Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements typically require financial institutions to rely on numerous third-party data providers for both onboarding and ongoing monitoring as the sophistication of fraud schemes increases. Digitally-focused financial providers (neo-banks, fintech startups, global banks, and platform banks) face the decision to build systems in-house, a resource-intensive undertaking, or rely on third-party integrations that are available in order to be compliant. Alloy, a complete identity decisioning and transaction monitoring solution, makes that decision seamless with its infrastructure-as-a-service platform. Launched in 2015, the company streamlines the onboarding process aided with automation and supports the customer lifecycle with ongoing monitoring to flag potential fraud and minimize risk. Alloy integrates with 160+ data sources to ensure that its customers are able to build a complete and accurate picture of their customers and their financial transactions. The company has 300+ clients and processes 1M+ decisions per day.
AlleyWatch caught up with Alloy Cofounder and CEO Tommy Nicholas to learn more about the business, the company’s strategic plans, latest round of funding, which brings the total funding raised to $207.8M, and much, much more…
Who were your investors and how much did you raise?
We raised an additional $52M to our Series C led by Lightspeed Venture Partners and Avenir Growth with participation from existing investors Canapi Ventures, Bessemer Venture Partners, Avid Ventures, and Felicis Ventures, bringing the company’s valuation to $1.55 billion.
Tell us about the product or service that Alloy offers.
Alloy helps some of the most innovative banks and fastest-growing fintech companies grow and scale operations by allowing them to find more good customers and bring them into their products without increasing the risk of fraud.
Founded in 2015, Alloy has grown to meet the rising demand for identity tools that help companies fight fraud and stay compliant while onboarding new customers in the US and abroad. Over 300 companies use Alloy’s API-based platform to connect to more than 160 data sources, automate identity decisions during account origination, and monitor them on an ongoing basis.
The company currently serves banking and fintech companies including Ally Bank, HMBradley, Gemini, Ramp, and Evolve Bank & Trust, processing over a million decisions daily.
What inspired the start of Alloy?
The company was formed when a few employees of a payments company saw just how hard it was to launch financial products, specifically the identity verification piece of launching those products, and wanted to find a way to reduce the friction and risk associated with building those products.
Charles (CTO and Cofounder) and I, actually went to high school together but weren’t close then. Laura (CRO and Cofounder) spent time working in financial services in Africa before moving back to the US.
In the company’s early days, most investors thought the idea was too niche and wouldn’t make it. In fact, several tried to talk us into looking at a different area of fintech. But the team stuck to their convictions around the need for identity verification.
Fast forward, past rejections from Y Combinator and several investors, the company was eventually accepted to Techstars.
That experience helped propel the company forward to where it is today.
How is Alloy different?
Alloy was the first to break ground on this market seven years ago, long before people were talking about the need for an identity management platform. Today, Alloy continues to lead the market both in product and in terms of size and traction (300 customers including Brex, Ramp, Ally Bank, etc., with connections to 160 data sources.)
Alloy’s experience over the years helping our customers defend against fraud attacks has given us unmatched expertise in fraud prevention. That’s more important than ever now that fraud has gotten so complex and well-funded and the regulatory environment has been so fast-moving – financial institutions need a guide they can trust and that’s what Alloy’s been able to do.
What market does Alloy target and how big is it?
Alloy services the global banking and fintech market, reaching tens of thousands of financial institutions.
What’s your business model?
Alloy has a hybrid subscription and consumption-based business model.
How are you preparing for a potential economic slowdown?
It’s somewhat counterintuitive, but historically fraud rates rise during downturns. So, our clients find our identity verification tools more important than ever. Alloy is seeing increased demand for our fraud prevention products right now and that’s why we’re excited to have even more resources to invest in our product and our team.
What was the funding process like?
We were fortunate to be in a unique position where we were doing well and hadn’t spent the money from our Series C last year. Our investors believed in the importance of our goal of fighting fraud in this market and were excited to double down on their investment.
What factors about your business led your investors to write the check?
Fraud rates are on the rise. It is not uncommon during a downturn for companies to begin seeing an increase in fraud (fraud rose during the 2008 recession and in 2020 during the pandemic.) This current moment is no exception.
Our investors saw an opportunity for Alloy to support more companies both here and in the US and abroad to address that rise in fraud.
What are the milestones you plan to achieve in the next six months?
Alloy recently expanded into 40 countries so we’ll be very focused on continuing to grow our global footprint over the next six months. Fraud rates aren’t just rising here in the US, they are something the global financial industry is dealing with. Alloy will move quickly to support the growing need for better tools to fight fraud.
Alloy recently expanded into 40 countries so we’ll be very focused on continuing to grow our global footprint over the next six months. Fraud rates aren’t just rising here in the US, they are something the global financial industry is dealing with. Alloy will move quickly to support the growing need for better tools to fight fraud.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Being scrappy is one of our core company values. It was key to keeping Alloy running in our early days and keeps us nimble and focused even today. I think it’s a mentality every company should have, no matter their size.
Where do you see the company going now over the near term?
We expect to see fraud continue to rise as fraudsters take advantage of this downturn and continue to get better funded. Our near-term focus is on continuing to share best practices for addressing fraud attacks with our clients that they can use in addition to Alloy’s on-the-go guidance.
What’s your favorite restaurant in the city?
Tortilleria Mexicana Los Hermanos.
