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Mastercard (MA) to Acquire Ethoca to Enhance Cyber Strategy

Zacks Equity Research

Mastercard Incorporated MA recently announced its agreement to purchase Ethoca, which is expected to close in the second quarter of 2019. However, terms of the transaction were not disclosed.

Ethoca provides technological solutions to merchants and card issuers, helping them form alliances in real-time around the globe. This in turn, enables fast detection and cracking of forgery in digital trade. When a fraudulent activity is exposed, merchants are informed immediately so that they can confirm the unethical transaction, reverse it or stop delivery, thereby reducing malpractices at the source.  

The acquired company’s products would allow Mastercard to stay focused on its commitment toward enhancing protection in the digital space. Purchasing Ethoca is an addition to its wide array of fraud management and security products.

Mastercard aims to include Ethoca’s capabilities in its present security activities, data insights and artificial intelligence solutions, which would stop false declines and fake purchases even more.

This deal is yet another accretion to Mastercard’s multilayered cyber strategy, which would benefit customers.

Per Juniper Research, retailers are expected to suffer a loss of 130 billion in online deception over the next five years. Moreover, research firm Aite Group anticipates that false decline summed up to $331 billion in the United States last year.

Mastercard has been making a significant progress in its digital strategy and continuously investing in technology. With MasterPass, the company became the first network to deliver a digital payment service across all devices and channels. It is also spending on tokenization technology with its Mastercard Digital Enablement Service (MDES), which supports contactless payments and Digital Secure Remote Payments.

The company announced that it will have token services on all its cards by 2020, assisting consumers to store credentials with merchants without revealing their actual card details.

Shares of this Zacks Rank #3 (Hold) company have rallied 25.4% in a year’s time, outperforming the industry’s growth of 14.3%. Mastercard’s strategic acquisitions, alliances and technology upgrades, along with product-diversification and geographic-expansion initiatives should help the stock retain the bull run.


Stocks to Consider

Investors interested in the finance sector can look into some better-ranked stocks like Virtu Financial, Inc. VIRT, Fidelity National Information Services, Inc. FIS and Euronet Worldwide, Inc. EEFT. You can see the complete list of today’s Zacks #1 Rank stocks here.

Virtu Financial provides market making and liquidity services to the financial markets across the globe. The company carries a Zacks Rank #2 (Buy) and came up with average trailing four-quarter positive surprise of 0.63%.

Fidelity National Information works as a financial services technology company worldwide. It sports a Zacks Rank #1 (Strong Buy). The company managed to deliver positive results in all the trailing four quarters, the average being 2.72%.

Euronet provides payment and transaction processing and distribution solutions worldwide. It carries a Zacks Rank of 2. The stock pulled off average four-quarter beat of 2.68%.

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