Building a successful financial services offering requires a delicate balancing act. Fintech startups need to manage risk and compliance while also delivering innovative solutions. Doing both things well is far from easy, which is why Alloy provides such a vital piece of the Fintech infrastructure stack.
As financial services become increasingly digital, companies often struggle to identify good customers and make smart risk decisions. Alloy handles the hard part: the Know Your Customer (KYC) and Anti Money Laundering (AML) functions required of every financial services firm and, ultimately, every business that accepts payments.
Businesses no longer have to devote limited engineering resources to reinventing the wheel or spend days manually reviewing each customer application. They simply plug into Alloy’s Identity Decisioning Platform, which integrates with more than 120 data source products to verify customers and assess risk. Decisions whether to onboard a new customer are made instantly, dramatically reducing review time and costs.
Engineers can then focus on their core mission: offering elegant solutions that meet their customers’ needs. Alloy’s position as a command center for managing identity and risk also makes it ideal for monitoring transactions and automating credit decisions, taking an already enormous market opportunity and expanding it by orders of magnitude.
Those are some of the reasons we are so excited to announce that Lightspeed is leading Alloy’s $100M Series C round, along with existing investors Canapi Ventures, Bessemer Venture Partners, Avid Ventures, and Felicis Ventures.
I feel fortunate to have gotten to know the team over the last three years via everything from discussions on company scaling to executing a go-to-market strategy. When working on their previous payments startup, the founding team experienced, first hand, the challenges of properly onboarding customers and managing risk. They are a team that understands their customers, has deep expertise in the space, and is sharply focused on building the right identity and risk management tools for their users. We are thrilled to join co-founder and CEO Tommy Nicholas, along with co-founders Laura Spiekerman (CRO) and Charles Hearn (CTO) on their mission in building Alloy.
A perfect market fit
Leading Alloy’s Series C was not a difficult decision for us. Alloy has already seen tremendous market uptake in a very short time. It now serves more than 200 clients and has tripled revenue in the past year. It is scaling quickly, growing from 54 employees to more than 140 in the space of a year. And its financial services clients love them. Using Alloy has reduced manual reviews by 95% while cutting incidents of fraud in half.
Alloy also fits well with Lightspeed’s overarching investment thesis:
* A strong market need. According to a 2021 survey by American Banker Magazine, financial institutions reported a 45 percent increase in identity theft and fraud reports. Nearly 40 percent cited ineffective technology in assessing and prioritizing risk as their biggest challenge.
* Legacy incumbents overdue for disruption. ID verification is a $16B market filled with a patchwork of legacy providers such as LexisNexis, Mitek, and Refinitiv.
* Global ambitions. Though currently operating only in the US and Canada at the moment, Alloy has plans to continue to expand internationally over the next two years.
* A vision for future growth. With the addition of its relatively new transaction monitoring and soon to be launched credit underwriting product offerings, Alloy plans to combat fraud by building out continuously evolving identity profiles throughout each customer’s lifecycle. That in turn will provide financial institutions with a true 360-degree picture of their customers.
An exploding Fintech ecosystem
Alloy is Fintech infrastructure at its core — and perhaps the most critical piece of the financial services technology stack. The number of Fintech startups and adjacent companies is growing exponentially, and all of them will require the kinds of risk management services Alloy provides.
This new round of financing will enable Alloy to expand its transaction monitoring and credit underwriting products while allowing it to develop continuously evolving identity profiles. The Fintech ecosystem is going through some amazing transformations at the moment, and Alloy is at the heart of many of them. We are happy to join them on their journey.
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