Anti-fraud startup Fraugster scores $14M Series B

Fraugster, the Berlin-based startup that uses artificial intelligence to prevent fraud for online retailers, has raised $14 million in a Series B funding. The round is led by CommerzVentures, the venture capital subsidiary of Commerzbank, alongside early Fraugster investors Earlybird, Speedinvest, Seedcamp and Rancilio Cube.

Notably, Munich Re/HSB Ventures, the VC arm of global reinsurer Munich Re, also participated in the round. That’s because Munich Re is insuring Fraugster’s “Fraud Free” product, which takes on the full liability for each transaction to ensure retailers utilizing Fraugster’s fraud detection technology never lose out — a sign that the company is pretty confident in its machine learning.

Selling its wares to payments companies — including Ingenico ePayments and Six Payments — the Fraugster AI technology takes data from multiple sources, then analyzes and cross-checks it in a fraction of a second to determine whether a transaction is fraudulent or not.

The idea isn’t just to block any potential fraud, which rules-based systems can already do, but to actually let more transactions through. That’s because false-positives (i.e. accidentally preventing perfectly valid purchases) is the real bane of the industry.

Citing industry average stats of false positives, Fraugster CEO and co-founder CEO Max Laemmle tells me that for every dollar lost to fraud, $17 is lost through transactions that are wrongly turned down, leading to lower revenues for merchants. He says that Fraugster’s technology has already got that down to $2.

Meanwhile, the anti-fraud startup says it will use the new funds to continue expansion into new markets. This includes the U.S., Asia and Europe, where retailers are facing “an accelerating battle against fraud.”

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