Accertify Will Become Part of AmEx in $150 Million Deal

American Express Co. on Thursday announced it will pay approximately $150 million to buy a software startup in suburban Chicago whose product lets online merchants automate order screening for fraud. Founded in 2007, Accertify Inc. has built a client base that includes Barnes & Noble, Urban Outfitters, and 1800 Flowers as well as airlines, social networks, and money-transfer processors.

The deal, which is expected to close before the end of the year, follows in the wake of similar, albeit larger, acquisitions by AmEx rivals Visa Inc. and MasterCard Inc. Visa this summer bought e-commerce gateway CyberSource Corp. for $2 billion. CyberSource is a major vendor of anti-fraud products for card-not-present merchants. And last month MasterCard closed on its $526 million acquisition of the U.K.’s DataCash Group, a gateway and fraud-solutions provider for online sellers.

Jeffrey T. Liesendahl, Accertify’s chief executive, says the Visa and MasterCard deals heightened interest in the marketplace in companies like Accertify. “Fraud prevention is a very big need,” he says. “Merchants are looking for the ability to handle that.” He says his company wasn’t seeking a sale but started getting calls earlier this year from potential suitors. “We had some early conversations with American Express, and we were interested enough to continue talking,” he says.

Though young, Accertify has enjoyed impressive growth, reaching a head count now exceeding 70. While Liesendahl declines to reveal transaction volumes handled by its fraud-screening product, called Interceptas, he says both his client list and the volume of transactions have doubled each year since the company started. “We expect to be at that level [of growth] or higher going into the future,” he says. The company has enjoyed particular success with air carriers, having signed Delta Air Lines, Southwest Airlines, and JetBlue Airlines.

The Interceptas platform automates front-end screening, order review, and chargeback processing (Digital Transactions News, July 18, 2007), reducing fraud losses in some cases by 50% or more, Accertify says, and allowing fewer personnel to review more orders. The product is available as licensed software, though clients may also outsource services to Accertify.

As part of American Express, Accertify will find it easier to grow internationally, taking advantage of merchant connections AmEx has overseas, Liesendahl says. He argues the linkup will help domestically as well. “It’s the brand name of American Express and the ability to get into additional merchants,” he says. “We’re excited about how we can work together.”

In a statement, Bill Glenn, president of AmEx’s Global Merchant Services unit, said the deal for Accertify “will enable us to further increase trust and confidence in the online-payment space.” Part of the rationale for the deal, he said, is that merchants are seeking anti-fraud solutions that work across multiple payment brands rather than those tied to just one brand. “Merchants increasingly want single-source platforms to address all types of transactions,” he noted.

“We’ve been hearing merchants ask for one-stop-shop fraudsolutions, and now we’re delivering a solution to them,” says Jessica Zoob, senior vice president for mergers and acquisitions at AmEx, in an e-mail message. “While we have been able to offer merchants best-in-class fraud solutions for American Express transactions, fraud is a more extensive issue for merchants and they want solutions to address all types of transactions. With Accertify we’re helping to address those needs.”

The deal will leave current management in place at Accertify. The company will retain its name but will become a part of the Global Merchant Services unit, with Liesendahl reporting to Glenn.