TechWeb

CyberSource Buys Assets Of Troubled CardSystems

Sep 23, 2005 (12:09 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=171200372


CyberSource Corp. on Friday said it has agreed to acquire the assets of CardSystems Solutions Inc., a credit-card processing company that was hit by a massive security breach affecting millions of cardholders.

CyberSource, a Mountain View, Calif., company that processes credit-card transactions on the web, plans to buy all of the privately held company's assets, including its transaction-processing platform with its direct connections to banks and major credit-card company networks.

In June, CardSystems disclosed that an unidentified person had broken into its network and stolen names, account numbers and other personal information. Some 22 million Visa cards and 14 million MasterCards were exposed to the security breach. The company acknowledged that it had stored the data in violation of rules set by Visa and MasterCard.

In the deal, CyberSource gets contracts to process credit-card transactions on behalf of more than 120,000 merchants representing over $18 billion in annual processing volume, and a network of Independent Sales Organizations that connect CardSystems's consumer-facing front-end with bank services. ISOs are the classic middlemen in credit-card transactions.

CyberSource believes that integrating CardSystems into its operations would broaden its core offering of processing Web transactions by adding point-of-sale processing in retail stores. CardSystems' ISO network also provides a new sales channel for CyberSource, the latter company said.

"We are excited about this acquisition," Bill McKiernan, chairman and chief executive of CyberSource, said in a statement. "It will mean a strategic expansion of CyberSource's payment platform, and allow current CardSystems customers and partners to continue processing without interruption."

Uninterrupted processing, however, is not assured. CardSystems has been notified that it will not be authorized to process transactions through some credit-card associations after Oct. 31. CyberSource and CardSystems are negotiating with banks and the associations to reinstate the latter company's operations, which is pivotal to the completion of the acquisition.

"There are no assurances that the parties will be able to negotiate and enter into a definitive agreement concerning the sale of CardSystems' business or consummate the transaction," CardSystems said in a statement announcing the acquisition plans.