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ID Verification Company Ekata Acquired by Mastercard for $850m




In an April 19th press release, Mastercard (NYSE: MA) announced their acquisition of identification verification company Ekata for $850m. In the release, Mastercard cited the importance of security in an ever-increasingly digital world. Through a combination of global experience and machine learning, Ekata has developed a product that provides real-time ID verification and decision-making services to a variety of businesses. Mastercard cited the acquisition as a key to helping them meet “consumer, bank, merchant, FinTech (financial technology company) or government’s data, payment and open banking needs.” Serving 2,000 businesses in over 100 countries, Ekata's identification verification software is likely to bolster the already impressive security apparatus that Mastercard has built.

Building onto an existing system

Ekata will be embedded seamlessly into the existing system Mastercard has in place to deal with fraud and security. In 2019, Mastercard developed a framework to deal with the challenges of security and fraud. In this framework, Mastercard established a vision to make digital payments “simple, smart, and secure”. From accessing financial services to engaging in business transactions to interacting with government services, digital identity has become an ever-increasingly important part of everyday life. With these areas of focus in mind, the Ekata acquisition makes perfect sense for Mastercard. 

Ekata describes their product as a way to help businesses “identify good consumers and businesses and bad actors in real-time.” The company, which spun off of Whitepages in 2019,  is based in Seattle and has offices in Amsterdam, Singapore and Budapest. Over 2,000 businesses currently use their platform, including major corporations like Lyft, Alaska Air, and Postmates. By optimizing the digital identification process, customers of Ekata are able to increase revenue by approving more good customers and reducing the number of chargebacks from fraudulent customers. Using machine learning to crunch massive amounts of data, Ekata can use their existing database of information to predict the risk of potential customers based on their behavioural data. Using their database of over 6 billion data points, Ekata uses insights into online identity signals to provide a score that predicts the likelihood that a person is who they say they are. Associations between individuals, business names, phone numbers, and many other connections are part of the database, allowing an accurate assessment as to whether or not a transaction is potentially fraudulent.

Regulatory review

The deal is predicted to close in 6 months, with a regulatory review necessary before the transaction can be finalized. While no major hurdles are expected, bets on fintech startups do not always pay off. Look no farther than Visa, who in early 2020 announced their attention to acquire payment processing company Plaid. After a year of regulatory reviews, the Department of Justice filed a suit to block the acquisition in late 2020. While Visa could have continued pursuing the case, they ultimately decided against it, dropping their plans to acquire Plaid in Janurary 2021. While this was just one deal that fell through, there has been speculation that fear of government intervention could lead to more uncertainty and lowered evaluation of fintech startups. 

Baggio has been an investor in the technology space for over half a decade. He uses the perspectives gained from his work experience in the private, public, and non-profit sectors to guide his investment strategy, with a specific interest in the potential of emerging disruptive technologies.