Fraugster , a German and Israeli startup that has developed Artificial Intelligence (AI) technology to help eliminate payment fraud, has raised $5 million in funding.
Earlybird led the round, alongside existing investors Speedinvest, Seedcamp and an unnamed large Swiss family office. The new capital will be used to add to Fraugster’s headcount as it expands internationally.
Founded in 2014 by Max Laemmle, who previously co-founded payment gateway company Better Payment, and Chen Zamir, who I’m told has spent more than a decade in different analytics and risk management roles including five years at PayPal, Fraugster says it’s already handling almost $15 billion in transaction volume for “several thousand” international merchants and payment service providers, including (and most notably) Visa.
Its AI-powered fraud detection technology learns from each transaction in real-time and claims to be able to anticipate fraudulent attacks even before they happen. The result is that Fraugster can reduce fraud by 70 per cent while increasing conversion rates by as much as 35 per cent. The point of any fraud detection technology, AI-driven or otherwise, is to stop fraudulent transactions whilst eliminating false positives.
“We founded Fraugster because the entire payment risk market is based on outdated technology,” the startup’s CEO and co-founder Max Laemmle tells me. “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”.
Once integrated, Fraugster starts collecting transaction data points such as name, email address, and billing and shipping address. This is then enriched with around 2,000 extra data points, such as an IP latency check to measure the real distance from the user, IP connection type, distance between key strokes, and email name match. Then the enriched dataset is sent to the AI engine for analysis.
“At the heart of our AI engine is a very powerful algorithm which can mimic the thought process of a human analyst reviewing a transaction. As a result, we can analyze the story behind every transaction and say with precision which transactions are fraud and which aren’t,” explains Laemmle.
“You get a score or decision. Results are completely transparent (and not a black box), so you can understand exactly why a transaction was blocked or accepted. On top of this, our speeds are as low as 15ms. The reason why we’re so fast is because we’ve invented our own in-memory database technology”.
Fraugster cites competitors as incumbent enterprise level companies like FICO or SAS, which it claims are based on outdated technology.
Adds Laemmle: “At Fraugster, we do not use any rules, models or pre-defined segments. We don’t use a single fixed algorithm to analyze transactions either. Our engine reinvents itself with every new transaction. This lets us understand transactions individually and therefore decide which one is fraudulent and which one isn’t. As a result, we can offer unprecedented accuracy and the ability to foresee fraudulent transactions before they happen”.

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Budget airline AirAsia is the latest corporate to get into hackathons. The company just revealed plans to host its first-ever hack event on March 18 at its headquarters in Kuala Lumpur, Malaysia.
“ AIRVOLUTION 2017 ” — yes, all caps and a cheesy name

Just weeks after revealing its first court case against sellers of counterfeit goods, Alibaba has again pledged to increase its focus on fake goods after it announced a partnership with 20 global consumer brands.
Louis Vuitton, Samsung and Mars are among the big names to sign up to the not-exactly-innovatively-named ‘Alibaba Big Data Anti-Counterfeiting Alliance.’ Swatch-maker Swarovski is also on board, having recently worked with Alibaba to take alleged two sellers of fraudulent watches to court in China.
The alliance aims to increase the sharing of information on fake goods between Alibaba and some of its highest profile brands. Alibaba’s said that its existing system scans over 10 million listings on its e-commerce sites each day and, it added, it helped remove 380 million fake listings, shut down some 180,000 sellers and put “hundreds of counterfeiters” behind bars.
Alibaba said alliance members will “pool resources and increase collaboration” to stamp out more fake goods and sellers, but the actual details are fairly vague.
“Alibaba will provide alliance members with big data and advanced technological support in their IP enforcement work, including helping to block, screen and take down infringing listings,” the company said in announcement.
Brands, it added, “have committed to share their expertise on IP authentication and anti-counterfeiting data with Alibaba.” That data will help the Chinese e-commerce giant collaborate with authorities and brands to pursue legal action and run further investigations.
“The most powerful weapon against counterfeiting today is data and analytics, and the only way we can win this war is to unite,” Jessie Zheng, chief platform governance officer at Alibaba, said in a statement.
But timing is also everything. This second PR push — the first was the Swarovski case — comes weeks after Alibaba returned to the U. S. government’s list of notorious counterfeit platforms after a four year absence. Alibaba CEO Daniel Zhang chalked the return down to “protectionism,” but, if nothing else, it has certainly spurred the company’s marketing team into action.
In another recent move designed to boost its reputation in the U. S., Alibaba president Jack Ma pledged to create one million new jobs in America. That came last week after a meeting with U. S. President Elect Donald Trump who, as you might have guess, was quick to take credit even though most pundits are skeptical that Alibaba can pull the ambitious goal off.

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