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Identity-decisioning platform Alloy announced today that it received $100 million in funding to boost its valuation to unicorn status, $1.35 billion. Lightspeed Venture Partners’ Justin Overdorff led the round with participation from existing investors Canapi Ventures, Bessemer Venture Partners, Avid Ventures and Felicis Ventures, bringing the total amount raised to over $150 million.
The identity decision platform
Alloy plans on using the new capital to expand its offerings, which help fintechs and banks to safely onboard customers and make subsequent identity-related decisions about them.
Decision-making about applicants for accounts or loans can be difficult simply because of the sheer number of data points financial institutions have to consider. Alloy simplifies the process. It gives customers a single API that can connect to multiple (120) data sources related to decisioning — address and banking authentication, credit, email and phone data, fraud records are just a few. Customers can use these sources as data points to create tailored workflows in a low-code, no-code way. “We automate the process of figuring out which data sources and what rules you apply works best for your use case, your population, and your risk tolerance,” said Laura Spiekerman, co-founder and chief revenue officer at Alloy.
Because of Alloy’s extensive experience with the ways financial fraud manifests, it can also advise clients on customizing workflows depending on their ongoing risk tolerance.
Decreasing bias in decision-making
Financial services might be ripe for bias but Alloy, which is not an AI-driven platform, works on leveling the playing field for applications by expanding the number of data points for application evaluation, Spiekerman said.
Most traditional decision-making conducted at banks is linear and not holistic, Spiekerman pointed out. Such a straitjacketed approach automatically eliminates otherwise legitimate applications. For example, insisting that applicants have a credit profile with one of the three U.S. credit bureaus (Experian, Equifax or TransUnion) before they can be given a loan. Such a process can be limiting for new immigrants, who might not have an established credit history in the United States. “Instead we can look at cash flow data, transaction history, which opens the doors to a broader population,” Spiekerman said. Similarly, public database records are skewed toward wealthier, more established demographics, so alternative data like utility bill records can level the playing field better, Spiekerman said. “We believe that at the fundamental level, bringing in more data can really help in eliminating bias,” she added.
An ongoing customer profile
While Alloy started out with automating identity and fraud compliance during the early onboarding process, it has since moved to helping customers with ongoing decisioning processes, Spiekerman said. Decision-making in financial institutions is not limited to early-stage onboarding. “There are tons of decisions to be made post-onboarding: should we let a customer send $5000 through an online transaction, change an email address etc. which requires additional information,” Spiekerman said.
It is why Alloy creates an evolving customer profile that moves beyond onboarding checks. “You need the original information about the user and you need their transaction history, what you have learned along the way and network data,” Spiekerman said. Alloy is a platform that “allows you to see all the behaviors, all the identity information you can collect about your users, which gets richer over time,” Spiekerman said. Such holistic information, a mix of static and transactional data, leads to better decisions and outcomes for applicants.
Alloy’s biggest competition is the move to build in-house versus buy. Showing value by helping companies get to market faster works to the company’s advantages. Alloy counts both small and large fintechs and banks in their roster, including Ally Bank, Gemini and Ramp. In the last year, the company has seen Annual Recurring Revenue (ARR) more than triple and headcount increase by 140%. Alloy currently services over 200 clients.
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