Feedzai Secures $200 Million Series D Funding to Combat Financial Crime

Following Jumio’s recent $150 million investment aimed at bolstering its AI-driven ID verification and anti-money laundering capabilities, another significant player in the sector is experiencing growth. Feedzai, a provider of AI tools for fraud detection and prevention to banks, financial institutions, and online payment processors, has announced a $200 million Series D funding round.

Funding Details and Valuation

The company stated that this new financing round values it at over $1 billion. The investment is being spearheaded by KKR, with participation from Sapphire Ventures and Citi Ventures, both of whom have previously invested in Feedzai.

Feedzai intends to utilize these funds to accelerate research and development, expand its product portfolio, and broaden its market reach beyond the United States. The company, originally founded in Portugal but currently headquartered in San Mateo, will also focus on strategic partnerships to integrate and distribute its solutions.

Strategic Partnerships and Industry Recognition

Citi has emerged as a key partner, emphasizing the importance of secure and efficient payment systems. Manish Kohli, global head of Payments and Receivables at Citi’s Treasury and Trade Solutions, commented on the partnership, stating that it allows them to deliver technology that balances both agility and security.

This latest funding round arrives approximately four years after Feedzai’s Series C, which raised $50 million. To date, the company has secured a total of $182 million in funding.

Growing Demand for Fraud Protection

Feedzai’s funding coincides with a surge in demand for robust fraud protection solutions for online transaction management. This heightened need is driving increased customer acquisition for companies operating in this field.

The company boasts an impressive client base, including four of the five largest banks in North America, 80% of Fortune 500 companies, and the processing of $9 billion in online transactions for leading athletic brands. Feedzai’s services collectively reach approximately 800 million customers.

Key Clients

Notable clients of Feedzai include Fiserv, Santander, SoFi, and Standard Chartered’s Mox, demonstrating the breadth of its impact across the financial landscape.

The rise in online activity, particularly accelerated by pandemic-related lockdowns, has exacerbated existing problems related to money laundering, fraud, and cybercrime. Financial fraud remains the primary motivator behind these malicious activities.

The Role of Artificial Intelligence in Fraud Prevention

Artificial intelligence has become a crucial component in identifying and combating illicit financial activities. AI-powered solutions can process significantly more data and execute actions at a faster rate than traditional methods or human analysis.

Furthermore, AI is capable of effectively countering increasingly sophisticated fraud schemes that are themselves leveraging AI-based platforms, necessitating advanced detection and prevention techniques.

Feedzai’s Disruptive Approach

Feedzai has differentiated itself by developing solutions applicable across various scenarios, enabling the AI system to learn from a broader range of data. This contrasts with the historically siloed approach adopted by many financial service providers.

Nuno Sebastiao, co-founder and CEO of Feedzai, previously explained that traditional fraud solutions were often specific to individual channels, such as ATMs or online banking, whereas Feedzai’s platform offers a more unified approach.

Escalating Fraud Trends

Data from Feedzai reveals a significant increase in fraudulent activities in late 2020 compared to early 2020. Specifically, account takeover scams rose by 650%, impersonation scams by 600%, and online banking fraud attacks by 250%.

“The past 12 months have accelerated the world’s dependency on electronic financial services – from online banking to mobile payments, and in turn have increased fraud and money laundering activity. Our services are in more demand than ever,” stated Sebastiao.

Industry Consolidation and Investment

This funding round follows closely on the heels of Jumio’s $150 million raise, highlighting a broader trend of investment in the fraud prevention and identity verification space. Kount, a competitor to Feedzai, was acquired by Equifax earlier this year for $640 million.

Other notable investments in the sector include ForgeRock ($96 million), Onfido ($100 million), Payfone ($100 million), ComplyAdvantage ($50 million), Ripjar ($36.8 million), Truework ($30 million), Zeotap ($18 million), and Persona ($17.5 million).

KKR’s Investment Strategy

KKR’s participation in this round exemplifies a growing trend of private equity firms investing in early-stage, rapidly scaling startups. The investment is being made through KKR’s Next Generation Technology Growth Fund II, which focuses on growth equity opportunities in the technology sector.

Stephen Shanley, managing director at KKR, emphasized the importance of Feedzai’s solution in addressing the challenges of financial crime in the digital age. He added that consumers expect both strong security and a seamless customer experience when using banking and payment services.

Spencer Chavez, principal at KKR, expressed confidence in Feedzai’s platform and its ability to meet these expectations, stating their eagerness to collaborate with the team to further expand its offerings.