How to Unite Industries Against Fraud
Double-header C-Level Insights with Fraugster’s Co-CEOs
In 2020, online fraud grew at twice the rate of e-commerce. In Q1 2021 alone, the fraud prevention industry received over $1Bn in new funding from investors betting on growth ¹. To control massive fraud and value loss, Fraugster believes there‘s a need to pool resources, IP, and technology within the cybersecurity industry. They are on a mission to unite the payment and cybersecurity industry by giving third parties access to their AI platform.
For our latest C-Level insights, we bring you a double header: you’ll hear from our portfolio company Fraugster’s Founder & co-CEO Max Laemmle and recently appointed co-CEO Christian Mangold about challenges that the payment security and fraud prevention industry face, and what the future holds.
1) Christian, you recently joined Fraugster, a payment security company from Berlin, as co-CEO. You‘re a veteran of the payments industry, having sold SOFORT to Klarna and led Klarna’s DACH operations. What attracted you to fraud prevention and payment security, and why now?
I‘ve seen multiple merchants, payment methods and PSPs struggle to deal with fraud, and I have felt the pain myself while running a buy-now/ pay-later scheme. So solving this problem with a no-code and easily implementable SaaS product is what attracted me to Fraugster. Powerful solutions should be available to customers without needing an army of developers and months to implement it.
Powerful solutions should be available to customers without needing an army of developers and months to implement it.
2) How does the use of Artificial Intelligence and Machine Learning fit into the equation?
These buzzwords have been over-used and abused by companies across industries. What really interests me is how we make AI explainable so that we understand how decisions are reached. For example, it is critical that a merchant knows why they have declined a customer, and the logic behind this needs to be a whitebox, not a blackbox like much AI in the market today. EU regulators are now taking an interest in this and have published draft legislation demanding that AI companies become more transparent. This will have big implications for the payments and ecommerce ecosystem, but we are in full support of it because it will create more transparency, trust and accountability for decision making. Our data science and R&D teams have already built explainability into our core product.
3) Max, you have been in this space for nearly 10 years. What do you see as the big challenges facing the payment security and fraud prevention industry?
The problem the industry faces is that there are many different providers, offering a range of solutions, but none of them neatly join up. If I put myself in the shoes of a typical customer (large merchant and PSP), this means multiple integrations, complexity, and getting different systems to communicate with each other. The way the payment security and fraud industry is serving customers is not fit for purpose, and spiraling fraud numbers back this up. We need to join forces.
4) So where do we go from here? Is fighting online fraud a losing battle?
It need not be a losing battle. At least that is what I believe. AI and machine learning now allow us to crunch vast amounts of data and prevent fraud before it builds in the system. But the problem is that the industry is very siloed across domains from database providers to biometrics, identity verification and wider payment security.
No single player, no matter how big or well-funded, can protect the industry from cybercriminals who learn quickly and have easy access to technology they need to defraud good customers and merchants. We need all hands on-deck and must pool resources, IP, technology and talent within the cybersecurity industry. This approach will allow us to build a much larger, bolder and faster self-learning platform.
We need all hands on-deck and must pool resources, IP, technology and talent within the cybersecurity industry.
5) What does uniting an industry against fraud look like? It sounds very ambitious.
It is an ambitious mission, you are right. But we can get there. Our first, bold step will be to open Fraugster’s AI platform to partners. This will allow us to bring a range of solutions — like PSD2 smart routing, device risk, anti-money laundering (AML) and ID verification to our customers, in one place. It also means customers have access to the very best tech partners who are working together to tackle complex challenges. We are doing this by recruiting the best talent in cybersecurity and data science from leading hubs like Tel Aviv and Berlin, and complementing it with amazing people from across the globe. At Fraugster, over 20 nationalities are represented.
6) Christian, you have had the privilege of being a leader at many key companies that employ talented people. What drives you to build such successful teams?
My leadership philosophy is built on a commitment to teamwork, determination, self-belief, and enablement. In that sense, I am more like a football coach. I create repeatable processes, set goals, and let the star players create the magic. In Fraugster’s case, I believe we have a unique team of intelligence and payment experts. The core team is of German and Israeli origin, stemming from our founding team and their networks including PayPal, Computop, SumUp and top consultancies. Now we infuse that with amazingly talented people from different corners of the globe. What unites our team is the focus on building a purposeful business to fight fraud; we are intellectually curious people who believe in the potential of advanced technology to achieve this.
What unites our team is the focus on building a purposeful business to fight fraud; we are intellectually curious people who believe in the potential of advanced technology to achieve this.
7) Question to both of you: what is the goal or strategy behind a co-CEO arrangement? How do you play to each of your strengths, reach consensus etc.?
The co-CEO arrangement allows us to combine a visionary founder mindset with the day to day operational and managerial skill sets required to scale a business. We complement each other in this way and have clearly defined areas of responsibility. Max covers investor relations and where the industry as whole is moving, whilst Christian has taken the reins of all day-to-day operations and team management.
8) Earlybird invested back in 2016. In what ways, would you say investors have guided you and what should startup founders look for in evaluating investors?
Earlybird are excellent sparring partners when it comes to growth, creating differentiation in competitive markets, and unlocking scalable growth. Earlybird, especially Christian Nagel who is on our board since 2016, empowers us on a regular basis to think very big and to be disruptive. This probably goes without saying that we have a very open line of communication to Christian; that has helped us advance our thinking and execution, but also know what pitfalls to avoid.
9) Finally, we noticed one of your teammates Mor led a great workshop this spring for our Vision Lab startups. She focused on KPIs and team culture: What’s unique about Fraugster in those aspects?
Two of our core values are excellence and curiosity, and they really define our culture. But to be excellent and build world leading tech products you need to have a clear focus on what you are building, why you are building it and what value it creates for you customer. This requires clear KPIs and focused curiosity. This allows us to execute on our promises, whilst still giving room for innovation. Mor, who leads our data science team, also creates space in her setting goals for cutting edge AI research.
Thanks for talking with us! How should people reach you best?
We have a number of open positions as we scale our business. If you are interested in joining a leading European AI tech company, you can find your next opportunity here. For all enquiries you can reach us at hello@fraugster.com. One of our team will get back to you.
¹Forter — $125m; Jumio $150m; Identiq $49m; Sift $50m; Socure $100m; Feedzai $200m; Seon $12m; ID.me — $100m; Veriff — $69m; Other earlier stage rounds — $200m. Sources: Crunchbase, Pitchbook, Business Insider.
If this resonated, please feel free to clap👏🏽 so more readers discover it.
Read more C-Level Insights on our publication and follow us on Twitter. 🙌🏽
