You’re shopping, you click on the check-out page and your transaction is declined! The Tel Aviv-based antifraud start-up Riskified is designed to stop that from happening.
Riskified was founded in 2013 to analyze credit-card transactions for online retailers in an attempt to identify and block thieves. The cybersecurity company counts Burberry, Macy’s, Footlocker and Giftcards.com among its thousand or so customers.
Many merchants and payment processing companies are wary about accepting certain transactions, since the companies are liable for fraud and fees. Often, companies will respond to fraudulent purchases by barring transactions from entire locations.
“We saw that fear of fraud causes merchants to leave money on the table,” said Assaf Feldman, Riskified’s chief technology officer and co-founder, sitting down with the Jerusalem Post
in the company’s verdant and plant-heavy, open-space office. “Merchants are afraid of approving the bad transactions, which causes them to reject a lot of good customers.”
In one scenario, Assaf’s wife tried buying shoes on Aldo while Assaf was working in the US. Since the request came from a computer in Israel, Aldo questioned the location and blocked the transaction.
Riskified seeks to update many companies’ old systems for risk management, which are not personalized but rules-based. Such misidentified fraud on the part of e-commerce firms can cost companies millions of dollars.
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With artificial intelligence and machine-learning tools, consumers can be monitored statistically and behaviorally as they peruse a company’s website, leading to a much higher accuracy rate for transactions.
“Let's say someone looks at the returns policy on the site,” said Feldman. “They're less likely to be a fraudster, since fraudsters typically aim to resell the stolen items. On the other hand, if somebody enters the site, sorts the items from most expensive to least expensive, adds that item to the cart and immediately goes to checkout, that might be suspicious behavior.”
The company’s algorithm helps retailers save money because it is highly accurate in pinpointing fraud. That is the impetus behind Riskified offering to cover every fraudulent transaction the company misses.
“Even if you 50% of orders from a particular region are actually by fraudsters, which is extremely unlikely, you can identify the good purchases and avoid losing money,” Feldman added, pointing to Riskified’s country-coded map, which ranks countries by rate of fraudulent transactions.
Some e-commerce companies still bar consumers with Israeli credit cards or IP addresses from ordering online.
“At some point, it’s possible someone from Israel stole something and boom, from now on, it will be a nightmare for every Israeli to buy from this merchant,” Feldman said.
Israel is a hotbed for fraud detection in e-commerce, partially arising from the fact that many tech-savvy Israelis honed their skills in army intelligence. That target-based mindset has led a number of local companies to specialize in risk analysis.
Many of Riskified’s employees come from intelligence backgrounds, such as cofounder Eido Gal. The company employs more than 200 people, with most in Tel Aviv and 70 working out of the company’s US office in New York.
In the company’s experience, fraudulent transactions often occur after hackers buy up thousands of details of stolen credit cards – with around 1,000 credit card details going for a few dollars.
With such data, someone can click on luxury retailer Burberry’s website, buy highend goods and sell them on the secondary market.
Interestingly, the initial data breach of stolen financial information tends to be more lucrative than selling the merchandise – which is logistically complex.
Feldman’s advice for ordinary consumers is to regularly monitor their credit card statements for irregular charges, even if it’s pocket change, and contact their credit card company.
To date, Riskified has raised $63.7 million, according to research outfit Crunchbase.