Sardine raises $ 51.5 million led by a16z to sniff out suspicious fintech transactions • TechCrunch

As fintechs become more efficient, scammers also become more efficient.

“Faster instant payments mean faster fraud,” Sardine Soups CEO and co-founder Ranjan told TechCrunch. That’s the thesis behind its startup, which uses behavioral, financial, and device-specific user data to detect fraud on behalf of its customers in the crypto and fintech industries.

These conditions also mean a quicker fundraising process for Sardine, evidently. The company announced that it raised $ 51.5 million in a Series B round led by Andreessen Horowitz’s (a16z) growth fund after closing $ 19.5 million for its Series A earlier this year. A16z was a new investor in Serie A, with fintech-focused GP Angela Strange leading the previous round of Sardine and Growth Fund partner Alex Immerman leading this time.

The other B Series participants were a mix of new and existing investors including XYZ, Nyca Partners, Sound Ventures, Activant Capital, Visa, Google Ventures, Eric Schmidt, Vikram Pandit, The General Partnership, NAventures, ING Ventures, ConsenSys, Cross River Digital Ventures, Alloy Labs, and Uniswap Labs Ventures, according to the company.

Sardine has grown substantially since it announced Serie A in February, increasing its client roster from ~ 50 to ~ 135 today, Ranjan said. His clients include cryptocurrency exchanges FTX and Blockchain.com, as well as fintech with broader mandates like Wealthsimple and Digit, he added.

After participating as one of 10 startups in the FIS Fintech Accelerator program this summer, the startup is taking a step forward in “core banking processes” and is in talks with large banks in the US and Europe, Ranjan said.

It’s easier to see why a fintech or crypto startup might want to strengthen its fraud prevention capabilities, but Ranjan explained that even for large banks, the KYC (“Know Your Customer”) standard compliance process is not the same as a program. fraud protection; 90% of the fraud detected on Sardine’s customer platforms comes from individuals who have already passed the KYC process, he said.

Sardine has competition from other startups in the identity verification space, such as Socure, which told TechCrunch last year that it counts three of the top five global banks as customers. Socure, which counts Tiger Global as its main investor, was valued at $ 4.5 billion during its last publicly announced fundraiser in November 2021, a Series D round. Sardine did not share the assessment of its latest fundraiser, but the startup is significantly in an earlier stage than Socure.

Ranjan described Sardine’s differentiation in the market as stemming from his team’s experience and the company’s focus on fintechs in particular. Ranjan himself previously served as Coinbase’s director of data science and risk and head of cryptocurrency at Revolut, and the company’s head of banking partnerships came to the startup from Zelle.

Sardine co-founders Aditya Goel, Soups Ranjan and Zahid Shaikh. Image credits: Sardine

“If you actually take a peek at one of these traditional fraud prevention providers, you’ll find that the APIs don’t even have support for an individual’s identity, because they’re all built or designed for a paid e-commerce experience.” Ranjan said. Rather than analyzing a customer’s shipping address and shopping cart, Sardine examines device intelligence and behavioral biometric data that helps identify whether an individual engaged in a transaction is really who they say they are, she continued.

Another major differentiator of Sardine from competitors like Socure is its instant ACH and cryptocurrency access ramp, which allows its customers to instantly purchase over 30 different crypto assets rather than having to wait the traditional few days to access the cryptocurrencies. own funds. It also offers direct fiat to the NFT checkout in partnership with Tom Brady’s company, Autograph, and plans to expand that product to other NFT markets, according to Ranjan.

Banks and card issuers typically use fraud detection algorithms for cryptocurrencies that aren’t granular enough, Ranjan said, meaning roughly half of customers attempting to transact using fiat-to-crypto ramps through traditional platforms are rejected as fraudulent.

When Sardine launched its NFT payment product in partnership with Autograph earlier this month, its conversion rate was much higher, around 98%, Ranjan said. It’s too early to tell if there are any chargebacks or fraud cases that haven’t been detected since that launch, he added, noting that Sardine is one of the first companies to offer such instant access to cryptocurrencies via ACH.

“One of the reasons people haven’t dabbled or launched ACH on cryptocurrencies, or even directed ACH on NFT, was that there is none. [else] taking responsibility for the risk of fraud, “Ranjan said. He declined to share details about the chargebacks Sardine sees in its older products, but said the platform allows customers to instantly access some, but not at all, their cryptocurrencies.

“La Sardine bears the risk of fraud. [The transaction] it typically settles over two days, so for that time period we take the liquidation risk and take the risk of third party fraud, as if someone were linking a stolen bank account, ”Ranjan explained.

Venture capitalist Andrew Steele, who led Activant Capital’s investment in Sardine, believes the company is uniquely positioned to take on and manage risk in a way that allows for instant transactions.

“Identity and fraud are usually completely separate things,” Steele said. “We have invested in identity platforms. We have also invested in fraud platforms and they are generally completely separate. Identity for me is a moment in time. It’s when you step aboard someone, it’s how you make sure they are who they say they are. And then fraud is usually a transaction-based thing, but both are completely separate and isolated. Typically, that lack of connection means you have limited data and can’t really take any chances in the way we’re talking [with Sardine]. ”

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