Visa bolsters financial crime prevention portfolio with Featurespace deal

By Manya Saini

(Reuters) -Visa agreed to buy AI-driven payments protection firm Featurespace on Thursday, marking the payments giant's latest effort to strengthen its financial crime and fraud detection product portfolio.

Fintechs, particularly those in the payments sector, have been exploring AI-driven use-cases for fraud prevention tools amid rising cases of sophisticated financial crimes including hacks and ransomware, many of which are powered by generative AI.

While the world's largest payments processor did not reveal the value of the acquisition, a Sky News report last month, citing sources, had pegged it at £700 million ($935.06 million).

Britain's IP Group - Featurespace's largest shareholder and its first institutional investor - said it expects to receive £134 million in cash from the takeover. It has invested a total of £22.9 million in the company over seven financing rounds.

Cambridge, UK-based Featurespace was founded in 2008. It counts high-profile banking companies such as HSBC, NatWest and Worldpay among its clients.

Visa said Featurespace's AI-enabled solutions will help its clients manage fraud in real time. In July, Visa said it prevented 80 million fraudulent transactions worth $40 billion globally last year thanks to investments in AI.

Earlier in September, Mastercard also struck a $2.65 billion deal for threat intelligence company Recorded Future.

"This (Featurespace) deal is a particularly good fit, in our opinion, as it broadens Visa's value added services offerings further beyond processing and merchant solutions," analysts at brokerage William Blair said.

"We believe the increasing mix of VAS and new flows revenue is an important piece of the Visa story, especially as transaction-based revenues face increased regulatory scrutiny."

Earlier this week, the U.S. Department of Justice filed a lawsuit alleging Visa violated anti-trust law by suppressing competition.

Visa has been facing heightened scrutiny from regulators and lawmakers for years, battling allegations of a duopoly with Mastercard, which both companies have denied.

($1 = 0.7486 pounds)

(Reporting by Manya Saini in Bengaluru; Editing by Janane Venkatraman and Krishna Chandra Eluri)