An interview with Max Laemmle, Founder & CEO of Fraugster about how he founded the company, AI and the impact of COVID-19 on the financial services industry.
Financial IT: Can you please tell us more about your background? What’s the story behind the founding Fraugster?
Max Laemmle (ML): I founded Fraugster back in 2014 together with Chen Zamir who I had met through a mutual friend. We are both seasoned payments professionals. As a background, I co-founded Better Payment, a payment gateway service provider, and also acted as the product evangelist for the mPOS company SumUp. Chen, who was first an intelligence officer at the Israeli Defence Force, became a risk manager at Paypal.
We quickly realized that we shared similar thoughts about the industry, especially about online security and the shortcomings of online fraud prevention. And we also saw the potential of AI technology to eliminate online payment fraud for good.
We decided to found Fraugster together. We have put together a team of world-class risk and payment experts who have spent several years designing an advanced, proprietary Artificial Intelligence (AI) technology that is eliminating online fraud for e-commerce businesses.
Financial IT: What is unique about Fraugster?
ML: We are a solution provider that helps e-commerce businesses and supports risk managers to reduce their total cost of fraud with the most advanced AI technology available on the market. The understood consensus amongst all affected parties in e-commerce is that fraud is a permanent issue that is here to stay. From merchants to consumers and payment providers, no one is immune to attacks and technology alone will not replace the job of a risk manager. From the start, our philosophy was to invest all resources into building the most sophisticated AI engine based on behavioral science and a self-learning algorithm to eradicate fraud. As a result, the Fraugster AI Engine was developed, which is an AI technology based on a behavioural science approach that mimics the thought processes of a fraud analyst. Instead of clustering transactions as done in classical machine learning, the Engine analyzes the behavioural context of each and every transaction. It delves deeply into analysing thousands of data points to understand what is really going on behind each transaction, ultimately enabling it to pinpoint and accurately decide whether a consumer transaction is fraudulent or legitimate. The Engine detects and adapts to new fraud patterns as they emerge in real-time. Combined with a machine’s computation power, it processes thousands of transactions within 15 milliseconds, enabling the scalability for unlimited transaction processing volume.
In a second step, we designed all Fraugster products tailored to the individual needs of e-commerce businesses. Merchants can either manage their own fraud and complete their team with one of Fraugster’s anti-fraud prevention tool - Fire or Flame – or outsource it completely to us and benefit from carefree risk management with chargeback protection, increased revenue by up to 30% with FraudFree, or a guaranteed revenue uplift with our latest product FraudFree+.
Financial IT: The fintech scene has yet to digest such a drastic impact as the coronavirus crisis – as do most companies worldwide. What are the main challenges facing companies now? Do they pass the "Digital Stress" test?
ML: If the current situation has taught us anything, then it is the importance of a healthy and functioning digital ecosystem. Whether it is being able to work remotely and to have a cloud setup, or being able to talk to your doctor online, this crisis allows us to accelerate the digital transformation of all sectors worldwide.
Now, when it comes to the FinTech industry, we should differentiate the type of Fintech company we’re talking about. For example, there’s obviously an increase in the usage of banking apps or online trading companies. Within the payments industry, it depends on the type of service a company is providing. For example, mPOS companies are hit very hard by the lack of physical shopping, but online payment providers are benefiting from the increase of online shopping. As for us, the reality is that e-commerce businesses see a rising level of fraud activity. Fraudsters move quickly, and take advantage of the fact that many online systems are overwhelmed, that businesses and institutions moved online as fast as they could and aren’t necessarily setting up the right online fraud prevention tools. E-commerce businesses are looking to sell fast and with as little friction as possible, but again, this is exactly what fraudsters are taking advantage of. And it’s where we come in. Our products are designed to fit all the needs of small to large online companies to prevent online fraud. And our set up is fast and easy, so that companies can protect themselves and their customers immediately. We can’t emphasize enough the importance of sophisticated and advanced fraud prevention tools for online businesses to fight cybercriminals and to stop losing money to fraud.
Financial IT: What is next for Fraugster?
ML: In the past two years, we have won customer contracts with leading online merchants and payment providers such as Ingenico, Worldline, RatePAY. In 2019, we managed tens of billions of dollars in online payment processing for our customers. We have recently released our latest product FraudFree+ and we’re looking forward to growing further on the European market.