Banking’s Spinal Cord

We at Draper Esprit have been working through a thesis in the invisible layer behind financial services, specifically in three verticals: fraud, payments and core banking systems — we call this the ‘spinal cord of banking’. We invested in Form3 which is innovating cloud-native software in payment schemes around the world in 2018, we recently led the Series B of Thought Machine who are building the future of core banking systems.

Increasingly we’ve been working through the payments stack to understand the drivers behind fraud and the various different attack vectors — stretching the metaphor, given its purpose of sensing and responding to the wider financial world, you could call this banking’s ‘nervous system’. We noticed that this is indeed a huge issue for merchants around the world. The volume of fraudulent transactions around the world is just staggering, at $72bn per annum; and merchants spend around $9bn per annum solving for it. In the past we have successfully backed entrepreneurs in innovating in the fraud arena; Red Kite (acquired by NASDAQ traded NICE Systems) and Neteconomy (acquired by Fiserv).

Sensational Ravelin

We came across the team at Ravelin in 2018 and began a deeper exploration of the segment and stack in which they operate. What really caught our attention was the simple yet sophisticated machine learning models they built in-house to help merchants detect fraudulent transactions in milliseconds.

As we watched Ravelin go from strength to strength; winning major contracts with leading tech players such as Deliveroo, Just Eat and others, our conviction became clear that this was a world class team building a best in class product. So when we engaged in a conversation about leading the recent Series C round, it was much less of a conviction building exercise but more of a partnership one; what could go right and how could we help Ravelin make things go right.

Faster, more accurate sensing

Ravelin is particularly strong in the on-demand sector, which has seen huge issues with fraudulent transactions, they’ve done some great work to understand fraudsters. In a 2-sided-market place model like food delivery – with restaurants and consumers to keep on side – the loss of trust that comes with fraud can be devastating. Yet driving fraud rate down whilst keeping high payments acceptance rates is a delicate balance and huge technological challenge. This is where Ravelin excels.

Ravelin’s global presence in over 18 markets enables its machine learning models to benefit from network effects which it can transfer across industries and markets; driving down the marginal cost of fraud. Increasing payments acceptance and avoiding having to go through 3D Secure is itself a very large issue being faced by all merchants — Ravelin frees merchants from relying on this archaic process by allowing them to make a go/no-go decision on a transaction much earlier in the process, augmented by various unique data points. It also hugely reduces false positives for fraud detection.

We at Draper Esprit are extremely excited to be partnering with Ravelin to see where their journey can take them. For this reason, we committed to lead their Series C fundraise alongside Blackfin Fintech, Amadeus, Passion Capital and Playfair, taking this incredible company to the next level. We sense something special.