayPal Inc. introduce a virtual debit card in 2007. The product, which allows PayPal customers to buy from any Web site that accepts MasterCard, relies on MasterCard's backbone network and features Orbiscom's proxy-number technology. Altogether, Orbiscom holds 40 patents worldwide, four of which are issued in the U.S. Beyond e-commerce, Orbiscom's capabilities could deepen MasterCard's position in the nascent trend toward mobile payments. Extending inControl's alerts to mobile phones would seem a natural application of Orbiscom's technology now that MasterCard owns it, for example. MasterCard in June introduced a mobile platform leveraging processor Obopay Inc.'s person-to-person payments interface (Digital Transactions News, June 19, 2008). As for using inControl's alerts with that or any other platform, “we do not have this in the plan at the moment, but it's a possibility” says a MasterCard spokesperson. Still, observers like Cundiff say it's only a matter of time. “It's crazy not to,” he says. “Getting the customer used to interacting with their financial institutions opens that floodgate [for mobile payments].”