- As the way we pay becomes increasingly digital, scammers target websites like Airbnb, Fiverr and OkCupid.
- A new wave of startups has arrived and has provided fraud prevention software to e-commerce retailers, online dating sites, lenders and other marketplaces.
- Here's a look at 10 startups that offer fraud prevention to both new and established players, including how much VC money they've collected and who some of their customers are.
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Fraud is not a new topic for merchants and banks.
But the way we pay for things and move our money is changing. And as our financial life becomes increasingly digital, managing fraud risks becomes more difficult – especially for new startups that don't have a Wall Street Bank's existing risk and compliance infrastructure.
But these old players were also used to a world where static rules could be written to identify fraud – like paying abroad or withdrawing from an ATM that exceeded an average threshold.
Nowadays, fraudsters use more complex tactics, so any company dealing with money and payments has to stay up to date.
To help companies keep up with the speed and complexity of digital payments, a new cohort of startups has been added to offer fraud prevention services to both newcomers and established companies.
From identity verification on dating sites to anti-money laundering AI for international e-commerce brands, these startups use data, machine learning, and automated information to do more than just rule-based fraud monitoring.
Here's a look at 10 startups that make sure our information isn't compromised when our financial life goes digital.
Overall increased: $ 2.1 million
Last round: $ 2.1 million seed in August 2014
key investors: Lightspeed Venture-Partner (Affirm, Grubhub, Snap), Khosla Ventures (Affirm, DoorDash, Impossible Foods), Y-Kombinator (Airbnb, Dropbox, Stripe)
Customers: Brex, Coinbase, Nextdoor
Cognito is an identity verification service used by companies to perform the "Know Your Customers" validation, often referred to as KYC validation, when they meet new users.
Cognito can review users' personal information to help companies prevent fraud. For example, to sell age-restricted items online, a company can use cognito software to check a user's birth date.
In addition to the consumer identity verification product, there is also the startup based in Palo Alto Development of a business verification product This applies to companies according to the same principles for data validation.
Overall increased: $ 3 million
Last round: GBP 2m Series A in January 2020
key investors: Digital Space Ventures (Capitalize, Revolut, Tandem), Power over Mass Capital (Airportr, Drover, Vidsy), Truesight Ventures (Octi, QuickBus, Steadypay)
Customers: AWS, Cisco, EPAM
Cybertonica offers payment processors and companies three fraud prevention products: Anomalytics, payment fraud detection software; ScreenWiZe, a mobile platform for detecting transaction fraud; and GoFrictionless, a one-click customer verification software for online retailers.
The London-based startup offers its products to payment providers such as banks, e-commerce companies and merchant acquirers (financial institutions that maintain a merchant account to accept payments).
Overall increased: $ 35 million
Last round: $ 23 million Series B in September 2019
key investors: Digital currency group (Cognito, Coinbase, Ripple), Octopus Ventures (Conversocial, Depop, Patch), Santander InnoVentures (Kabbage, Trulioo, Socure)
Customers: Silvergate Bank
Elliptic offers banks, crypto exchanges and regulators risk management and anti-money laundering software for cryptocurrency. The software can help identify fraudulent accounts, links to dark web marketplaces, and money that may be associated with theft.
Founded in 2013, the London-based startup hopes to bring crypto to banks that often don't trade on crypto exchanges where they feel they can't manage the risk. Elliptic offers banks insight into the licenses and KYC guidelines of crypto exchanges and the transactions that take place on this exchange in sanctioned countries.
Overall increased: $ 77.5 million
Last round: $ 50 million Series C in October 2017
key investors: Citi Ventures (Honey, Plaid, Trulioo), Data Collective (Gusto, LendUp, Tala), Sapphire Ventures (23andMe, LinkedIn, Square)
Customers: Citi, Credorax, SafetyPay
FeedZai offers banks, acquirers and merchants AI-based fraud prevention services. Products include account opening, anti-money laundering and transaction monitoring.
FeedZai was originally launched in Portugal before it came to the US in 2014. It has partnered with major banks like Citi. FeedZai's machine learning and AI capabilities provide an alternative approach to more static, rule-based fraud monitoring that can lead to false positives and de-sensitize consumers to fraud monitoring.
Overall increased: $ 100 million
Last round: $ 50 million Series D in September 2018
key investors: New corporate partners (Coursera, Robinhood, Letgo), Scale Venture partners (Bill.com, Root Insurance, Socure), Sequoia Capital Israel (BigPanda, Lemonade, Moovit)
Customers: Way, Fiverr, Nordstrom
Forter provides a fraud prevention platform for e-commerce retailers like Nordstrom and marketplaces like Fiverr.
Forter helps retailers protect themselves from fraudulent transactions that often result in chargebacks that require the retailer to return the money. It also offers protection against advertising and misuse of return policies. Forter was founded in 2013 and has a technology center in Tel Aviv and a business center in New York.
Overall increased: $ 282 million
Last round: $ 150 million Series F in August 2014
key investors: Accel (Dropbox, Slack, Spotify), Andreessen Horowitz (Airbnb, Instacart, Lyft), Index Ventures (Glossier, Plaid, Robinhood)
Customers: Landis + Gyr, Schneider Electric, US House of Representatives
Lookout specializes in mobile fraud detection and anti-phishing. Organizations are increasingly vulnerable to phishing attempts, often via email, where an employee incorrectly clicks a link and gives hackers access to internal documents and systems.
Lookout has partnered with Microsoft Office 365 to give businesses an overview of a world where employees often use their personal phones to access business email and documents.
Overall increased: $ 107 million
Last round: $ 53 million Series D in March 2018
key investors: Insight partner (HelloFresh, N26, Shopify), stripes (The Black Tux, GrubHub, GoFundMe), Union Square Ventures (Kickstarter, SoundCloud, Stash)
Customers: Airbnb, Harry, OkCupid
Sift works with online retailers, marketplaces and even dating sites to prevent fraudulent transactions and fake user accounts.
San Francisco-based company Sift was founded in 2011 and uses data from its customer base to further develop its fraud monitoring technology. This means that customers can use more than just their own transaction data to inform fraud monitoring.
Overall increased: $ 61.9 million
Last round: Series C $ 30 million in February 2019
key investors: Scale Venture-Partner (Bill.com, Forter, Root Insurance), Santander InnoVentures (Elliptic, Kabbage, Trulioo)
case studies: Investment advisors, lenders, banks
Socure provides identity verification software to lenders, financial institutions and e-commerce retailers. It can help set up new account settings, monitor identity fraud, check identity documents, and screen users for money laundering watchlists.
The New York-based startup was founded in 2012 and counts digital-first companies such as challenger banks and direct-to-consumer retailers among its customers.
Overall increased: $ 80.8 million
Last round: CA $ 70m Series C September 2019
key investors: Citi Ventures (honey, plaid, square), Goldman Sachs (Marqeta, plaid, very good security), Santander InnoVentures (Elliptic, Kabbage, Socure)
Customers: Bitbuy, CricketBet, PSI-Pay
Trulioo offers financial services customers such as brokers, challenger banks and gaming platforms identity and business verification software.
With Trulioo's GlobalGateway, businesses can identify and review both consumers and businesses based on data such as contact information, credit history, and business registrations, as well as complete information about beneficial ownership. Trulioo works with data providers such as American Express, Experian and Refinitiv to verify the data.
The Vancouver-based startup was founded in 2011 and has attracted investments from corporate venture capital such as Citi Ventures, Goldman Sachs and Santander.
Very good security
Overall increased: $ 44.9 million
Last roundSeries B worth $ 35 million in October 2019 (extended by Visa corporate venture investment in January 2020)
Main investors: Goldman Sachs (Marqeta, Plaid, Trulioo), Visa (Klarna, Marqeta, Stripe)
Customers: Brex, LendUp, Petal
Very Good Security (VGS) helps companies like Brex, Petal and Deserve protect themselves from fraud by storing data on their behalf.
VGS stores confidential information such as credit card numbers and health data on behalf of its customers. By storing customer data with VGS, startups reduce the risk of hacks and data breaches. VGS was founded in 2015 and is based in San Francisco.