Merchant Fraud Journal

The Most Promising Fraud Detection Startups in Europe

Bradley

europe

The top fraud detection startups in Europe know how to operate in a tough regulatory environment. GDPR forces merchants doing business in Europe to take customer data privacy seriously. Merchants that don’t have a GDPR compliant fraud prevention solution risk huge fines. European Union legislation is deliberately vague and casts a wide net — increasing the pressure on merchants to get compliance correct.

At the same time, these same merchants must balance the need to avoid the long-arm of the EU Commission with the need to provide an excellent customer experience. This means decreasing friction and providing streamlined, friendly sales funnels. In a crowded marketplace with more and more advertisers competing for online consumer dollars, there is no room for fraud prevention to slow things down.

Below are profiles of the most promising eCommerce fraud startups you need to watch out of Europe:

Nethone

Nethone

At a glance:

Nethone’s tagline is to ‘Know Your Users to resolve fraud’ while maintaining a focus on gaining loyal customers. In keeping with that vision, company CEO Hubert Rachwalski wrote an editorial in Merchant Fraud Journal about the challenges merchants face to maintain their chargeback levels below the qualifying thresholds while also minimizing the impact of fraud on their business.

The piece, entitled ‘High-risk Merchants are at Risk of Matching’, discusses the problems merchants face with the decrease in chargeback thresholds at VISA down to 1%. Should they go over this limit in an effort to accept as many orders as possible, they risk getting put in the high-risk ‘MATCH’ category. At best this requires them to change processors. At worst, it can mean a complete inability to sell online.

To avoid this, Rachwalski writes that Nethone is working on additional analytics capabilities to detect and eliminate friendly fraud:

One of the key values for online merchants that Nethone provides is comprehensive KYU analytics (KYU). Besides profiling, it combines external merchant data to provide a real-time decision accurately and transparently to closely detect fraudsters who damage merchants’ reputation with chargebacks. And that’s exactly why we decided to create Nethone – to bring KYU analytics to online merchants.

Covery

At a glance:

Covery fights eCommerce fraud by specializing in device fingerprinting. This technique allow merchants to collect more and better data about the nature of customers when evaluating an order for fraud. Specifically, Covery helps merchants understand the device and browser settings used by merchants, so that it can supplement additional methods for preventing eCommerce fraud.

In an interview with Merchant Fraud Journal, Covery hightailed the growing number of ‘fraudster bots’ and explained the sophisticated, long-term nature of their attack strategy. They begin with what looks like legitimate orders. But in reality, the fraudsters behind them are testing the waters to learn how the site scans for fraud. When they identify a good target, they begin to steal passwords, financial information, and card credentials. Eventually, they can even graduate to DoS attacks and other kinds of advanced hacking techniques.

“Some of the common bot attacks we see are affiliate fraud, bonus abuse, reputation abuse, etc.,” the company said in its Influencer Insights interview. “The most important part of stopping a bot attack is awareness an attack is occurring. Unfortunately, the big problem is bot attacks often go unnoticed. Device fingerprinting helps to greatly reduce this vulnerability.”

Fraugster

At a glance:

Fraugster, founded by two payments specialists with experience at PayPal and Better Payment, improves on the traditional eCommerce fraud machine learning models. While these models are a step up from the rules-based systems that characterized the early days of the industry, they lack the dynamism necessary to keep up with increasingly sophisticated fraudsters.

To increase merchants’ defenses, they created a true artificial intelligence system from scratch. This allowed them to completely reinvent the way algorithms can think about interpreting order data. In addition, their hands-on knowledge of the nuts and bolts lets them quickly adapt the technology to emerging threats, at scale.

SEON

At a glance:

SEON specializes in multi-layered fraud prevention technology. Normally, you will hear about multi-factor ways of prevention eCommerce fraud such as additional devices. SEON takes that one step further, enabling merchants to use all of their own data in a ‘white box’ scenario. In turn, merchants don’t miss out on some potentially critical insights.

In an interview with Merchant Fraud Journal, SEON outlined some of the ways it improves on companies’ ability to use their own data. Traditionally, fraud prevention solutions will flag IP addresses, with risky or known fraudulent domains either receiving additional scrutiny or being banned outright. However, this ignores the fact that many fraudsters work around this by simply using VPNs.

To fight back, SEON allows merchants to flag entire data centers and open port PING. This reveals proxies so that merchants can see when an order comes from one of these places, and act accordingly.

“IP addresses are useful for flagging high-risk locations, but they’re also really easy to mask and change via VPNs and proxy servers. If your business relies on geo-blocking, you need to know when this happens. Companies like Netflix, for example, have a zero tolerance towards proxy usage,” the company said in the interview. “The way to do detect that usage is looking at the ISP and via open port pinging. It helps reveal proxies as they all need an open port so people can connect to them. And if an ISP is only bringing in fraudsters from these IP addresses, it makes sense to block the entire data center. “

Feedzai

At a glance:

Feedzai is an eCommerce fraud prevention startup that focuses on the banking sector and financial crimes. The FBI reports that these types of attacks are significantly on the rise as hackers move towards data theft crime such as business email compromise (BEC), transaction fraud, and other forms of account takeover.

The company was also named a ‘best in class’ company by AITE, a consultancy, for its methods in the fight against anti-money laundering prevention (AML). It’s clients include major international banks such as CITI.

Specifically, Feedzai offers a unique account protection solution — friction less account opening. This offering helps banks to increase the security of the accounts to reduce AML while minimizing the amount of friction that occurs throughout the sign-up process. This gives banks the ability to take AML seriously without allowing the fight to impact their customer acquisition objectives.

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