Fraudio, a startup founded by experienced operators and technical experts from the celebrated Dutch payment ecosystem, has raised a $3.3 million Seed round.
The team has spent 2 years building what it describes as a cloud native centralised AI and machine learning payment fraud detection solution that can be leveraged by any company in the payments ecosystem: payment-service-providers (PSPs), acquirers, issuers, processors, card schemes and even large merchants who run their own checkout or gateway.
The aim is to offer a modern replacement to the generation one rules based systems or generation two integration heavy fraud prediction models that are standard in the market today.
“We worked in the payment industry for many years and became so frustrated with the options available for fraud detection that we decided to build our own solution. In a blind test by the risk department at the PSP and acquirer we were at our solution effectively controlled fraud while causing 40% fewer false positives than one of the top vendors in the world. This was a vendor that charged six figures just for a proof of concept and then took half a year to implement it. We thought, hang on, why should companies make that kind of commitment before knowing if it’s any good? There must be a better way,” said CEO and Co-Founder João Moura.
The company considers itself the first in the next generation of fraud detection players. It leverages proprietary and patented AI technology with a powerful network effect from its vast dataset of transactions and real-time signals to offer three products from one easy to connect to platform: payment fraud detection; merchant initiated fraud detection (merchant initiated fraud detection); and money laundering detection.
“The long project timelines and the prohibitive costs of testing solutions was identified by Gartner as a major frustration in the industry. We don’t charge customers before they see value from our solution. We do this by offering what we call a proof-of-results free of charge. This allows companies to see the real results of our product in a week or less. Between that and our simple API integration we believe we are offering something really unique and compelling. Our current customers are very happy with the quick integration time and product performance”.
Current customers include Viva Wallet, Borgun, Novalnet, PagueloFacil and other undisclosed customers in Europe, North America, Latin America and Asia. “Some of our customers are quite private about using our platform, as they believe it gives them an edge in their local market, which we have to respect,” says COO and Co-Founder Nathan Trousdell.
Viva Wallet was one company happy to speak about the positive impact of the Fraudio solution, with a spokesperson saying this about the company. “Fraudio enables us to detect fraudulent merchants and money laundering, ensuring the safety of our clients against Fraud in Payments.”
Fraudio’s funding is happening at a time when there is growing demand for fraud detection solutions as more merchants and consumers move online in the wake of the Covid-19 pandemic.
Nathan elaborates on the changing nature of the market. “More than 70% of fraud is caused by organised crime groups. These are sophisticated organisations with their own data scientists developing cutting edge AI solutions that are constantly evolving. Their industry is booming, with some reports indicating payment fraud was up over 600% year-on-year during Covid-19. The old way of doing things is just not working anymore.”
Investors in this round are the founders of FinTech companies Stone and SaltPay, VCs BiG Start Ventures and BYND Venture Capital, as well as the founders of Viva Wallet, ComplyAdvantage and VOLT, and experts from the payments and cybersecurity industries.
“We’re really happy with our mix of investors in this round. We believe they bring a lot of relevant industry expertise and a vast network within the payments and security ecosystems”, says Nathan.
João Freire de Andrade from BiG Start Ventures believes in the company’s strong technology, compelling offer to customers and founding team. “Payment provider players are growing in quantity, specificities, and geography. Fraudio’s solution is being used by the most innovative payment providers around the world, proving it is the perfect democratization of the top-notch transactional fraud technology and ease of integration and use,” he said.
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