Visa Acquires Featurespace for AI-Driven Fraud Detection

By Manya Saini

(Reuters) – Visa agreed to buy AI-driven payments protection firm Featurespace on Thursday. This acquisition marks the latest effort by the payments giant to enhance its financial crime and fraud detection portfolio.

Fintechs, especially in the payments sector, are increasingly exploring AI-driven fraud prevention tools due to rising cases of sophisticated financial crimes, including hacks and ransomware, many powered by generative AI.

Although Visa did not disclose the acquisition’s value, a previous report from Sky News estimated it at £700 million ($935.06 million).

Britain’s IP Group, Featurespace’s largest shareholder and first institutional investor, anticipates receiving £134 million in cash from the acquisition, having invested £22.9 million over seven financing rounds.

Founded in 2008 and based in Cambridge, UK, Featurespace serves high-profile clients such as HSBC, NatWest, and Worldpay.

Visa stated that Featurespace’s AI-enabled solutions will assist its clients in managing fraud in real-time. In July, Visa reported preventing 80 million fraudulent transactions worth $40 billion globally last year, attributed to investments in AI.

Earlier in September, Mastercard also acquired threat intelligence firm Recorded Future for $2.65 billion.

Analysts at brokerage William Blair noted that the Featurespace deal is a beneficial fit, expanding Visa’s value-added services beyond processing and merchant solutions. They emphasized the significance of increasing value-added services and new flows revenue in Visa’s strategy, especially with regulatory scrutiny facing transaction-based revenues.

Recently, the U.S. Department of Justice filed a lawsuit against Visa for allegedly violating anti-trust laws by suppressing competition. Visa has been under increased scrutiny from regulators and lawmakers for years, combating allegations of a duopoly with Mastercard, which both companies deny.

($1 = 0.7486 pounds)