NEW YORK (
$520 million acquisition of Datacash
could be one of several acquisitions credit-card companies make in the e-commerce and mobile technology space in the next year.
are all reportedly considering expanding e-commerce capabilities as consumers do more shopping online and through smartphones.
"There are a number of rumors of potential acquisitions. Targets could include
. On the mobile side there are a number of companies Visa and MasterCard could be targeting," said Robert Dodd a senior analyst at
Morgan Keegan & Co.
in a phone interview." [Card] carriers are focused on expanding existing accounts and expanding access."
"Visa, Mastercard, American Express and Discover will all create mobile account access. The prime objective of all entities in the space will be to break into mobile. This is happening completely exclusive of the Durbin Amendment," said David Robertson, of the payment industry newsletter
. "The mobile and ecommerce segment is one of the fastest growing segments of products with a substantial amount of purchasing allure."
The Durbin Amendment is part of the financial reform legislation that recently passed. The amendment ensures that debit interchange fees are proportional to the processing costs.
Scott Valentin, managing director of specialty finance equity for
FBR Capital Markets
says MasterCard may also make a play in mobile or another play in ecommerce because Visa and
Bank of America
are testing a mobile payment system in New York this year. In addition, Visa acquired Cybersource for $2 billion in April. "MasterCard may be looking for a way to leapfrog them."
One way MasterCard might gain on its competitors could be to acquire
, which currently manages MasterCard's mobile payments as a third party, says Dodd. In addition, with consumers shifting away from using credit cards, MasterCard is also likely to expand itself on the debit side. He believes MasterCard could acquire a smaller debit network such as
to strengthen its base.
Since competition in the mobile payment space is likely to grow, the valuations of any deals are likely to be a bit on the high side, according to industry professionals.
"I thought [MasterCard's acquisition of DataCash] was a good acquisition. The valuation was a little high," said Dodd. Dodd explained MasterCard's acquisition was expected since it has $3 billion worth of cash on its balance sheet and Visa acquired CyberSource for $2 billion in April. "It was 18 times EBITDA, but it was still less than Visa paid for CyberSource. They paid 25 times EBITDA, so it was a fair price comparatively."
"As for pricing... the acquisition was not the last, and so perhaps MasterCard was willing to overpay to get momentum going," said James Wheeler Partner at Morris, Manning & Martin.
Written by Maria Woehr in New York