Fraud detection and ID check scale-up FrankieOne raises extra $23m

The venture capital and accelerator arm of Chinese crypto king Changpeng Zhao's Binance is one of the latest backers to put its weight behind Melbourne-headquartered regulatory-tech company FrankieOne, which has more than doubled a Series A round from last year through an extension.

As a global API platform for identity verification and fraud detection, FrankieOne has witnessed four-fold revenue growth over the last 12 months with its customer stable including the likes of Westpac (ASX: WBC), Shopify, Afterpay and Pointsbet (ASX: PBH).

The company now operates across 48 markets connecting banking, fintech, crypto and gaming companies to hundreds of data sources.

This performance and business model have helped garner the investor support necessary to extend the Series A+ round to $45 million, led by high-profile backers AirTree Ventures and Greycroft, a US-based VC firm whose prior investments include Bumble, HuffPost, and Venmo. 

The previous Series A was worth $20 million, adding to a $2 million seed round.

Reinventure (Westpac’s venture arm), Tidal Ventures and Apex Capital Partners also reinvested, while Binance Labs and Kraken Ventures came on board as new strategic investors, demonstrating the wave of crypto businesses focused on compliance and mitigating risk, particularly as markets realise the importance of protecting customers, and their businesses.

The Series A+ represents the largest amount of venture capital funding raised by an Australian reg-tech to date.

Initially founded by Simon Costello and Aaron Chipper with a neobank set-up in mind in 2017, the business plan shifted in 2019 after the pair saw how disjointed customer onboarding processes were within banks and other fintechs.

It was this revelation that led the pair to focus exclusively on resolving the problem, and the result has been a platform that combines ID verification, know your customer (KYC), know your business (KYB), anti-money laundering (AML), fraud and credit tools into one unified service for banks and fintechs.

FrankieOne opened an office in San Francisco this year, and the additional funding is expected to help the company scale faster and focus specifically on mirroring the success in Australia across the Asia Pacific region and North America.

"It's incredibly difficult for companies to provide a world-class onboarding experience whilst mitigating fraud. FrankieOne is on a mission to change this. By providing a single API to access leading identity and fraud prevention providers, globally," says Costello, who won the prestigious Trailblazer title at the 2021 Melbourne Young Entrepreneur Awards.

"We have been laser-focused on improving the onboarding customer experience and have been overwhelmed with the response, now helping over 170 financial institutions globally.

"We attribute our growth to our unique offering which guarantees the best onboarding verification pass rates coupled with our ability to enable customers to seamlessly switch on their choice of fraud detection tools."

He said the FrankieOne platform was helping drive business growth and allowing customers to respond quickly to trends in fraudulent behaviour and changing regulations, which is particularly helpful, given the increase in fraud. 

"We are extremely proud to be helping some of the largest companies in the industry and excited to be backed by the most prestigious global investors. We are grateful for the support from existing and new strategic investors, the new funds will allow us to continue to build an even more robust identity and fraud ecosystem," he said.

AirTree Ventures partner John Henderson said recent high-profile security breaches had shone a light on the responsibility organisations have to protect customers, so fraud detection has never been more business-critical.

"The global fraud detection and prevention market is expected to reach USD 129.17 billion by 2029 and we believe FrankieOne is well positioned to continue to capture the growing market - they continue to impress us with their strong growth, unit economics, and ability to attract some of Australia's largest financial institutions as customers," Henderson said.

Greycroft partner Will Szczerbiak said fraud continued to be a major issue in digital transactions.

"FrankieOne is providing critical infrastructure to address this via their unified API, which seamlessly integrates data from leading identity and fraud providers across the globe.," Szczerbiak said.

"Over the past year since our initial investment, we’ve seen that FrankieOne’s product resonates with a wide array of customers, from regional banks to market leaders such as Westpac, Pointsbet, and Shopify.

"We’re excited to support their next phase of growth as FrankieOne continues powering identity verification and fraud detection for a growing number of businesses globally."