Is combatting credit card fraud really that important in the crowdfunding ecosystem? YES it is…In this R.A.B.B.I.T. Report we learn more about one innovator’s unique approach to beating fraudsters.
Company: CashRun* (www.cashrun.com)
Sector: Money Transfer / Blockchain
Location: Singapore / San Francisco
CashRun is a unique online payment fraud protection service that actually guarantees 100% of all online payments that it clears. It does this via a combination of fraud detection technology, big data and machine learning that is optimized through a proprietary risk management algorithm. The team has a 6 year track record together. In the last 6 months, they have added over 50 clients in 15 countries across Asia, Europe and North America. Key industry verticals include payment service providers and e-commerce companies, telecoms, online gaming and travel. Clients include T-mobile.de, Vodaphone.de and Telecom.de.
What is the problem that CashRun is solving?
CashRun is addresses two levels of online fraud. First, as organized crime (aka fraud syndicates) has shifted online, major data breaches (e.g. Sony and Neiman Marcus), have allowed these fraudsters to collect stolen data. Armed with sophisticated software, these syndicates launch coordinated fraud attacks on online businesses and then monetize the stolen data. CashRun can prevent this. Second, the recent changes in policies by card issuers, banks and payment service providers, push the responsibility of preventing online fraud back to the merchants. For instance, merchants are not insured for chargeback claims by customers (whose card details have been stolen to make purchases), and are required to pay back these customers, resulting in further fraud loss (in addition to the products sent out to fraudsters). CashRun stops this before merchants are left paying the price.
Why is the CashRun product Necessary?
By using their proprietary technology to combat online transaction fraud, CashRun has demonstrated that it can help merchants minimize their fraud losses. This may help reduce the risk of cross border transactions and enable merchants to increase their sales because their algorithm clears more valid transactions. Unlike other companies, CashRun operates independently from card issuers, banks and payment service providers. It is therefore able to provide merchants with protection against fraud with no conflict of interest.
How does CashRun work?
CashRun’s fraud system (know as CashShield) is based on a combination of fraud detection technology, big data and machine learning that are optimized through a proprietary risk management algorithm. The company charges a fixed percent of charge volume each month for their service. CashRun describes their solution this way:
Who are the founders?
CashRun was founded and built from scratch by the CEO Justin Lie, who has more than a decade of experience in e-commerce. In his earlier entrepreneur venture into setting up e-commerce sites, Justin was hit by massive fraud attacks, prompting him to devise his own system of rules to verify incoming transactions. The CashRun team has been working together for 6 years to create the full CashShield solution.
What are examples of CashRun’s traction and experience to date?
The team soft-launched CashShield in 2013, and focused on supporting their early clients and perfecting their technology. In 2014, CashRun increased marketing efforts and word of mouth support to ramp CashShield’s customer growth and exposure. Currently, their portfolio of merchants have expanded from largely only telecommunication providers to include merchants in the retail, gaming and airline industry as well as payment service providers. Approximately 70% of their merchants are based in Europe, 20% in Asia and 10% in the Americas.
What are the risks to CashRun’s business?
The company often receives queries on their ability to provide 100% Chargeback Protection. This may expose CashRun to greater risk in fraud prevention if something fails. CashShield is unlike traditional rule-based fraud solutions that are unequipped to detect and prevent coordinated fraud attacks (which forms the majority of fraud attacks). Their technology combines fraud prevention with big data and machine learning to detect these coordinated fraud attacks with a high degree of effectiveness. The company says that their optimized risk management algorithm helps their merchants (and therefore CashRun) to manage the risks of accepting or rejecting transactions by viewing them as part of a portfolio. If fraudsters change the way they perform their coordinated attacks, CashRun will have to update its algorithms.
What is CCA’s Perspective?
A guarantee against online transaction chargebacks that is backed by a track record of success, a proprietary machine learning algorithm and data science is a powerful solution for the crowdfunding ecosystem. While these types of services are growing in number, it is important for payment service providers and businesses to carefully evaluate the specifics of the technology and the experience of existing customers. We think CashRun is a leading provider of these services. Additionally, the ability for their system to continue learning and in many cases increase the percentage of transactions that are cleared, can actually increase revenue for its clients.
One of the consistent themes in our international work has been fear of credit card fraud. In some countries, this fear is so profound, that very little e-commerce takes place. This restricts economic development and trust generally – while specifically reducing the ability for online finance (equity and debt crowdfunding) to function at scale. Solutions that can be applied globally to increase SME and startup revenue while fighting online payment fraud can be transformative both for increase access to capital via crowdfunding as well as increasing economic activity in a country.