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- As the way we pay becomes increasingly digital, fraudsters are targeting sites like Airbnb, Fiverr, and OkCupid.
- A new wave of startups has entered the scene, providing fraud prevention software to e-commerce retailers, online dating sites, lenders, and other marketplaces.
- Here’s a look at 10 startups that provide fraud prevention for both new and incumbent players, including how much VC cash they’ve raised and who some of their clients are.
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Fraud isn’t a new issue for merchants and banks.
But the way we pay for things and move our money around is changing. And as our financial lives become increasingly digital, the fraud risks get harder to manage — especially for new startups who don’t have the legacy risk and compliance infrastructure of a Wall Street bank.
But those legacy players were also used to a world where static rules could be written to identify fraud — like a payment made in a foreign country, or an ATM withdrawal that breaches an average threshold.
Today, fraudsters are deploying more intricate tactics, so any company dealing with money and payments needs to stay on its toes.
To help companies keep up with the speed and complexity of digital payments, a new cohort of startups has arrived, and they’re offering fraud prevention services to both newcomers and incumbents.
From identity verification on dating sites to anti-money laundering AI for international e-commerce brands, these startups use data, machine learning, and automated intelligence to provide more than just rules-based fraud monitoring.
Here’s a look at 10 startups making sure that as our financial lives get more digital, our information isn’t at risk.
Total raised: $2.1 million
Last round: $2.1 million seed in August 2014
Key investors: Lightspeed Venture Partners (Affirm, Grubhub, Snap), Khosla Ventures (Affirm, DoorDash, Impossible Foods), Y Combinator (Airbnb, Dropbox, Stripe)
Clients: Brex, Coinbase, Nextdoor
Cognito is an identity verification service used by businesses to perform “know your client,” often referred to as KYC, validation when onboarding new users.
Cognito can verify users’ personal information to help businesses prevent fraud. To sell age-restricted items online, for example, a business can use Cognito’s software to verify a user’s date of birth.
In addition to its consumer identity verification product, the Palo Alto-based startup is also developing a business verification product which applies the same data validation principles to businesses.
Total raised: $3 million
Last round: £2 million Series A in January 2020
Key investors: Digital Space Ventures (Capitalise, Revolut, Tandem), Force Over Mass Capital (Airportr, Drover, Vidsy), Truesight Ventures (Octi, QuickBus, Steadypay)
Clients: AWS, Cisco, EPAM
Cybertonica offers three fraud prevention products to payments processors and businesses: Anomalytics, payments fraud detection software; ScreenWiZe, a mobile transaction fraud detection platform; and GoFrictionless, a one-click customer verification software for online merchants.
The London-based startup offers its products to payments players like banks, e-commerce companies, and merchant acquirers (financial institutions that maintain a merchant’s account to accept payments).
Total raised: $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)
Clients: Silvergate Bank
Elliptic provides risk management and anti-money laundering software for cryptocurrency to banks, crypto exchanges, and regulators. Its software can help identify fraudulent accounts, links to dark web marketplaces, and money that may be tied to theft.
Founded in 2013, the London-based startup hopes to bring crypto to the banks, who often won’t trade on crypto exchanges, where they feel they can’t manage risk. Elliptic provides banks with insight into the licences and KYC policies of crypto exchanges and the transactions happening on that exchange that may be in sanctioned countries.
Total raised: $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)
Clients: Citi, Credorax, SafetyPay
FeedZai offers AI-powered fraud prevention services to banks, acquirers, and merchants. Its products include account opening, anti-money laundering, and transaction monitoring.
FeedZai was initially launched in Portugal, before coming to the US 2014. It has inked partnerships with big banks like Citi. FeedZai’s machine learning and AI capabilities offer an alternative approach to more static rules-based fraud monitoring, which can generate false positives and desensitize consumers to fraud monitoring.
Total raised: $100 million
Last round: $50 million Series D in September 2018
Key investors: New Enterprise Associates (Coursera, Robinhood, Letgo), Scale Venture Partners (Bill.com, Root Insurance, Socure), Sequoia Capital Israel (BigPanda, Lemonade, Moovit)
Clients: Away, Fiverr, Nordstrom
Forter provides a fraud prevention platform for e-commerce retailers like Nordstrom and marketplaces like Fiverr.
Forter helps retailers protect themselves against fraudulent transactions that often result in chargebacks, where the retailer has to return the money. It also offers protections from promotion and return policy abuse. Forter, founded in 2013, has a tech hub in Tel Aviv and a business hub in New York.
Total raised: $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)
Clients: Landis+Gyr, Schneider Electric, US House of Representatives
Lookout specializes in mobile fraud detection and anti-phishing. Companies are increasingly vulnerable to phishing attempts, often via email, where an employee could mistakenly click a link and give hackers access to internal documents and systems.
Lookout has a partnership with Microsoft’s Office 365 to give companies oversight in a bring-your-own-device world where employees often use their personal phones to access work emails and documents.
Total raised: $107 million
Last round: $53 million Series D in March 2018
Key investors: Insight Partners (HelloFresh, N26, Shopify), Stripes (The Black Tux, GrubHub, GoFundMe), Union Square Ventures (Kickstarter, SoundCloud, Stash)
Clients: Airbnb, Harry’s, OkCupid
Sift works with online retailers, marketplaces, and even dating sites, to prevent fraudulent transactions and fake user accounts.
Founded in 2011, San Francisco-based Sift uses data from its customer base to evolve its fraud monitoring technology, which means that customers get the benefit of more than just their own transaction data to inform the fraud monitoring.
Total raised: $61.9 million
Last round: $30 million Series C in February 2019
Key investors: Scale Venture Partners (Bill.com, Forter, Root Insurance), Santander InnoVentures (Elliptic, Kabbage, Trulioo)
Case studies: Investment advisors, lenders, banks
Socure provides lenders, financial institutions, and e-commerce retailers with identity verification software. It can help verify new account set ups, monitor identity fraud, identity document verification, and check users against anti-money laundering watchlists.
The New York-based startup was founded in 2012, and counts digital-first businesses like challenger banks and direct-to-consumer retailers as customers.
Total raised: $80.8 million
Last round: CA$70 million Series C in September 2019
Key investors: Citi Ventures (Honey, Plaid, Square), Goldman Sachs (Marqeta, Plaid, Very Good Security), Santander InnoVentures (Elliptic, Kabbage, Socure)
Clients: Bitbuy, CricketBet, PSI-Pay
Trulioo offers identity and business verification software to financial services customers like brokerages, challenger banks, and gambling platforms.
Trulioo’s GlobalGateway helps companies identify and verify both consumers and businesses on data like contact information, credit history, and, for businesses, company filings and full beneficial ownership details. Trulioo works with data providers like American Express, Experian, and Refinitiv to cross check the data.
The Vancouver-based startup was founded in 2011 and has attracted investment from corporate venture capital including Citi Ventures, Goldman Sachs, and Santander.
Very Good Security
Total raised: $44.9 million
Last round: $35 million Series B in October 2019 (extended with Visa’s corporate venture investment in January 2020)
Key investors:Goldman Sachs (Marqeta, Plaid, Trulioo), Visa (Klarna, Marqeta, Stripe)
Clients: Brex, LendUp, Petal
Very Good Security (VGS) helps companies like Brex, Petal, and Deserve protect against fraud by storing data on their behalf.
VGS stores sensitive information like 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.