As fintech becomes more efficient, so do fraudsters.
“Faster, faster payments mean faster fraud. That’s the thesis behind the startup, using behavioral, financial, and device-specific user data to detect fraud on behalf of its customers in the crypto and fintech industries,” Sardine CEO and co-founder Supes Ranjan told TechCrunch.
Those conditions mean a quick fundraising process for Sardine. After closing a $19.5 million Series A earlier this year, the company announced it has raised $51.5 million in a Series B led by Andreessen Horowitz (a16z) growth fund. A16z was a new investor in the Series A, with fintech-focused GPN Angela Strange leading Sardine’s previous round and growth fund partner Alex Immerman serving as lead this time around.
The other Series B participants were a mix of new and existing investors, including XYZ, Nika Partners, Sound Ventures, Activist Capital, Visa, Google Ventures, Eric Schmidt, Vikram Pandit, General Partnership, Ventures, ING Ventures, ConsenSys, Cross River Digital. Ventures, Alloy Labs and Uniswap Labs Ventures, according to the company.
Sardine has grown significantly since announcing its Series A in February, growing its client list from ~50 to ~135 today, Ranjan said. Its clients include crypto exchanges FTX and Blockchain.com, as well as fintechs such as Wealthsimple and Digit, he added.
After participating as one of 10 startups in the FIS Fintech Accelerator program this summer, the startup is pushing into “core banking processes” and is in discussions with major banks in the US and Europe, Ranjan said.
It’s easy to understand why a fintech or crypto startup would want to improve its fraud prevention capabilities, but Ranjan explained that even for large banks, a formal KYC (“know your customer”) compliance process does not equate to a fraud protection program. ; He said 90% of fraud on Sardine’s customer forums is from individuals who have passed the KYC process.
Sardine faces competition from other startups in the identity verification space, such as Socure. Socure, which counts Tiger Global as a lead investor, was valued at $4.5 billion in a Series D round in November 2021, the last time it was publicly announced. Sardine didn’t share the valuation from its latest fundraising, but the startup is at a much earlier stage than Socure.
Ranjan attributes Sardine’s differentiation in the market to the experience of his team and the company’s focus on fintech. Ranjan himself previously worked as Coinbase’s director of data science and risk and Revolut’s head of crypto, and the company’s head of banking partnerships came to the startup from Zele.
“If you look under the hood in these traditional fraud prevention providers, you’ll find that the APIs don’t even support an individual’s identity, because they’re all built or designed for e-commerce detection. experience,” said Ranjan. Instead of analyzing a customer’s shipping address and shopping cart, Sardine looks at device data and behavioral biometrics to help identify a person engaging in a transaction who they say they are.
Another key differentiator for Sardine from competitors like Socure is the fast ACH and card operation that allows customers to instantly buy over 30 different crypto assets instead of waiting the traditional few days to receive their funds. It also partnered with Tom Brady’s company, Autograph, to offer direct checkout for NFTs and plans to expand that product to other NFT marketplaces, Ranjan said.
Banks and card issuers typically use fraud-detection algorithms for crypto that aren’t good enough, Ranjan said, meaning that about half of customers trying to transact using fiat-to-crypto onramps on traditional platforms are rejected as fraud.
When Sardine launched its NFT checking product earlier this month in partnership with Autograph, the conversion rate was much higher at around 98%, Ranjan said. It’s too early to tell if there have been any backlash or cases of fraud since its inception, Sardine said, adding that it is one of the companies offering quick access to crypto via ACH.
“One of the reasons people haven’t converted ACH to cryptocurrency or even routed ACH to NFT is because no one has. [else] Taking the risk of fraud liability,” said Ranjan. Sardine declined to share details about the payout rates it sees in its older products, but said the platform allows customers to access some, but not all, of their cryptos instantly.
“Sardine is taking the risk of cheating. [The transaction] It typically settles over two days, so for that time, we’re taking settlement risk, and we’re at risk of third-party fraud if someone connects a stolen bank account. He explained.
Venture capitalist Andrew Steele, who led Active Capital’s investment in Sardine, thinks the company is uniquely positioned to anticipate and manage risk in a way that enables faster transactions.
“Identity and fraud are often completely different things,” Steele said. “We have invested in identity platforms. We’ve also invested in fraud platforms, and they’re typically completely different. To me, identity is a moment in time. When you ride someone, it’s your way of making sure they are who they say they are. And then fraud is usually something based on marketing, but both are completely different and prohibited. Typically, that lack of connectivity means you have limited data and can’t be compromised in the way we’re talking about. [with Sardine]He said.