Alloy Raises $100M to Revolutionize Fraud Prevention

Alloy Secures $100 Million in Series C Funding

Alloy, a provider of identity operating systems for banks and financial technology companies, announced Thursday the completion of a $100 million funding round. This investment brings the company’s valuation to $1.35 billion.

Round Details and Backers

Lightspeed Venture Partners spearheaded the Series C round. This funding arrives just over a year following Alloy’s $40 million Series B financing. Existing investors, including Canapi Ventures, Bessemer Venture Partners, Avid Ventures, and Felicis Ventures, also participated, increasing Alloy’s total funding to over $150 million since its founding in 2015.

Addressing Onboarding Challenges with a Modern Platform

Alloy was initially established to resolve inefficiencies within the traditional customer onboarding process. Historically, online bank account applications often required extensive manual review. The company’s core objective was to empower banks and fintechs to enhance their identity verification and risk assessment capabilities through a single API service and a SaaS platform.

Over the past year, Alloy’s platform has expanded beyond automated onboarding to encompass transaction monitoring, with credit underwriting capabilities planned for release soon. According to Alloy CFO Kiran Hebbar, the company has experienced a tripling of its annual recurring revenue (ARR) and a doubling of its customer base in the last 12 months.

Growing Client Base

Currently, Alloy serves over 200 clients, a significant increase from the 90 it had a year ago. Notable clients include Ally Bank, HMBradley, Brex, Marqeta, Gemini, Ramp, and Evolve Bank & Trust.

How Alloy Mitigates Fraud and Enhances Security

Alloy integrates with data from 120 identity providers. This data is then utilized to assist financial institutions in preventing fraudulent activities during both initial customer onboarding and ongoing transactions.

The platform aims to answer critical questions for financial institutions, such as verifying the authenticity of applicants and assessing the potential for fraudulent behavior.

Alloy enables the creation of customized, instant decisioning systems tailored to specific regulatory compliance and risk requirements.

Seamless User Experience and Risk Management

“It presents a significant challenge for fintechs and banks to launch products that are both secure – protecting against fraud and compliance issues – and user-friendly,” stated CEO and co-founder Tommy Nicholas.

Historically, risk mitigation efforts by financial institutions have often led to suboptimal user experiences.

“Our goal is to eliminate this trade-off, making risk management a seamless background process that addresses the challenges faced by users,” Nicholas explained to TechCrunch. “We’ve become highly proficient in automating and optimizing these processes, essentially encouraging organizations to centralize their most critical operations within a single system.”

Expanding Market Opportunities

The increasing trend of companies integrating financial services into their platforms – particularly e-commerce businesses – has broadened the potential customer base for Alloy, according to Nicholas.

Furthermore, the company’s expansion into transactional monitoring and the upcoming launch of a credit underwriting product demonstrate its commitment to innovation.

Future Development and Investment

The newly acquired capital will primarily be allocated to developing “continuously evolving” customer identity profiles. These profiles will be instrumental in preventing fraud and minimizing risk.

Alloy also intends to integrate “richer data and risk signals” to provide banks and fintechs with a comprehensive 360-degree view of their customers. Improving the developer experience is another key priority.

“Our vision is to simplify fintech product development to the same level of ease as e-commerce product creation,” Nicholas said. “Identity and associated risk shouldn’t be a business concern; it should be a readily available solution. As Alloy expands, we aim to not only enhance risk understanding but also foster industry innovation by streamlining fintech product development.”

Investor Perspective

Justin Overdorff, a partner at Lightspeed Venture Partners, initially invested in Alloy as an angel investor during its Series A funding round in 2019.

“At the time of that investment, I had direct experience with this problem while at Stripe, having spent years assembling data sources,” he recalled.

He described the process as “extremely challenging.”

“The goal is to approve as many legitimate customers as possible, while avoiding false positives and rejecting qualified applicants, as each rejected customer represents lost revenue,” Overdorff explained.

This experience sparked his “interest” in Alloy’s approach.

“I’m particularly excited by the company’s rapid revenue and customer growth,” he told TechCrunch. “The opportunity is substantial, with a growing number of financial service companies, both large and small, and even software companies embedding financial services into their offerings. Each of these entities will require customer onboarding and KYC/AML compliance processes.”