Fighting fraud has always been a dilemma for digital merchants. Set the anti-fraud thresholds too low and risk losing substantial sums to the criminals; set them too high and risk turning away good customers.
That’s where Ravelin and a growing set of data-rich AI powered start-ups can help. These businesses examine transactions “on the fly” and provide fraud scores used to determine whether a transaction should be accepted, rejected or paused for further investigation. There’s some good background in this interview with Martin O’Riada, its CIO. He used to work in law enforcement and seem a very thoughtful man.
London based Ravelin, named after a triangular medieval fortification, grew revenues 43% to £11.0m, in 2021 according to documents filed at Companies House. Management is pretty optimistic, describing a year of “exceptional customer success [with] a strong pipeline of active opportunities.”
Customers such as Just Eat certainly do seem happy. At a client conference I attended most of the talking was by its clients (big tick) who felt comfortable enough to come on stage to discuss common challenges such as how to set up an anti-fraud team. It’s no surprise that 100% of contracts up for renewal in 2021 were retained.
Administrative expenses were up 47% to £14.7m with headcount growing from 75 to 91. Ravelin “has adopted a remote-first workforce” and says many UK staff have chosen not to return to the office. Since the company is now “where possible .. exploring hiring staff in less expensive locations outside the UK,” this might be a career mistake for some.
The company is some way from profitability despite the strong revenue growth. Losses before tax rose to £5.9m from £2.8m the previous year “in line with group expectations.” Operating margins fell from -50% to -54%. A tax credit of £1.2m narrowed the company’s overall loss to £4.7m.
Ravelin has raised a total of £30m from a blue chip rosta of investors including Draper Esprit and Passion Capital. At year end, the company had £13.3m in the bank “providing sufficient liquidity for… 2022 and beyond.”
Strong Customer Authentication (SCA) has reduced online fraud in Europe by mandating 3SD2 in many transactions. At first sight, this would seem to be a threat to Ravelin and its competitors because online merchants many now have less need to buy additional services to help decide which transactions are likely fraudulent. But Ravelin says it has turned SCA to its advantage by launching its own 3DS2 solution, expanding fraud coverage to include non-payment frauds such as promotional code abuse and returns/refunds abuse, as well as expanding its geographical reach to countries outside the scope of PSD2.
Fighting fraud is wack-a-mole. For every loophole closed, the criminals find another. This means continued opportunity for Ravelin and its peers but based on the company’s website claim of 4bn fraud scores produced annually, 2021 revenue amounted to just 0.3p per score. Anti-fraud services are a volume game with significant prizes for the vendors that can get to scale. Expect consolidation.