Israel: Where Fintech meets cybersecurity

Israel is well known as a world leader in cybersecurity and a critical innovation center driving the development of tools and resources aimed at combating cybercrime and managing the increased digital security risks organizations face today.

Investors know this all too well.

According to the Israel National Cyber ​​​​Directorate, in 2021, the country’s cybersecurity sector attracted a record $8.8 billion in funding, and one in three cybersecurity unicorns in the world is based in the Middle Eastern country.

It is not surprising that many of Israel’s cybersecurity firms sell their products and services to military and intelligence agencies worldwide, but also to private businesses, from banks and FinTechs to online platforms and retailers.

Israel’s role as a lynchpin in the global cybersecurity ecosystem also means that local businesses are deeply embedded in payment networks and technologies. In recognition of this, Mastercard launched a FinSec innovation lab in the country last year, designed to cultivate startups working at the intersection of cybersecurity and FinTech.

Read on: Mastercard launches Innovation Lab in Israel with Enel X

As the FinSec lab states on its website, the incubation program will help companies develop solutions across a range of verticals, including in digital authentication, threat intelligence and detection, anti-fraud and anti-money laundering.

Anti-fraud and chargeback reduction

Aided by strong cybersecurity talent and a healthy startup scene, Israeli companies continue to support digital payment systems worldwide, both at the service provider and merchant levels.

For example, Israeli startup Justt uses artificial intelligence (AI) to protect businesses from chargeback fraud. The company’s technology can be integrated with most of the world’s largest payment providers such as Visa and Mastercard, as well as modern online payment providers such as PayPal and Stripe.

Related: Return-limiting start-up Justt names new managers

Justt says the technology can recover 60% to 80% lost from illegitimate chargebacks that occur after the transaction. This cost reduction could ease the significant chargeback fraud burden on businesses that lose money to fraudulent transactions and illegitimate cardholder claims, as revealed in a PYMNTS study on chargebacks.

This study, based on a survey of 301 merchants whose annual revenue from online or mobile app sales ranged from $20 million to $1 billion plus, found that 77% of merchants reported that the costs of fraud, disputes and chargebacks contribute to harm to their business as a result of cardholder disputes.

Read on: Half of merchants say the abnormal costs of handling chargebacks are their worst problem

In addition to helping businesses recover lost funds, Israeli technology companies are also creating solutions to prevent fraudulent transactions in the first place.

Credorax’s chargeback prevention solution is part of the Tel Aviv-based FinTech’s suite of risk management tools designed to protect merchants from fraud and chargebacks. The system consists of a fraud detection algorithm and an automatic blocking mechanism for transactions, and the system can be tailored to individual businesses’ specific needs and risk appetite.

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