Serial founder Greg Woolf is tackling digital identity fraud with his latest startup, FiVerity, as banks and credit unions continue to grow their online presence and digital services and as new advances in areas like AI provide fraudsters with more ways to commit financial crimes.
Today the Boston-based company announced a $4 million seed financing round, led by Mendon Venture Partners. Other investors included Mendoza Ventures, Service Provider Capital, Grasshopper Bank and FinCapital. As part of the deal, John Clausen, a partner at Mendon Venture Partners and former NY Federal Reserve Bank regulator, will join FiVerity's board of directors.
“We strongly agree with FiVerity’s view that stopping fraud requires a twofold approach that combines actionable intelligence and a collaborative model, enabling businesses to act swiftly. Now, with this infusion of capital, the team can continue evolving its offerings to keep customers ahead of the ever-evolving digital fraud landscape,” Clausen said in a statement.
Woolf said FiVerity got its start through the DCU FinTech Innovation Center and began focusing on fraud prevention in 2019.
One of the problems they set out to tackle was collaboration among fraudsters.
“By collaborating, cyber hackers and the fraudsters have access to tremendous resources where they can go after these specifically small and mid-sized institutions,” Woolf said.
Financial institutions can’t collaborate as freely. These organizations have certain data privacy rules to follow, Woolf said. So, FiVerity spent the last year building a mechanism in its platform to anonymize and securely share intelligence patterns and identity elements of known fraudsters.
“We recognize that the industry wants to collaborate to fight back. The only way to fight back is to work together,” Woolf said. “We’ve taken a collaborative approach that allows real-time information sharing capabilities for financial institutions to take a more proactive approach to fraud detection.”
Woolf said that by using this mechanism to share intelligence anonymously, they have the ability to use machine learning and AI models to look for patterns of fraudsters across institutions. Meanwhile, hackers are using AI to generate fake identities and create realistic-looking customers.
“We’re kind of in the AI wars here, where industry is using AI to combat the AI automation that the hackers and the fraudsters are using. And this is just going to accelerate significantly,” Woolf said.
Last year, FiVerity led a team at a tech sprint challenge hosted by the Federal Deposit Insurance Corporation and the Financial Crimes Enforcement Network. Their work was recognized as the top solution for effectiveness and impact in digital identity proofing for remote customers.
After that success, Woolf said the company has started onboarding customers. Their typical customers include small to mid-sized institutions who lack the resources of larger banks or credit unions to fight fraud. But, Woolf said they’re also engaging with bigger banks who want to be part of building trust in the industry.
Woolf said this new funding will help the company boost its go-to-market efforts and expand its sales team. In the first three months of 2023, Woolf said they saw a 50% increase in revenue.
FiVerity is among a growing number of fintech startups based in Massachusetts. In a report earlier this month, BostInno found that, after years of investing in the state’s fintech sector, Massachusetts is starting to reap the benefits of this work. More than 350 fintech companies call the Bay State home, according to data from the Mass Fintech Hub.
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