German and Israeli anti-fraud technology startup Fraugster is working to make fraud detection smarter. The startup recently raised $5 million in a venture funding round led by international venture capital fund Earlybird, along with existing investors Speedinvest and Seedcamp.
Founded in 2014, Fraugster has developed artificial intelligence technology that the company uses to help detect and eliminate payment fraud. The startup claims its AI-powered fraud detection technology can anticipate fraudulent payment attacks even before they happen, reducing fraud by a reported 70 percent, while also increasing conversion rates by as much as 35 percent.
Max Laemmle, CEO and cofounder of Fraugster, was quoted as saying: “We founded Fraugster because the entire payment risk market is based on outdated technology. 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. We have invented a self-learning algorithm that mimics the thought process of a human analyst, but with the scalability of a machine, and gives decisions in as little as 15 milliseconds.”
Fraugster analyzes and learns from transactions in real time, collecting over 2,000 data points, such as name, email address and billing and shipping address. All of this data is then sent to be analyzed by the company’s artificial intelligence engine, which then reviews each transaction’s data individually for signs of fraud.
According to Laemmle, Fraugster’s program doesn’t use a fixed algorithm to analyze and review transactions but rather learns as it goes.
Earlybird Partner Christian Nagel was quoted as saying: “We are very excited to be working with Fraugster. Their technology gives online merchants a new weapon in the fight against fraud. As more business continues to move to the internet, Fraugster’s vision of a fraud-free world is one that we should all be working towards.”
The startup reportedly said that it is already handling nearly $15 billion in transaction volume for several thousand merchants and payment service providers worldwide, including Visa. With the latest round of funding, the technology startup reportedly plans to grow its staff to support Fraugster’s continued international expansion.