PayPal acquire FraudSciences
by Chris Dawson
This post was written in January 2008; specific information contained within it may be out of date.
PayPal has acquired FraudSciences for just under $170,000,000 in cash, FraudSciences are a privately held Israeli company with expertise in online risk tools. Their technology differentiates between real and fraudulent transactions with supposed unprecedented accuracy and so is a great fit for PayPal’s business.
Scott Thompson, the new President of PayPal said “Integrating FraudSciences’ risk tools with PayPal’s sophisticated fraud management system should allow us to be even more effective in protecting eBay and PayPal’s hundreds of millions of customers around the world.”
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The thing I rather liked about this story was Fraud Sciences’ technology enabling merchants to accept transactions they would normally reject. One customarily thinks of fraud prevention as “saying no”, but it appears this isn’t.
I think this is a very smart investment to (a) acquire Fraud Sciences’ technology (lots of smart guys) and (b) their customers.
If you look at the recent CyberSource fraud report it is pretty striking that, based on their survey, that retailers on average reject 4%+ of transactions as “suspicious” while only 1.4% (in 2007) are actually invalid orders. Helping detect this more efficiently is a significant opportunity.
Wow Max! 2.6% of lost transactions being valid orders is a LOT of business to be losing!!! Anything that can recover some of that is great news. Mind you almost without exception everytime PayPal have withheld funds from me when I’ve contacted the buyer they’ve been as surprised as me and repaid. I guess I’m not the only one in that situation either.