The Shifting Sands of Financial Fraud: A New Threat Emerges
Credit card fraud has long been a persistent challenge for financial institutions, but its landscape is undergoing a dramatic and concerning transformation. Traditionally, scams were the domain of external bad actors. However, a startling new trend reveals that nearly a third of all fraudulent transactions are now initiated by cardholders themselves. This rise in “first-party fraud” is fueled by increasingly accessible AI tools that simplify charge disputes and by social media communities openly sharing tactics for acquiring “free stuff” at the expense of banks.
“It comes back to people thinking ‘this is a victimless crime, banks have a lot of money and I need money’, so people tell what they think are white lies,” explains Shanthi Shanmugam, CEO and co-founder of Casap, a pioneering startup leveraging AI to revolutionize how banks and card companies manage disputes and chargebacks.
Casap’s AI: A Powerful Shield Against Deception
In response to this escalating threat, Casap has developed a sophisticated AI suite designed to discern legitimate disputes from fraudulent claims. The company recently announced a significant $56 million Series B funding round, led by Base10 Partners, bringing its total funding to an impressive $90 million since its 2023 launch. Financial titans Synchrony and Experian also joined as strategic investors, underscoring the urgency and importance of Casap’s mission.
The Challenge of Consumer Protection Laws
Casap’s innovative solution is particularly vital given the complexities of existing consumer protection laws. While these regulations effectively shield consumers from third-party fraud, they inadvertently place a substantial burden on financial institutions when it comes to rejecting dishonest claims made by cardholders. Shanmugam notes, “When you look at the rules that govern these disputes, they are written in a way that almost assumes that no one lies.” This regulatory environment often compels banks to automatically resolve disputes in a customer’s favor, especially for amounts below a certain threshold, which can sometimes be surprisingly high due to the prohibitive time and expense of thorough investigations.
Tangible Results and Streamlined Processes
Casap’s AI tools are dramatically altering this calculus. The startup reports remarkable success, with customers reducing first-party fraud losses by up to 51% and boosting their chargeback win rate to an impressive 96%, significantly outperforming the industry average of 60%. Beyond financial savings, Casap also drastically cuts resolution times, bringing the average dispute resolution down to just 8 days, a stark contrast to traditional methods that can drag on for up to 90 days.
While AI streamlines much of the process, a crucial human element remains. Shanmugam emphasizes that human reviewers are still in the loop, but their tasks are now highly optimized, often requiring only 1-2 minutes to clear a case. Casap’s AI analyzes various indicators, including the physical location of a credit card and spending patterns, to identify potential deception, though the full range of its proprietary criteria remains undisclosed.
Expanding Horizons: Beyond Fraud Detection
With its name cleverly derived from “get your Case done ASAP,” Casap has firmly established itself in combating first-party fraud. However, the new funding will fuel its expansion into other critical areas of bank and credit card company back offices. This includes tackling customer complaints and enhancing collections services, further solidifying its role as a comprehensive financial operations partner.
Before co-founding Casap with Chime veteran Saisi Peter, Shanthi Shanmugam honed her expertise as a product manager at leading Silicon Valley firms such as Robinhood, Meta, and Salesforce. The company’s robust investor base also includes Lightspeed Venture Partners, Emergence, and Primary, signaling strong confidence in its disruptive potential.
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