In the world of startups, few things are certain. However, one thing we are sure of is that fraudsters will continue to look for vulnerabilities to exploit consumers and businesses alike. In 2022, the Federal Trade Commission cited $8.8 billion in reported consumer fraud losses, up over 30% from the previous year. Meanwhile, the Financial Crimes Enforcement Network (FinCEN) just announced that 42% of suspicious activity reports were related to identity – representing $212 billion in suspicious activity.
The problem has not only grown in magnitude, but also in sophistication and breadth. And legacy providers have failed to innovate at the pace of fraudsters. Sometimes fraud is unauthorized and a bad actor steals credentials to commit fraud; however, fraud can also be authorized, like when a bad actor utilizes social engineering to manipulate victims into sending money. And in the last few years, fraudsters have been gifted two massive enablers: the democratization of generative AI and the rise of real-time, irrevocable payment schemes like PIX, UPI, and more recently, FedNow. With these tools in hand, we expect fraud to continue to accelerate in the coming years and require more sophisticated detection than what legacy vendors can provide.
For more on our broader thesis, watch the below:
Incognia is just that: an innovative technology that combines exact location behavior, best-in-class device ID, and tampering detection to catch fraud that other vendors are unable to detect. Legacy fraud detection is certainly better than nothing, but most vendors have been unable to effectively protect customers from identities that have been manipulated. However, fraudsters are increasingly committing fraud across multiple devices, resetting devices, and employing location spoofing technology.
And this is not just the type of fraud that happens in our bank accounts; fraud is happening all around us. It is the bot on Facebook Marketplace trying to infiltrate your wallet; it is the coupon or promotion abuse on iGaming platforms; it is the delivery order that never actually gets picked up; it is the fake ticket that you bought to the Taylor Swift concert.
Incognia’s customers have been able to prevent millions of dollars in fraud annually. The results speak for themselves: every single proof of concept with a prospect has caught millions in previously undetected fraud and has converted to a customer. It is rare that we see such customer love for back-end infrastructure. But Incognia’s SDK is unique. It has been refined over the past decade, originating back to when co-founders Andre Ferraz, Alan Gomes and their classmates developed the technology in a university lab in Brazil. Fast forward and Incognia’s SDK now maps over 500 million places and over 300 million devices monthly.
And given the maturity of PIX instant payments in Brazil (whose transaction volume is now greater than debit and credit cards combined) and the accompanying proliferation of fraud, we were not surprised to find that this level of innovation had its initial roots in the country.
We at Bessemer Venture Partners have felt strongly that fraud and identity is an ever evolving category for many different industries and is a space that requires continuous innovation. We have spent decades investing in solutions like Auth0 for Identity Access Management, Shift for insurance claims fraud, Alloy for financial services KYC and ongoing monitoring, and TRM Labs for crypto-related financial crime and feel that we are at another inflection point for new innovation. We look forward to supporting Andre, Alan, and the entire Incognia team as they help customers fight new types of fraud around the world and across multiple sectors.