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Building Fraud Protection into the Foundation: Why We Invested in Sardine

Updated: Oct 25, 2022

I don’t need to tell you how pervasive financial fraud is in the consumer psyche- the wave of articles flooding the media detailing scams and providing prevention tips drives that point home. Fraud (and fraud prevention) has always been interconnected with financial services, but as we have moved to more digital solutions it has become even more ubiquitous; with even the savviest of consumers left unsure if they are dealing with their financial institution or a scammer.

Fraud in Digital Money Movement

COVID-19 accelerated trends toward digital payments and fintech platforms. ACH transfer demand has doubled in recent years, driven in part by the explosive growth in digital wallets (projected to total $10 Trillion in spending in 2025) offered by neobanks, crypto firms, and other fintech solutions. This has increased the attack vectors for fraudsters, particularly in instant and irreversible money transfer, which has become the norm in peer-to-peer payments and crypto transactions.

Since 2020, there has been a 200% increase in digital wallet fraud rates. This type of fraud is expensive, delays product launches, hurts a brand’s perception, and adds friction to the user experience. More users, sending larger amounts, from more products has expanded risks and costs for everyone involved.

Existing infrastructure has not kept up to ensure compliance, fraud avoidance, and frictionless customer experience. In an increasingly digital world with increasingly impatient consumers, fintech and crypto platforms need fraud prevention infrastructure to scale and meet demand.

Why we Invested in Sardine

Fintechs and crypto firms understand they need prevention tools to combat the growing and increasingly sophisticated fraud; the question becomes how best to integrate it into their current tech stack?

Most fraud prevention efforts work in a ‘Quality Control mode’ - a set of checks or controls built on top of existing processes like money movement to flag transactions (or accounts) on a retroactive (or proactive) basis.

Sardine flips this model on its head with a ‘Quality Assurance’ approach that brings fraud prevention directly into the foundation of these processes rather than around them; before any money movement takes place. Their core fraud product is powered by behavioral biometrics, which use advanced analysis of a user’s actions without sacrificing privacy. Sardine leverages this product to offer risk-free instant payments to fintechs and their end users. The risk-free payments are available as instant ACH, as a swift on-ramp to crypto, or an instant payment into a customer’s digital wallet.

Rather than building a payment platform with fraud prevention measures, Sardine started as a fraud prevention tool and built its payment platform on top of that. Fraud prevention is central to what they do, not an afterthought. This is why Sardine can facilitate payments at a much lower fraud rate compared to other players.

The Power of Network Effects

We at Alloy Labs inherently understand and appreciate the power of a consortium working together to reach a common goal, which is why we are especially excited about Sardine’s fraud data consortium. The consortium connects traditional financial institutions, fintechs, and crypto firms to reduce fraudulent transactions. It not only provides more data to train its fraud detection models, but also enables Sardine to respond quickly to any fraudulent activity across the financial industry, for the benefit of all their customers.

We all benefit from working together to prevent fraud and with Sardine at the center, we are primed to finally get and stay ahead of scammers.


Kelsey Landau is Senior Venture Associate at Alloy Labs. We invest in companies reimagining financial services through our Alloy Alchemist Fund.


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