Alloy: An Overview of a Fast Growing Identify Verification FinTech Startup

Alloy recently raised $100M at a $1.35B valuation to help banks and fintechs fight fraud with its API-based platform.

Alloy recently raised $100M at a $1.35B valuation to help banks and fintechs fight fraud with its API-based platform. In light of this large raise, and the fact that I follow this space closely, I wanted to shed some light on who this company is, how they operate, and the KYC market.

Who is Alloy?

Alloy has built an identity operating system for banks and fintechs. Specifically, they are a developer of an identity verification platform designed to check frauds and increase overall security. The company’s platform combines a single API and dashboard centralizing case management, alerts, decision audit trail, and reporting. Alloy helps financial institutions integrate multiple sources of data and customer identification program rules to manage identity verification from signup through the life of the customer, enabling banks and FinTech companies to automate their identity compliance and fraud decisions.

What does their cap table look like? How much have they raised?

The company raised $100 million of venture funding in a deal led by Lightspeed Venture Partners on September 15, 2021. Previously, the company raised $40 million of Series B venture funding in a deal led by Canapi Ventures on September 5, 2020, putting the company’s pre-money valuation at $180 million.

Which other companies offer solutions similar to Alloy?

  1. Socure
  2. Avoka
  3. Jumio
  4. TruNarrative
  5. Datactics
  6. Veriff
  7. Onfido
  8. Centrify
  9. ZignSec
  10. Passbase

What is Alloy’s unique value prop?

To provide a seamless, online experience for your customers while preventing fraud. Real impact in real-time. Leverage more data.

In the words of CEO Tommy Nicholas, Alloy “helps banks automate 98% of onboarding decisions, reduce 50% of fraud, and increase overall customer conversion.”

How does Alloy achieve these outcomes?

Alloy enables the following value additive outcomes for their clients:

  1. Build a full identity profile of customers’ needs and risks — not just a point-in-time snapshot.
  2. Identify and act on customer activity right within Alloy. Review flagged activity, collaborate with colleagues, and make approval or denial decisions from a simple user interface.
  3. Get visibility into customer’s transactions and activities with batch or real-time API monitoring.
  4. Create rules to flag high-risk events and transactions. Rules can be as simple or as complex as needed depending on your goals and risk tolerance.

Alloy’s API connect to external data sources and a FinTech’s internal data to help build a full customer profile. The information captured during onboarding when viewed with ongoing transaction and account activity provides an evolving view of a customers’ risks and needs.

These insights can be leveraged to stop fraud, protecting the FinTech and the end-user.

This diagram captures this work-flow.

What search queries drive organic traffic to Alloy? What percentage of their traffic is derived from these search parameters?

  1. Payments fraud (22%)
  2. Fraud identification (7%)
  3. Ezshield fraud protection 6%)
  4. Fraud detection algorithm (6%)
  5. kyc abbreviations (7.5%)
  6. citi aml (3%)

What is KYC and why does KYC matter?

Know Your Customer (or KYC) is a procedure to identify and verify a customer’s identity. The process consists of a series of checks implemented in the first stage of the relationship with the client to verify that he or she is who they are, taking into account identity documents and personification. In short, KYC is the process of a business confirming the identity of its customers and assessing their suitability.

How is KYC being transformed by digital innovation?

KYC is affected by a series of regulations in relation to, for example, anti-money laundering (AML), terrorist financing or electronic identification standards and trust services (eIDAS). eKYC (Electronic Know Your Customer) is the expression used to describe the digitalization and electronic and online conception of KYC processes. eKYC is the remote, paperless process that minimizes the costs and traditional bureaucracy necessary in KYC processes. This is where Alloy excels. To quote Alloy’s CEO, Alloy “wants to make building a FinTech product as easy as building an e-commerce product.”

How large is the KYC/AML Market?

The post-COVID 19 global Anti-money laundering market size is expected to grow from USD 2.2 billion in 2020 to USD 4.5 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 15.6%.

There are various international as well as regional AML regulations for KYC. These regulations include The Financial Industry Regulatory Authority (FINRA), China’s Banking and Insurance Regulatory Commission (CBIRC), and Australian Transaction Reports and Analysis Centre (AUSTRAC). With continuously changing face of financial frauds, these regulations are getting upgraded and refined for covering even the smallest money laundering aspects complicating these regulations.

How big a problem is identify fraud and theft?

The problem is massive, growing, and ever changing. The Federal Trade Commission (FTC) estimates that as many as 9 million Americans have had their identities stolen each year. Identity fraud cost Americans a total of about $56 billion last year, with about 49 million consumers falling victim. That’s according to the 2021 Identity Fraud Study by Javelin Strategy & Research.

About $13 billion in losses were due to what Javelin calls “traditional identity fraud,” where cybercriminals steal personally identifiable information and use it for their own gains, such as through data breaches.

But the bulk of the losses last year, $43 billion, stemmed from identity theft scams where criminals interact directly with consumers to steal their information through methods such as robocalls and phishing emails. Victims of these scams lost $1,100 on average, according to Javelin.

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