Mastercard to buy Canadian fraud-detection firm Ethoca

Mastercard is bringing Ethoca—a fraud solution powered by collaboration between banks and merchants—in-house.

The card network has agreed to buy Toronto-based Ethoca for an undisclosed sum in a deal expected to close in the second quarter of this year, Mastercard announced Tuesday. Ethoca has also worked with Visa in a partnership dating back to 2013.

Ethoca, launched in Toronto in 2005, leverages data from 5,000 merchants and 4,000 financial institutions to flag potentially fraudulent online transactions before they occur, including spotting false positives that have plagued merchants' efforts to battle online fraud.

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Ethoca has worked closely with other payment industry providers in recent years, including FICO, to share data in the battle against fraud. As recently as last fall, American Express added Ethoca’s service for real-time fraud alerts.

This marks the second deal announced this month targeted at bringing new features in-house. Last week, Mastercard agreed to buy the cross-border payments company Transfast, ending a bidding war with Visa to buy a competing firm, Earthport.

Last year Ethoca rolled out Eliminator, a tool to battle “friendly fraud" by enabling issuers’ customer-service teams to reduce chargebacks by confirming actual purchases with cardholders in real time.

Mastercard plans to add scale to Ethoca’s solution by combining the existing technology with its own data insights and artificial intelligence tools, Mastercard said in the release.

“Ethoca is a strong addition to our multilayered cyber strategy, helping customers take immediate action against fraud and eliminate chargebacks before they can occur,” said Ajay Bhalla, Mastercard’s president of cyber and intelligence solutions, in the release.

Ethoca sees the deal as a way to rapidly expand its technology to more users. “Mastercard is a natural home for Ethoca," said Andre Edelbrock, Ethoca’s CEO, in the release.