The Norcross, Ga., antifraud software vendor Digital Envoy Inc. has augmented its offerings by buying Cydelity Inc. of Santa Clara, Calif.
The acquisition, announced Monday, closed Feb. 23. The price was not disclosed.
Digital Envoy's software examines the Internet Protocol addresses and other characteristics of users' computers at the beginning of an online banking session. Cydelity's software and fraud network continue that process by monitoring activities throughout the session.
"This takes what we were doing and puts it on steroids," said Dennis Maicon, the executive vice president of Digital Envoy's Digital Resolve financial services solutions unit. His company will begin packaging the products together in two weeks and will sell a fully integrated version by the third quarter.
After the login, Digital Envoy's software could be activated only if banks configured it to kick in for certain high-risk transactions; it could not monitor continuously sessions to spot other types of risky activity, Mr. Maicon said. The Cydelity software is designed to monitor all transactions to spot potential fraud.
There have been several examples of similar consolidation within the security software sector.
Notably, EMC Corp.'s RSA Security, which has long touted its one-time-password tokens for online authentication, has acquired several other companies. In 2005 it purchased the transaction monitoring software company Cyota Inc., and last year it bought PassMark Security Inc., which developed authentication software.
In July, Entrust Inc., which makes encryption and authentication tools, purchased the transaction monitoring software vendor Business Signatures Corp.
Transaction monitoring software has become popular among banks in the past year, in part because it is not visible to users during online banking sessions.
"This takes us into the realm of protecting against advanced attacks," Mr. Maicon said, such as Trojan horses that wait for the user to log in and start moving money out after authentication is complete.
The integrated software will also help Digital Envoy clients protect users against so-called man-in-the-middle attacks, in which a criminal piggybacks on a user's session and attempts to steal money after the user has logged in to a bank site.
The Digital Envoy and Cydelity products will be able to feed data to one another, Mr. Maicon said. For example, the Digital Envoy software will be able to evaluate data from Cydelity's fraud network when examining login behavior.
Digital Envoy may make further acquisitions to address other areas of security, he said, such as software for using the phone to provide further authentication.
The two companies share no clients, so there is ample opportunity to cross-sell, he said. Digital Envoy had 150 relationships, including indirect ones, with financial institutions. Cydelity has three announced customers.
Avivah Litan, a vice president and research director at the Stamford, Conn., market research company Gartner Inc., said Digital Envoy is "good at analyzing the login, but they needed to go beyond the login."
The cultures of the two companies complement each other, she said. The folks at Digital Envoy are "not rock stars in the industry, but they've found a good niche with second-tier financial institutions."
