Berlin-based startup Fraugster that applies AI and machine learning algorithms to fraud detection in the e-commerce space, has raised $14 million in a funding round led by CommerzVentures, the venture capital subsidiary of Commerzbank, and early Fraugster investors Earlybird, Speedinvest, Seedcamp and Rancilio Cube, with participation from HSB Ventures, the venture capital arm of the global reinsurer Munich Re. The company plans to use the fresh capital to expand geographically across Europe, Asia, and the US.
The company claims to have developed an effective technology platform that analyses some 2,500 data points for every transaction in order to detect fraudulent ones.
“In general, the most common fraud behaviour we see in the eCommerce space is that of stolen financials, meaning a fraudster steals credit card credentials (usually simply bought online on the darkweb) and uses them to buy goods online,” Fraugster’s co-founder and CTO Chen Zamir told Tech.eu. “In order to detect such patterns, our engine is trained to spot minute incoherences in the identity and behaviour of the user. […] To spot them, we can look into basic data points like the geographic location of the billing address and the IP address and see if there’s some level of mismatch between them.
“Of course, more sophisticated fraudsters will know how to mask their IP address behind VPNs or proxy IPs and by identifying the IP as such, that would on itself serve as a data point we would use to analyse the transaction. Another example of more sophisticated methods we can use for fraud detection is to analyse email addresses thoroughly to identify ‘bogus’ emails (i.e. email@example.com), match the email to the name of the user and even find fuzzy bad networks (i.e. a fraudster that is using repeatedly emails such as firstname.lastname@example.org, email@example.com, etc. where the email is similar but not a straight match that a machine would easily identify).”
Founded in 2014, Fraugster monitors millions of transaction every day, with its clients including payment service providers Ingenico ePayments and Six Payments.