As e-commerce usage increases, so do the opportunities for fraudsters to cash in.
It also creates a need for more opportunities for fraud protection firms such as Forter, a San Francisco-based company that recently closed on a $32 million round of Series C funding.
Forter chief executive officer Michael Reitblat said the investment will be used to improve the company’s automated fraud prevention platform. It also will fund the company’s growth and expansion in the U.S., including its sales and marketing efforts.
The round was led by Scale Venture Partners, with participation from previous investors including Sequoia Capital and New Enterprise Associates, and brings the total raised since February 2014 to $50 million.
According to the Global Fraud Attack Index, online fraud attacks grew 215 percent last year.
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U.S. retailers devote billions of dollars to fraud, Reitblat said, as the liability for fraudulent online credit card charges fall on the merchant. He estimates that on top of the up to $4 billion paid directly to fraudsters each year, retailers spend up to $3 billion preventing fraud and then close to $20 billion on lost transactions due to fraud prevention measures.
He said there are three ways that fraud can prevent legitimate transactions: a Web site can flag a shopper as “too suspicious” and block the sale, the authentication process can create too much friction in the buying process, or general restrictions — like limits to international addresses or hotels — can diminish the potential scope of customers.
That final category, the amount lost from misguided fraud prevention, Reitblat said, “is constantly being overlooked because it’s so hard to measure.”
He said retailers who begin working with Forter see on average a five to 10 percent increase in revenue because it allows, for example, shipment to more customers internationally or allows someone to buy something “20 times in a row if they like something,” he said.
“Fraud is a moving target,” said Reitblat, who got his start in Israeli military intelligence (the research and development arm of Forter’s tech is based in Israel), and has spent the past 15 years working in fraud prevention. “They constantly adapt, so we have to constantly improve our technology.”
Forter works by combining cyber intelligence with behavioral and identity analysis. It charges retailers per every transaction they approve.
In addition to the funding, the investment from Scale Ventures means that partner Rory O’Driscoll will join Forter’s board of directors.