Spade – one of the fastest and most accurate providers of real-time merchant intelligence for the card ecosystem – recently announced it closed a $10 million Series A funding round led by Flourish Ventures with continued participation from a16z, Gradient Ventures, Y Combinator, Dash Fund, and Everywhere Ventures (The Fund).
There are nearly 2 billion credit card transactions that are processed daily on infrastructure that has not changed since the 1960s. And when a card is swiped or tapped, payment data is sent through credit card networks. However, due to data standards that regulate how this information is communicated much of the relevant information about a transaction is quite literally lost in translation. Both card issuers and consumers are forced to make mission-critical payment authorization, fraud detection, and categorization decisions based on an unreadable set of characters that obscures the precise merchant involved in a transaction.
For example, imagine a consumer on a business road trip who makes a purchase at a gas station in East Lansing, Michigan – which appears to the issuer as “10202LAN12102903.” And based on this string of text, the card issuer must make a vital authorization decision in under two seconds. Issuers have an idea of who a customer is based on a plethora of consumer-focused data that powers countless tools, including machine learning models and deterministic rules engines. But since merchant profiles are built using the low-quality merchant data available, issuers don’t have access to accurate, detailed, and consistent merchant information, resulting in false declines and, thus, billions of dollars of lost interchange revenue and the need to fix false positives and negative customer experiences.
In this case, matters made it worse when the consumer logs into their digital banking app weeks later to file an expense report and finds a seemingly unknown charge at a place called: “10202LAN12102903.” Due to the lack of quality merchant data, the consumer believes their card is compromised, files a dispute, and requests a new credit card from their bank. Depending on the merchant data available, the bank might wrongfully believe this charge to be fraudulent. And after spending their resources investigating this claim and completing a chargeback, they now have an unhappy customer who has lost faith in their bank.
The lack of real-time merchant intelligence is considered a problem that hamstrings card issuers’ operations and budgets while also harming consumers who report hundreds of millions of instances of credit card fraud each year. And card issuers spend over $30 billion in dispute costs and lose over $32 billion to credit card fraud annually.
To address this issue, Spade built a proprietary ground truth database to cover nearly 100% of merchants across the US. And Spade reliably returns a comprehensive merchant profile and is the only provider that can power an authorization flow with a p99 of under 50ms.
After a card is swiped or typed, the issuer sends Spade the data in real-time. Then Spade links each transaction to a verified merchant identity, returning granular merchant, category, and geolocation information, even including granular details such as phone numbers and legal business names.
Spade also works with card issuers to learn more about their cardholders’ spending habits to solve complex cases such as determining an account takeover if purchases tread into abnormal categories, exceed average spending amounts, or more accurately identify brick-and-mortar retailers from e-commerce sites. And in cases where a card might be issued for a specific spending relationship, such as a debit card for gas station purchases with prenegotiated rates or for travel and entertainment expenses while at a conference in a specific city, Spade can help with the creation of rules that could lock these cards from unapproved expenses. Spade can even power reward programs accurately across merchants, geographies, and categories or accurately categorize transactions across profit and loss (P&L) statements.
Spade will utilize the funds raised to grow the team to support its continued development of merchant intelligence products and international expansion outside the US. And Spade achieved SOC 2 Type 2 certification this year and will continue its deep commitment to providing enterprise-grade security and bank-level data encryption.
KEY QUOTES:
“This problem hasn’t been solved for lack of trying, but Spade is truly differentiated on both depth of data powering their enrichment and speed – in a payment transaction authorization window, every millisecond counts. Over the last year, Spade has demonstrated it can be a critical part of the answer to card fraud, disputes and chargebacks for a range of companies from large-scale global fintechs to banks. We’re thrilled to work with Oban, Cooper and Tess and for Spade to become part of Flourish’s portfolio of companies with the ambition to evolve key components of the financial infrastructure.”
— Kabir Kumar, Partner, Flourish Ventures
“With Spade’s provision of truly real-time merchant intelligence, we’re proud to be helping product-focused teams at issuers of all types and sizes authorize more transactions and stop fraud by making the most informed and accurate decisions at the time of authorization. Spade allows builders to create the future of finance at all card issuers, whether a neobank, traditional financial institution, fintech, or a corporate or P-card provider, to make the most informed and accurate transaction decisions.”
“What’s more interesting is that we’re able to solve some of the more unique or complex challenges in card transactions. For instance, if an employee holding a P-card is only permitted to make purchases over a certain amount while at a tradeshow in New York City, then Spade’s provision of precise geolocation information can help support those parameters. Or, if a consumer completes an Apple Pay purchase at their local Starbucks, and only moments later, their card is used at a POS across the city, card issuers can leverage the two exact latitudes and longitudes to flag a potentially stolen card immediately.”
— Oban MacTavish, co-founder and CEO, Spade
“As a leader in fraud prevention, our primary goal is to help customers detect and stop fraud with minimal impact on customer experience. Accurate data is a key part of that endeavor. By calling Spade’s API, we can get granular details about the merchant and the payment terminal, such as an accurate identifier for the merchant and location down to the latitude and longitude, which helps us create precise spend activity aggregations and geolocation mismatch indicators for our fraud models. Combining Spade’s data to our existing mix of device and behavior signals provided a meaningful lift to their performance.”
— Izel Niyage, Product Manager at Sardine
