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I sat down with Soups Ranjan, CEO/Co-Founder of Sardine, a fraud-prevention company that’s on a mission to make payments instant and risk-free. Sardine enables companies to improve risk management through a single API for fraud detection and compliance within financial services.
Founded in 2020, Sardine has raised around $75 million from a16z, NYCA, Activant, FJ Labs, Visa, and a long list of impressive folks.
In this episode, we discuss:
What he learned about fraud in his role as Head of Risk at Coinbase, where they had to prevent attacks against the most sophisticated fraudsters and nation-state attackers
“When you’re running a large-scale bitcoin exchange, you attract the more sophisticated fraudsters as well as nation state attackers.”
Soups was the Head of Risk at Coinbase from 2015 to 2019. He was drawn to the role by the challenge of fighting sophisticated fraudsters and nation-state attackers in a large-scale global environment. As one of the first 15 engineers, Soups developed machine learning algorithms from scratch to combat fraud and aid in risk management. He also assisted in launching instant ACH on-ramps and card-based on-ramps at Coinbase, along with the development of internal compliance tooling, marking an exciting phase in his career and giving him the inspiration to later launch Sardine.
Some of the most creative fraud attacks they are seeing these days and how Sardine helps fight and prevent them
“Some of the most creative attacks that we're seeing are phishing done via social engineering. We are also seeing a lot of phone thefts, which lead to someone draining your bank account. And then of course, you have the classic stolen identity /synthetic identity fraud.”
All types of fraud that Sardine helps prevent and fight, is the kind that leads to significant financial losses for the victims. Social engineering scams often involve fraudsters impersonating crypto advisors or bank representatives and tricking victims into installing remote access tools such as TeamViewer or Citrix. With access to the victims' devices, scammers are able to withdraw money from a victim’s financial account undetected, due to the legitimate appearance of the victims' IP address and device ID. Sardine's SDK offers a unique solution by detecting non-owner device activities like unusual screen control and mouse movements, identifying a scam behind the operations, and helping prevent fraudulent transactions.
The urgent need for real-time transaction monitoring in the financial industry
“It's actually very important that in order to fight faster payment fraud, you have real time engines, which look at the data, and they can stop a transaction from happening in real time. Because with Faster Payments, comes faster fraud.”
There's a pressing need for real-time transaction monitoring given the rising prevalence of faster payment methods around the world, such as Brazil's PIX and the widely anticipated FedNow in the US. These new systems create a new headache for banks that are grappling with outdated core processing engines (as if you were placing a Ferrari engine in an old car's body). This makes it crucial for banks to upgrade to real-time engines that can rapidly detect and halt fraudulent transactions. Additionally, banks must establish strong fraud detection measures and reassure customers about their efforts in preventing real-time fraud to maintain trust.
Why fraud and growth are two sides of the same coin … and a lot more!
“Fraud and growth are two sides of the same coin. In fact, what we have seen is that if you do fraud prevention better, you can actually increase conversion rates.”
Fraud prevention and growth are intertwined; efficient fraud prevention can actually boost conversion rates, as demonstrated by Sardine's crypto on-ramp business which has been achieving high conversion rates. Financial services companies that prioritize fraud and compliance tend to perform better and top management for financial companies, including CEOs, need to recognize the importance of robust fraud prevention tools. Not properly accounting for fraud rates can lead to skewed customer acquisition cost (CAC) calculations and potentially overspending on attracting fraudsters, undermining growth efforts and profit margins. Regular engagement between company leaders and heads of fraud/compliance is key to maintaining control.
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.
Soups Ranjan, CEO of Sardine – Navigating a Sea of Financial Fraud, Outsmarting Scammers, & The Need For Real-Time Fraud Detection