Voice of the Industry

From start-ups to scale-ups: lessons to learn from Israel top fraud prevention companies

Friday 24 March 2023 14:05 CET | Editor: Irina Ionescu | Voice of the industry

Irina Ionescu, Senior Editor at The Paypers, provides an in-depth overview of the most promising fraud prevention startups in Israel, emphasising on their success model.

Israel has become a haven for startups in the past decade, especially when it comes to fraud prevention. PSPs, tech providers, merchants, and other fraud prevention companies can learn from the Israeli model and scale their business to efficiently fight fraud in ecommerce, a market which is estimated to exceed USD 48 billion globally in 2023, according to Juniper Research.

We invite you to read on and discover our latest research in the field, which shows why the Israeli model is successful, which are some of the top fraud prevention startups in this market, and how they can efficiently tackle fraud in ecommerce, deterring fraudsters and increasing conversion rates for merchants.

Overview of the global fraud market

The global fraud detection and prevention market size was USD 30.65 billion in 2022 and is expected to reach up to USD 129.17 billion in 2029, a CAGR of 22.8% during the forecast period, showing that fraudsters are most probably here to stay, targeting even more businesses globally.

As criminals and fraudsters become more tech-savvy and intelligent, companies must display huge efforts to deter their tricks and save-guard business at all costs. Although online fraud is experienced throughout the globe, North America and Europe continue to remain the preferred playground for cybercriminals and fraudsters.

Why is Israel leading the fraud prevention market globally?

Standing at the crossroads of Europe, Asia, and Africa, Israel has also experienced spikes in cyberattacks and online fraud, much of this activity being linked to criminal organisations and terrorist groups. In fact, a report released by a government agency in 2021 found a significant increase in financial crimes connected to organised crime and terror financing – and, according to the Israelian Money Laundering and Terror Financing Prohibition Authority, organised crime’s share of all financial crimes reached 19% in 2021. At the same time, public authorities fail to respond rapidly since the average fraudulent online purchase lies around USD 1,000, while the cost of catching transnational crime networks is much higher.

Thus, many Israeli startups are pushing the envelope on machine learning (ML) and artificial intelligence (AI) techniques to tackle increasingly sophisticated fraud attacks. From phishing attacks to ecommerce fraud and credit card skimming, these Israeli startups bring fresh solutions to older problems.

1. Previous army experience

Military service is mandatory for all Israeli citizens, which may help entrepreneurs gain army experience that could prove beneficial when starting their own business in fraud prevention. Military intelligence not only helps people develop their anticipation capacities but also forces individuals to think outside the box and provide different approaches to come up with answers to a problem. This could partially explain why Israeli startups and mature businesses in the fraud prevention market have performed well in the past decade.

2. Continuously investing in technology

In the past decade, Israel became a hub for fraud prevention technologies, with more than 35 companies raising over USD 500 million in venture capital and generating over USD 1.5 billion in exits. The Israeli culture and the success of several Israeli companies in the field definitely influenced the current market of fraud prevention startups and scale-ups, as many entrepreneurs are focused on anti-fraud technologies.

At the same time, the Israeli model followed a different approach, as opposed to the US model, where a group of entrepreneurs who worked together at one company then proceeded to fund each other’s startups (the PayPal model). Israeli alumni of PayPal went on to independently build five fraud prevention startups: Forter, Fraugster, Riskified, Simplex, and VerumView. Their previous experience at PayPal also helped co-founders get funding faster, with four of the five companies raising over USD 200 million in venture capital.

In 2021, more than USD 25 billion was raised by Israeli startups, a 400% increase from the sum raised in 2018, which was considered a record high – USD 6.5 billion. The capital influx correlated with the entrance of capital giants into the local market, including Tiger Global, SoftBank, and Insight Partners, who helped dozens of companies earn their Unicorn status.

3. Regulation to boost investments and fight against money laundering and fraud

Seeking foreign capital and becoming a trusted market for international investors can only be done with the continuous support of the legislative body, and Israel has plenty of laws protecting its capital and fighting against money laundering and fraud.

The Law for the Encouragement of Capital Investments and the Law for the Encouragement of Industrial R&D are designed to encourage economic growth, with Israel offering maximum supporting conditions for companies seeking to invest locally. Incentives include conditional grants, reduced tax rates, tax exemption, and other tax-related benefits.

At the same time, the laws are created to improve the economy’s production capacity, increase the business sector’s ability to be competitive in an international environment, and develop the necessary infrastructure to support in-house technological advancements and the creation of new workplaces.

Similarly, the Prohibition on Money Laundering Law aims to protect citizens and companies from illicit business that could be used for money laundering, funding terrorism, and perpetuating fraud. The law that became effective in 2002 ‘prohibits any actions involving assets originating in criminal activity, designed to hide the source and the identity of owners of such assets’, and it is extended to drug trade, illegal arms trade, fraud, gambling, and others. To effectively combat fraud and money laundering, banks and other financial institutions must obtain and verify the identity of anyone looking to open a local bank account or conduct transactions through the bank.

Combined, the laws create a proliferous ecosystem for tech companies and fraud prevention startups to thrive.

Top Israeli fraud prevention startups

Due to the rapid evolution of technology, the latest innovations in the industry, and continuous funding, Israel is now home to over 200 growth-stage companies in various tech fields, including risk management, fraud prevention, payments, and ecommerce, apart from the country’s unicorns. Following their own development path, looking to scale their business or exit the market, here are some of the most important fraud prevention startups in Israel.

Irina Ionescu, Senior Editor at The Paypers, provides an in-depth overview of the most promising fraud prevention start-ups in Israel, emphasising on their success model.


Transmit Security. The startup born in 2014 offers a CIAM platform that provides authentication, authorisation, fraud detection, and embedded orchestration services. Headquartered in the US and Israel, Transmit Security has raised USD 583 million to date and is one of the country’s Unicorns.

BioCatch. Founded in 2011, BioCatch leverages the power of device and behavioural data to create a world of trust and ease across the digital identity lifecycle from account origination to monitoring online sessions. The company offers a wide array of products and services, including account takeover (ATO) protection, social engineering scam detection, and PSD2 SCA compliance. To this date, it has raised over USD 213 million in funding, closing on a USD 145 million Series C funding round led by Bain Capital Tech Opportunities, back in 2020.

Forter. Founded in 2013, it provides a series of payment fraud prevention tools and services. Overseeing the entire process of shopping online, from account verification to chargeback claims, Forter’s digital Trust Platform aims to protect users’ identities, detect duplicate account attempts, and prevent harmful fraud or abuse. Its latest Series F funding round totalling USD 300 million was led by Tiger Global Management, with the participation of Sequoia Capital, Scale Venture Partners, and Salesforce Ventures, to name a few. The company’s post-money valuation almost tripled, reaching USD 3 billion.

Riskified. Founded in 2012, the company helps retailers transition to online shopping platforms and offers products that use machine learning and behavioural analytics to monitor payments and identify theft that leads to account takeovers. Riskified raised USD 165 million in 2019 at a company valuation of more than USD 1 billion, making it one of the few Unicorns in fraud prevention.

Identiq. The young startup was founded in 2018 and aims to change the USD 12 billion identity verification market. Its unique protocol can validate a new end-user without asking customers to expose any user data, which will set a new standard for end-user privacy. It has already gained industry recognition from brands like Visa, CitiBank, and KPMG. To this date, the startup raised a total of USD 52 million in funding from Sony Innovation Fund and Entrée Capital, among others.

AU10TIX. Founded in 2010, the startup never raised funds externally apart from a funding round in the form of a Growth Equity for USD 20 million, back in 2019. Also, in 2019, the owners sold 30% of the company’s shares for USD 80 million at a valuation set in July of approximately USD 260 million. However, in April 2022, the Israeli owners and founders were in negotiations to sell their holdings at a company valuation of up to USD 1.2 billion, which would make AU10TIX another Unicorn in the fraud prevention market.

nSure.ai. The startup was founded in 2019 and already managed to raise a total of USD 25.5 million, with its latest Series A funding round completed in early 2022, for USD 18 million. The company has developed an automated chargeback guarantee platform and is backed by DisruptiveAI, MoreTech Ventures, and Moneta Seeds, among others.

Fraugster. Founded in 2014, Fraugster is a German-Israeli anti-fraud company using AI to eliminate fraud and increase customers’ profits. Fraugster already raised USD 19 million in funding, with its latest funding round completed in 2018. It is trusted by various popular brands and companies, including Worldline, Kipp, Dior, Metro Markets, Mondy, and Epay.

SimpleX. This Israeli startup was founded in 2014 and, so far, has secured USD 19 million in funding from six funding rounds. The latest funding was raised in 2019 from a Venture – Series Unknown round. Unlike traditional ecommerce fraud prevention methods that work by identifying credit card fraudsters, SimpleX allows merchants to use crypto, as well as other digital payment forms, which provides merchants with extra protection against traditional CNP fraud.

Fugu. A new-comer in the industry, Fugu was founded in 2018 and aims to help merchants identify fraudulent payments online using ML at the post-purchase stage. The company has raised an undisclosed pre-seed funding round in 2021, roughly around USD 600,000, led by an international venture fund and private investors.

Detelix. The startup founded in 2015 as a spin-off of Alto Group has developed Argoscope, an advanced payment-monitoring system designed to detect and prevent fraud in organisations by monitoring the entire payment process and conducting real-time risk assessments. The company has not raised any funds yet.

ClickCease by CHEQ. Founded in 2014, ClickCease is a click-fraud detection, prevention, and protection software designed to protect customers who use Google Adwords and Bing by blocking fraudulent IPs automatically. In September 2020, the Israeli startup was acquired by cybersecurity company CHEQ in an undisclosed agreement.

Valid.it. This 2021 new-comer has developed an AI-based technology designed to detect fraud actions. Its contactless, smartphone-based trust validation app analyses bio-scientific and cognitive responses to determine the trust of a payment participant. Currently, the venture capital-backed startup is in its pre-seed funding raise stage, reaching a total of USD 608,000 so far, raised by the Israel Innovation Authority and other private investors.


How Israeli companies scale their businesses

The success of these startups has determined more entrepreneurs to try their luck in the sector, which inevitably led to more money poured in, additional accelerator programmes accessed, and big companies starting to pay more attention to what happens locally. Moreover, Israel attracts the most Foreign Direct Investments (FDI) of all countries in the Middle East region. The country’s startup culture is based around the capital – a city counting more startups per capita than any other region in the world.

Unfortunately, more than 80% of these startups don’t achieve success within the first 12 months, but the ones that survive usually attract millions in funding. At the same time, international and local tech companies are scouting for startups to acquire or merge with, and this is where the Israeli model differs from the American one: American companies prefer acquiring promising startups, while Israelis have learned to give their business a chance and try scaling it locally.

The standard path for a successful Israeli company has traditionally included raising a couple of rounds of early-stage capital and then listing on NASDAQ as soon as possible. In fact, to this date, Israel is the home of the third most NASDAQ-listed companies in the world, apart from the US and China. However, the country experienced a strong mentality shift in 2014-2015, considering the capital invested in local techs. From ambitious CEOs looking to exit early and retire early, now it’s more about scaling businesses locally and helping the overall ecosystem.

Startups in Israel represent an attractive asset class, and given the industry’s focus on innovative technologies, fraud prevention companies are here to bloom.

By constantly investing in innovation and having access to the necessary funding to drive this innovation, Israeli startups in fraud prevention have become a global model of how to do business.

By applying the same model, other companies can learn from the Israeli success and implement it into their solution offering to scale their business and raise more funding.


About Irina Ionescu

Irina is a Senior Editor at The Paypers, primarily specialising in Payments and Commerce. She has a Ph.D. in Economics and a strong economic academic background, with interests in fintech, ecommerce, alternative payment methods, blockchain, and cryptocurrencies. You can reach out to her via LinkedIn or email (irina@thepaypers.com). 

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Keywords: fraud management, fraud detection, online fraud, fraud prevention, identity fraud, startup, Unicorn, digital identity, biometrics, biometric authentication, AML, artificial intelligence, machine learning, payment fraud, CNP fraud, fraud platform
Categories: Fraud & Financial Crime
Companies: Forter, FUGU
Countries: Israel
This article is part of category

Fraud & Financial Crime




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