Munich Re invests in Fraugster, seals partnership for fraud detection
Munich Re is partnering with Berlin-based Fraugster in the area of artificial intelligence-based fraud detection. The reinsurer has also invested in the startup's latest funding round.
Fraugster, a software company that uses artificial intelligence to prevent fraud for online retailers, has raised $14 million in a new series B round led by CommerzVentures, the venture capital subsidiary of Commerzbank, and other investors including Earlybird, Speedinvest, Seedcamp and Rancilio Cube, as well as Munich Re's venture capital arm HSB Ventures.
Fraugster said it will use the new funds to continue its expansion into new markets, including the US, Asia and Europe, where retailers are facing an accelerating battle against fraud. According to the company, online merchants lose more than $30 billion to fraudulent transactions every year.
“The partnership between Fraugster and Munich Re’s Special Enterprise Risk Team provides security for the mitigation of a costly risk online merchants face," said Michael Berger, business development manager at Munich Re. "It is costly because of two reasons. First, failing to detect fraudulent transactions causes direct costs for merchants. Second, too restrictive risk management based on blocking too many good transactions reduces a merchant’s revenue. We are convinced that Fraugster’s AI empowered technology mitigates this risk in an optimal way,” Berger said.
Under the partnership, Munich Re will insure Fraugster’s Fraud Free product which takes over the full liability for each transaction to help ensure the retailer will never lose out.
Fraugster has developed a proprietary technology that takes data from multiple sources, analyses and cross-checks it in a fraction of a second, to determine whether a transaction is fraudulent or not.
“Our technology is constantly improving and adapting to new fraud trends as they emerge around the world," said Fraugster's founder and CEO Max Laemmle. "We are protecting our clients from the risk of fraud and also giving them a significant revenue uplift because we’re reducing the number of genuine transactions that are erroneously blocked,” Laemmle added.
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