Fraugster, a German and Israeli startup that has developed Artificial Intelligence (AI) technology to help eliminate payment fraud, has raised $5 million in funding.
Earlybird led the round, alongside existing investors Speedinvest, Seedcamp and an unnamed large Swiss family office. The new capital will be used to add to Fraugster’s headcount as it expands internationally.
Founded in 2014 by Max Laemmle, who previously co-founded payment gateway company Better Payment, and Chen Zamir, who I’m told has spent more than a decade in different analytics and risk management roles including five years at PayPal, Fraugster says it’s already handling almost $15 billion in transaction volume for “several thousand” international merchants and payment service providers, including (and most notably) Visa.
Its AI-powered fraud detection technology learns from each transaction in real-time and claims to be able to anticipate fraudulent attacks even before they happen. The result is that Fraugster can reduce fraud by 70 per cent while increasing conversion rates by as much as 35 per cent. The point of any fraud detection technology, AI-driven or otherwise, is to stop fraudulent transactions whilst eliminating false positives.
“We founded Fraugster because the entire payment risk market is based on outdated technology,” the startup’s CEO and co-founder Max Laemmle tells me. “Existing rule-based systems as well as classical machine learning solutions are expensive and too slow to adapt to new fraud patterns in real-time.