Berlin, Germany-based Fraugster is an artificial intelligence software company that has raised $14 million in Series B funding led by CommerzVentures. Earlybird, Speedinvest, Seedcamp, Rancilio Cube and Munich Re / HSB Ventures also participated in this round.
Online merchants are believed to be losing more than $30 billion due to fraudulent transactions every year, which is roughly 1.5% of revenue. Fraugster is aiming to solve this problem through the use of its proprietary technology — which takes data from multiple sources and cross-checks it in fractions of a second to determine if the transactions are fraudulent. As Fraugster monitors thousands of data points, the company’s technology is able to determine the trustworthiness of users and decide if transactions are genuine quickly.
Munich Re is going to be the insurance company behind Fraugster’s Fraud Free product, which will take over the full liability for each transaction to help ensure retailers do not lose out. With this funding round, Fraugster is going to expand into new markets including the US, Asia, and Europe.
Fraugster launched in 2014 by Max Laemmle (CEO) and Chen Zamir (CTO). Laemmle is known for co-founding Better Payment and Zamir spent more than 10 years working in analytics and risk management roles across several companies including PayPal.
“Our technology is constantly improving and adapting to new fraud trends as they emerge around the world. We are protecting our clients from the risk of fraud and also giving them a significant revenue uplift because we’re reducing the number of genuine transactions that are erroneously blocked,” said Fraugster founder and CEO Max Laemmle in a statement.
Fraugster monitors millions of transactions. And some of its clients include payment service providers Ingenico ePayments and Six Payments.
Another issue that Fraugster handles is mitigating false positives. Blocked genuine transactions cost the industry more than $493 billion in 2017 alone. For every $1 lost to fraud, $17 is lost to transactions that are wrongly turned down.