Stripe Acquires Bouncer: Enhancing Fraud Protection with Card Authentication

Stripe Acquires Bouncer to Enhance Fraud Prevention Capabilities

Following a substantial $600 million funding round earlier in the year, Stripe, a leading payments processor, continues to expand its business through strategic acquisitions. The company has recently acquired Bouncer, an Oakland-based startup specializing in automated card authentication and fraud detection for online transactions.

Focus on Mobile Transaction Security

Bouncer’s technology is specifically designed for securing mobile transactions. It incorporates a system that allows users to verify their identity if incorrectly flagged, enabling legitimate access to applications.

Financial Details and Integration with Stripe Radar

The financial terms of the acquisition have not been publicly disclosed. Both Bouncer’s technology and its team will be integrated into Stripe Radar, Stripe’s existing AI-powered anti-fraud technology suite.

Launched in 2018, Radar has primarily relied on internally developed technology to prevent fraudulent activity on the Stripe platform. Stripe reports that Radar currently safeguards businesses from “hundreds of millions of dollars of fraud” annually.

Statements from Stripe and Bouncer

Simon Arscott, Business Lead for Stripe Radar, stated that “Bouncer is a great tool for modern internet businesses.” He further explained that it efficiently identifies stolen cards while ensuring valid customers can complete transactions without interruption.

Arscott expressed excitement about welcoming the Bouncer team and integrating their expertise in payment authentication software into Stripe. He anticipates that the addition of advanced card scanning will bolster fraud prevention and increase revenue for Stripe’s global business clientele.

Recent Acquisitions and Y Combinator Connection

This acquisition follows Stripe’s recent purchase of TaxJar, aimed at incorporating cloud-based sales tax calculation tools into its payments platform.

Notably, both Stripe and Bouncer were incubated at Y Combinator. Bouncer participated in the Summer 2019 cohort, and previously secured funding from Commerce Ventures and the Pioneer Fund, though the total amount raised was not revealed.

Founders’ Background and Expertise

Bouncer was co-founded by Will Megson (CEO) and Sam King (Chief Scientist). They bring a wealth of experience in identity verification, stemming from both academic research and roles at rapidly growing companies.

Prior to Bouncer, both Megson and King held positions at Lyft, focusing on fraud, identity, and payment management. Megson also worked at Groupon, while King served as an associate professor of computer science at UC Davis and led the fake accounts team at Twitter, specializing in account security.

Current Clients and Service Continuity

Bouncer’s current clients include Groupon, OfferUp, ibotta, and Dealerware. The company will continue to serve its existing customer base following the acquisition.

Stripe Radar Pricing and Features

Stripe Radar is offered in various tiers, ranging from free to $0.06 per screened transaction, depending on usage. These tiers include basic machine learning and enhanced options for fraud teams. Pricing also varies based on Stripe’s standard fee structure.

Stripe also provides chargeback protection at 0.4% per transaction, alongside analytics tools for Radar users to monitor activity.

Radar’s Fraud Prevention Record

Stripe claims that Radar has successfully blocked over $1 billion in fraudulent transactions since its launch.

Bouncer’s Pricing Structure

Bouncer’s pricing also varies, from free to $0.15 per scan for its basic solution, with custom pricing available for tailored services.

Synergies and Enhanced Effectiveness

Integrating Bouncer’s technology into Radar is expected to enhance the value proposition of Stripe’s services and improve their effectiveness. When Radar identifies a potentially fraudulent transaction, Bouncer’s card screening will serve as a “dynamic intervention” to verify the card’s legitimacy.

This process aims to reduce false positives, which are more common in high-risk transactions involving large purchases or unusual payment patterns.

Bouncer’s Verification Process

The current wave of authentication technologies includes biometrics and other innovations. However, Bouncer employs a simpler approach, requiring only a smartphone’s camera and the customer’s payment card.

When a transaction is flagged, Bouncer requests a photograph of the card, which is then analyzed through a PCI- and GDPR-compliant system to determine its validity. The entire process can be completed in under a second.

Mutual Benefits of the Integration

Bouncer anticipates that Stripe’s machine learning capabilities will further enhance its effectiveness. Will Megson, CEO of Bouncer, stated that scaling their card-verification technology across the Stripe network will help businesses grow revenue while reducing fraud.

He believes that the signals learned by Radar will improve Bouncer’s performance, and vice versa, creating a synergistic relationship.

Stripe’s Acquisition History and Focus on Compliance

Stripe has a history of acquiring companies to integrate key technologies. This includes the acquisition of PayStack in Lagos to expand its presence in Africa and emerging markets.

Several acquisitions have been specifically aimed at strengthening Stripe’s compliance and authentication tools. In 2016, Stripe acquired Teapot, a startup specializing in APIs for identity verification. In 2019, it acquired Touchtech, an Irish startup focused on preparing for Strong Customer Authentication regulations in Europe.

The Ongoing Need for Robust Fraud Prevention

The demand for advanced tools to ensure the legitimacy of online transactions remains strong. The persistent threat of malicious hacking and the increasing prevalence of e-commerce necessitate continuous innovation in fraud prevention.