InsurTech Drone Startup Betterview Forms Strategic Partnership with Munich Re
Munich (Apr. 23, 2018) – German-Israeli start-up Fraugster has developed an algorithm that checks in milliseconds whether online payment transactions are fraudulent. This artificial intelligence (AI) technology allows online sellers to approve transactions faster and more reliably, which lowers costs and also increases profits, since it reduces the number of legitimate transactions that are refused. Munich Re has tested Fraugster’s algorithm and is also insuring it, should the software nevertheless return any incorrect results.
Online sales currently generate around €2 trillion in revenue worldwide, and are growing at a rate of roughly 25% per year. Yet a large number of such purchases are made through credit card fraud, which causes online sellers to lose around €25bn per year, or an average of 1.5% of annual revenues. In an attempt to reduce such costs, payment transactions are currently checked almost exclusively by hand or using rule-based solutions, which ends up being slow, expensive and ineffective. Fraugster has developed a fully automatic algorithm that can recognise whether an online payment was authentic or fraudulent, offering payment companies, and thus online sellers, an unprecedented level of security. Not only does the system detect and, with a high level of probability, prevent fraudulent transactions in the first place, it also lowers the number of valid payments that are incorrectly rejected. Online sellers can thus reduce losses while at the same time increasing revenues from legitimate transactions.
Munich Re’s data analysts have tested Fraugster’s self-learning algorithm, and found that the statistical theory it applies, the quality of its transaction check, and its IT infrastructure are all fit for purpose and reliable. In addition to this “seal of approval”, the start-up was also granted an insurance policy against transactions that are wrongly deemed legitimate. This is a decisive issue for Fraugster since, in addition to checking the electronic transactions, the start-up offers to reimburse its clients for any payment defaults caused by fraud that goes undetected. The insurance policy allows the company to externalise this risk and fully concentrate on growth and new product development.
Max Laemmle, founder and CEO of Fraugster: With several million transactions passing through Fraugster’s system each day, our AI technology ensures that the product offered is very secure. The cooperation with Munich Re will make a significant contribution to our new AI-based product reaching e-commerce markets around the globe.
Doris Höpke, Board member for Special and Financial Risks: The ever-growing volume of online sales means that there is great demand for better security. Fraugster and Munich Re’s Special Enterprise Risk Team have joined forces to provide this security through an innovative type of risk appraisal and a tailored insurance solution. This solution is creating macroeconomic value by reducing sellers’ costs and increasing their revenue and efficiency.
There is enormous growth potential for further cooperation between Fraugster and Munich Re. Fraugster’s clients already make up around 4% of online sales worldwide, with a volume of roughly €100bn. Fraugster’s self-learning algorithm improves with each checked transaction, and thus the system is continually honing itself and adapting to changes. The insurance solution was provided via Munich Re’s subsidiary Great Lakes Insurance SE.
About Munich Re
Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. In the financial year 2017, the Group – which combines primary insurance and reinsurance under one roof – generated profits of €0.4bn. It operates in all lines of insurance, with over 42,000 employees throughout the world. With premium income of around €32bn from reinsurance alone, it is one of the world’s leading reinsurers. Munich Re is a much sought-after risk carrier, especially when clients need solutions for complex risks. Munich Re’s primary insurance operations are concentrated in ERGO, one of the leading insurance groups in Germany and Europe. ERGO is represented in over 30 countries worldwide and offers a comprehensive range of insurances, provision products and services. In 2017, ERGO posted premium income of €17.5bn. Munich Re’s global investments (excluding insurance-related investments) amounting to €218bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.
Fraugster is a German-Israeli payment security company leading the future of fraud prevention with artificial intelligence. With the vision of creating a fraud-free world, we have designed and built proprietary artificial intelligence technology that not only eliminates payment fraud but also maximises revenues for e-commerce merchants. Fraugster was founded in September 2014 by Max Laemmle and Chen Zamir and has been operating across the globe since 2016. We are currently responsible for tens of billions of dollars for our clients, and our products are used and trusted internationally by leading payment companies such as Ingenico and Credorax.
This corporate news item contains statements about the future that are based on current assumptions and forecasts by Munich Re management. Known and unknown risks, uncertainties and other factors may lead to material differences between the statements made here and the actual progress, particularly the results, financial situation or performance of our Company. The Company assumes no responsibility for updating such statements or adjusting them to future events or developments.
SOURCE: Munich ReTags: artificial intelligence, cyber security, digital sales, Fraugster, Munich Re