Capital One, Groupe Arnault back e-commerce fraud preventer Riskified

A customer exits after shopping at a Macy's store in the Brooklyn borough of New York, U.S., May 11, 2017. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Riskified, an e-commerce fraud prevention startup, has raised $33 million in new funding from investors including Capital One Financial Corp and Groupe Arnault, which controls French luxury goods conglomerate LVMH, it said on Tuesday.

The funding was led by Israeli venture capital firm Pitango Growth and also included Qumra Capital, C4 Ventures, Phoenix Insurance Company and Genesis Partners. Capital One participated through its venture arm, Tel Aviv-based Riskified said in a statement.

Riskified, whose clients include U.S. retailers Macy’s and Foot Locker Inc, said it would use the funds to expand globally and accelerate sales of its software, which helps merchants spot online payment fraud and reduce false alarms that cause genuine buyers to be turned down.

In 2016, every dollar of fraud cost merchants $2.40, up from $2.23 a year ago, according to a report from LexisNexis. Fraud as a percentage of revenues grew to 1.47 percent from 1.32 percent over the year.

“As more and more consumers move their shopping online, the fraudsters follow,” Riskified co-founder and Chief Executive Eido Gal said in an emailed response to questions by Reuters. “The market for our service is big and getting bigger.”

Founded in 2013, Riskified is among a growing number of software developers which help companies analyze vast amounts of data with little manpower.

Riskified plans to increase its focus on the U.S. market, where many of its merchants are based, Gal said. It expects to employ 65 people in its New York office by year-end, he added.

Gal described Riskified’s investors as strategic partners, but declined to say whether companies owned by Groupe Arnault would be using its technology.

LVMH said in May that it would launch an e-commerce site to host all of its brands, as the world’s biggest luxury goods group seeks to capitalize on the sector’s online sales boom.

Reporting by Anna Irrera; Editing by Richard Chang