Friday, February 01, 2008

eBay buys Israeli startup for $169m

Gil Ronen

US online auctioning giant eBay has purchased Israeli online risk tools startup Fraud Sciences for $169 million, Israel21c reported.

Following years of intensive research, Fraud Sciences has developed a technology that differentiates between real and fraudulent transactions with unprecedented accuracy. Using this groundbreaking technology, Fraud Sciences offers a unique transaction verification service to manage online fraud. The small privately owned company only raised $7 million in investment before the buy-out. Fraud Sciences' technology is designed to uncover fraudulent credit card purchases by verifying that the customer making the purchase is in fact the card's owner.

99.9 percent accuracy
"At PayPal we use the same type of tools, and we feel that Fraud Sciences technology is going to be very complementary," PayPal spokeswoman Sarah Gorman told

Gorman said that Fraud Sciences' technology will build on what PayPal calls its "neural detection technique," which "literally gets smarter with every transaction.".

Fraud Sciences has claimed that its system is 99.9 percent accurate, significantly reducing th
The small privately owned company only raised $7 million in investment before the buy-out.
e chance that a fraudulent transaction will be accepted, as well as the chance that legitimate purchases will be rejected. The technology works by evaluating a composite of the purchaser's digital history to ensure that he is both a real person and the authorized cardholder. Further details regarding the system are secret

Phishing for dollars
Risk tools relating to identity verification will improve the security of online transactions executed through PayPal, but eBay's payment-services division has run into other types of fraud over the years, particularly phishing. This term refers to scammers who send e-mail to individuals in which they pose as legitimate companies – like eBay or PayPal – in order to lure their victims into giving up their credit card numbers and other information.

Tel Aviv-based Fraud Sciences was founded in April 2006 by Shvat Shaked and Sa'ar Wilf. They will be joining PayPal's technology and fraud management teams.

Investors in Fraud Sciences include Redpoint Ventures, BRM Capital and entrepreneur Eli Barkat, who acquired a 40% stake in the firm for $5 million. He is set to make 12 times that amount in the exit

eBay and its subsidiary, e-commerce enabler PayPal, have been facing an increasingly difficult battle against online fraud. They plan to use Fraud Science's risk tools and analytics to expose scams and deceptions targeted at their companies, and to accelerate the development of the next generation of fraud detection tools.

No comments: