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Sizing a new technology market

25/07/2016

Over the last 12 months we have been working with Cambridge, UK-based Featurespace, an exciting VC funded machine-learning company. It is the world leader in Adaptive Behavioural Analytics used to detect unusual behaviour such as fraud or addictive behaviour in real time. What is different about Featurespace’s platform, ARIC, is that it does this not by trying to pattern recognise the unusual behaviour, but by recognising good behaviour coupled with anomaly detection. Featurespace’s CEO Martina King asked us to help size the benefits of their approach to fraud detection to the card payments industry. The surprising outcome is that their platform’s reduction in false-positives, good transactions that are blocked by existing fraud systems, saves as much money for card issuers as the reduction in fraud losses, and improves their customer satisfaction.

Featurespace was born from the work of the late Prof. Bill Fitzgerald at Cambridge University applying Bayesian statistical methods to signal processing. The company’s ARIC engine looks for features in data, hence the name.

When we started working with the company it had already applied its technology to the online gambling industry where William Hill, Betfair and others use ARIC. Featurespace had also just won the fraud platform tender for Vocalink’s Zapp online payments platform – Vocalink is the UK’s ATM and bank payments network which MasterCard recently announced it was acquiring.

But it was in the giant debit and credit card payments market that Featurespace was now being trialled, and we worked with the leadership team to help quantify how Featurespace’s unique approach to the fraud problem could benefit the industry. We used the results of Featurespace’s trials with real industry data coupled with our technology analyst experience to package the results in a way Featurespace could provide third-party verification of the benefits of ARIC to potential customers, and to investors.

In May 2016 Featurespace announced that it was collaborating with TSYS, the $10 billion US payment processing company that is the largest North American third-party card processor, and the second largest in Europe. Working with the technology company that provides the card processing capabilities for almost 500 million cards worldwide is a strong endorsement. And in the same month it announced a new $9m funding round, adding US FinTech VC specialist TTV Capital to its shareholder base alongside previous lead investor Imperial Innovations.

Machine learning technologies are only just coming out of academia and being used commercially which means that this is one of the first studies in the field.

Link to latest Featurespace press release and Oakhall Analysis report

Oakhall was established by top-rated equity research analysts to help CEOs and CFOs better analyse their own business and strategies, and articulate them to stakeholders. Founder Andrew Griffin spent almost two decades as a technology equity analyst, ultimately as managing director of European technology equity research at Bank of America Merrill Lynch, before working in investor relations, corporate development and market intelligence for a UK listed software company.