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BFD Expert Voices - Private Credit

BFD Expert Voices

CFPB's Chopra says more rules coming

CFPB's Rohit Chopra. Photographer: Andrew Harrer/Bloomberg via Getty Images

Dispute automation startup raises $8.5M

Illustration of Benjamin Franklin wearing a burglar's mask

Credit score

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Deals!

It's Personnel

The Consumer Financial Protection Bureau is gearing up for further rulemaking, director Rohit Chopra said yesterday at Money20/20.

Why it matters: This comes ahead of an election that could mean massive changes at the bureau.

Flashback: The CFPB was defanged during Donald Trump's presidency.

What they're saying: "You should expect some additional rulemaking — proposed and final — over the next few months," Chopra said in a meeting with reporters in Las Vegas. 

"We have a lot in the works when it comes to the Fair Credit Reporting Act, a lot in the Truth in Lending Act. I'm gearing up for some more in the mortgage space," he continued.

Context: In May, the CFPB launched an inquiry into why mortgage closing costs have risen.

The bureau has also yet to finalize a rule that say many paycheck advance products are subject to Truth in Lending, as well as one to exclude medical bills from credit reports.

The CFPB has accelerated its enforcement this year. 

1 big thing: CFPB's Chopra says more rules coming

Casap, a startup helping banks and fintechs fight first-party fraud, raised $8.5 million in seed and pre-seed funding, CEO Shanthi Shanmugam tells Axios exclusively.

Why it's the BFD: In just a few years, the volume of chargebacks worldwide is expected to climb more than 40% from 2023 levels.

How it works: Casap has a dispute automation and fraud prevention platform for banks, credit unions and fintechs to identify fraudulent chargeback cases and automatically resolve legitimate cases.

The company offers a white-label, self-service user experience where consumers can dispute any transaction, whether by card, check, ACH, ATM or digital payment.

It asks a list of proprietary questions and gathers the data it needs to create a case in its case management platform.

Behind the scenes: Casap scores the likelihood that a transaction is fraudulent — and that a chargeback dispute will be successful — by examining the consumer's dispute history and the merchant they are disputing with, among other factors.

It will automatically refund the consumer for transactions with a high likelihood of winning, log the transaction for compliance purposes and file a chargeback dispute — all without human intervention.

The big picture: First-party fraud has risen steadily since the onset of COVID-19, with chargeback volume reaching more than 238 million worldwide in 2023, according to Mastercard data.

Global chargeback volume is expected to increase 42% over the next few years, reaching 337 million cases by 2026.

"There's a lot of friendly fraud. People are lying about legitimate claims, getting something they ordered, and pretending they didn't," Shanmugam says. "On top of that, people are using their banks and card companies as a universal refund center."

Follow the money: As a result, fraud losses from card-not-present transactions are expected to increase by 40%, to over $28.1 billion, by 2026.

"Maybe you're getting a credit because they're required to give it to you in 10 business days, as per Reg E, but then they're getting that credit clawed back, 45 to 90 days later, when they lose the chargeback [dispute]," Shanmugam says.

Between the lines: Slow fraud dispute resolutions are disruptive from a financial perspective, but they can also contribute to customer attrition due to poor user experience.

"Throughout all of the handoffs, members don't know what's going on and end up leaving long financial relationships because of one bad dispute experience or one bad fraud experience," Shanmugam says.

Casap improves the usual experience by providing a tracker that gives consumers more visibility into the dispute transaction process, including if and when they can expect a refund.

Context: Before Casap, Shanmugam and co-founder Saisi Peter spent years building risk and customer support products for Robinhood and Chime, respectively.

Zoom in:  Lightspeed Venture Partners led the company's $7 million seed round, and Primary Ventures led $1.5 million in pre-seed funding. 

Other investors include Commerce Ventures, Curql, Alloy Labs, and angels from Chime, Robinhood, Square, Current, Novo and Alloy.

2. The BFD: Dispute automation startup raises $8.5M

⚖️ FTX dropped litigation against Bybit in a deal allowing it to withdraw assets worth $228 million. (Bloomberg)

👖 PayPal will share customer purchase data with retailers for targeted ads, including personal information like clothing sizes. (WSJ)

🛑 Experian, TransUnion and Equifax have all ended their data partnerships with TomoCredit. (Forbes)

🫣 Capital One said its credit metrics, such as late payments and charge-offs, are rising above pre-pandemic levels. (WSJ)

🚪 Klarna shareholders have voted to oust Mikael Walther in a move approved by 87% of shareholders (Bloomberg)

3. Credit score

Go deeper into our full database with the Axios Pro Deals Tracker.

• Reflexivity (formerly Toggle AI), a New York-based maker of AI for the investment industry, raised $30m in Series B funding led by Greycroft and Interactive Brokers. Other investors included Stanley Druckenmiller and Greg Coffey. reflexivity.com

• Osigu, a LatAm-focused health care payments and claims management platform, raised a $25m Series B led by IDC Ventures, with participation from Visa. Go deeper

• Wildfire Systems, a San Diego-based loyalty and reward program company, raised $16m in Series B funding. Intuit Ventures and Mucker Capital co-led and were joined by Cohen Circle, Samsung Next, Evolution VC and Gaingels. wildfire-corp.com

• Skyfire, an SF-based payments startup for AI agents, raised an additional $1m in strategic funding from Coinbase Ventures and a16z's Crypto Startup Accelerator, bringing the total raised in its seed round to $9.5m. Go deeper 

• Fondo, an SF-based accounting platform for startups, raised $7m in seed funding. Money Forward led and was joined by YC, Motley Fool Ventures, Next Coast Ventures and Twenty Two. tryfondo.com

• Reactiv, a mobile commerce startup, raised $5m in seed funding, per Fortune. Bonfire Ventures led and was joined by Foxe Capital, Anthemis, Daher Capital and Alumni Ventures. reactivapp.com

• J.C. Flowers & Co. agreed to acquire a control stake in Italian insurance brokerage Consulbrokers. conslbrokers.it

• American National, an insurer owned by Brookfield, hired Jefferies to sell a $1.5b private credit portfolio, per Bloomberg. axios.link/4fmtG4m 

• BT (LSE: BT) hired Citigroup to find a buyer for financial services unit Radianz, per the FT. axios.link/3NGMdwA

• MDX Technology, a London-headquartered data collaboration platform, acquired U.K.-based data management startup Schematiq for an undisclosed sum. Go deeper

• Western Union (NYSE: WU) agreed to acquire Dash, a mobile wallet operated by Singapore-based communications technology group Singtel. Go deeper

• First Carolina Bank agreed to acquire BM Technologies, a Banking as a Service fintech, for about $67m. Go deeper

• Slice, an Indian fintech unicorn, completed its merger with North East Small Finance Bank. Go deeper

4. Deals!

• Arjun Sethi, co-founder of VC firm Tribe Capital, is expected to be named co-CEO of crypto exchange Kraken, per The Information. Go deeper

• Madhusudan Kejriwal, a former HSBC executive, will succeed Mark Horsey as TransUnion's CEO for the U.K. and Europe in January. Go deeper

October 28, 2024

1 big thing: CFPB's Chopra says more rules coming