On August 3, 2024, Visa Inc. (NYSE:V) agreed to buy Tel Aviv-based fraud detection startup BioCatch for $2.4 billion in cash, its biggest move yet to fight the wave of AI-powered scams hitting the payments industry. The deal comes just days after rival Mastercard Incorporated (NYSE:MA) posted its own strong quarterly results.
Why Visa Is Spending Big to Catch Up
BioCatch analyzes typing cadence, touchscreen swipes, and device handling to catch scammers and bots before a payment goes through. Visa says the technology is critical as generative AI makes fraud cheaper and more convincing. Visa Inc. (NYSE:V) estimates scams and account takeovers already cost the global economy more than $1 trillion a year. Evercore’s Adam Frisch said investors will welcome the news, noting that “many” in the industry have been flagging Mastercard’s own Recorded Future acquisition as “the best-in-class tool” for exactly this kind of protection.
This makes you question: is Visa’s deal a smart, necessary defense of its massive transaction network, or is Visa simply following a playbook Mastercard already proved out two years ago?
Visa’s Bull and Bear Case
BioCatch already protects 760 million users across more than 350 banks in 21 countries. Folding that into Visa Inc. (NYSE:V)’s value-added services division, which is one of its fastest-growing businesses, gives Visa huge distribution potential across its network of nearly 14,500 financial institutions and $17 trillion in annual transaction volume. BioCatch’s revenue and gross profit both roughly tripled under its previous owner, Permira, showing real momentum behind the technology Visa just bought. Visa has invested more than $13 billion in fraud and technology infrastructure over the past five years, a sustained commitment rather than a one-time purchase.
However, the deal explicitly makes a comparison to Mastercard Incorporated (NYSE:MA)’s Recorded Future, already described by analysts as the category leader, suggesting Visa is trying to catch up rather than leading. Visa’s own stock barely moved on the announcement. The acquisition also won’t close until the end of Visa’s fiscal second quarter of 2027, a long wait before any of it shows up in results. The deal also follows Visa’s recent 2,600-person layoff, raising questions about how the company balances cost cuts with fresh acquisition spending.
Mastercard’s Bull and Bear Case
Mastercard Incorporated (NYSE:MA)’s own results, reported just days before Visa’s announcement, beat expectations across the board. Adjusted earnings of $5.04 a share versus $4.77 expected; revenue grew by 14% to $9.3 billion. The value-added services revenue, the exact category Visa is now targeting, soared by 20%. Mastercard’s 2024 purchase of Recorded Future already gives it a head start in fraud intelligence. Visa’s new deal will need over a year to close before it can even begin competing with it directly.
However, Mastercard’s cross-border volume growth actually slowed to 12% from 15% a year earlier, even though it still beat estimates. With Visa now spending heavily on fraud technology specifically to challenge Mastercard’s lead, that advantage may not last as long as it looks today.
Insider Monkey’s Hedge Fund Data
Insider Monkey’s hedge fund database shows Visa Inc. (NYSE:V) had 181 hedge fund holders as of Q1 2026, down slightly from 184 the quarter before. Mastercard Incorporated (NYSE:MA) had 157 holders, up from 150.
Among other payment peers, American Express had 83 holders, flat from the quarter before, and PayPal had 76, down from 78. Visa still draws the most hedge fund interest of the group.
Conclusion
Visa is spending big to close a fraud-technology gap that Mastercard opened two years ago. Mastercard’s Recorded Future remains the tool the market already trusts most until the BioCatch deal actually closes sometime in 2027. Nonetheless, hedge funds favor Visa Inc. (NYSE:V) over Mastercard.
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Disclosure: None. This article is originally published at Insider Monkey.
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