Spade is creating a new transaction enrichment wheel

Instead of modifying decades-old transaction infrastructure, Spade provides better fraud protection by creating a new system. Customers like Sardine, Mercury, Unit and Ramp have improved their fraud models by more than 15% using Spade’s real-time merchant intelligence for the card ecosystem. 

Co-founder and CEO Oban MacTavish called providing clean network data the most significant fintech opportunity today. When he was a consultant, MacTavish said his discussions with financial technology companies showed the problem of poor-quality data to be universal.

How Spade overcame the ancient infrastructure challenge

Companies are navigating industry-standard infrastructure that was built in the 1960s. Every financial card must communicate similarly, either through the original ISO 8583 or ISO 20022. Because those standards are so old and must deliver information within milliseconds, only so much information can be included. 

Instead of trying to enhance legacy infrastructure, Oban MacTavish and Spade are creating a new model.

The limit is at most 45 characters. Within those constraints must go geographical data, merchant name, MCC code and more. That’s why those communications look garbled. There’s also no standardized way to include names and legal information, so anything goes.

“There’s very standardized fields that everyone has to communicate on,” MacTavish said. “Everyone has to agree with these. Things change, and you’re talking about updating incredibly ancient systems. 

“That’s the beauty of what we’ve done. We’ve run a parallel pipe of information so that when the card issuer wants to know more about this transaction, they go elsewhere rather than relying on this very archaic piece of infrastructure.”

Changing something so entrenched would be a monumental challenge, so MacTavish set out to create a new one. Spade’s network covers virtually every American business.

Taking a different perspective produced results

MacTavish said the process began with viewing the problem differently. Instead of focusing on cleaning data, Spade prioritizes matching data with merchants.

Decisioning must run through every stop on a network within 50 to 100 milliseconds. MacTavish, the combination of several excellent data partnerships, vendors, and proprietary technology, makes it possible.

He’s excited about doing it better and faster because that creates opportunities to deliver added value by helping banks and merchants understand where their customers spend. That provides actionable insights and combats fraud.

“I’d love to see a world where we’re scraping the 10 to 20 millisecond at a p99 level or p99.9 level because that just gives us more time to fill that back up with some very interesting, more sophisticated techniques or insights about a business that are generated at the time of enrichment,” MacTavish said.

Better data fidelity and customer insights allow fraud detection systems to be more permissive on approvals and reduce loyalty-destroying false positives. 

“What we’ve seen is that by providing more granular merchant data to the bank, they can reduce the likelihood of these things happening,” MacTavish explained. “They can trust that they’re better at stopping fraud.”

Courting investors in today’s challenging climate

Spade, whose client roster includes many great fintech names recently raised a $10M Series A round led by Flourish Ventures. Gradient Ventures, Y Combinator, Dash Fund and Everywhere Ventures re-upped, as did Andreessen Horowitz.

“This problem hasn’t been solved for lack of trying, but Spade is truly differentiated on both depth of data powering their enrichment and speed – in a payment transaction authorization window, every millisecond counts,” said Flourish Ventures partner Kabir Kumar. “Over the last year, Spade has demonstrated it can be a critical part of the answer to card fraud, disputes and chargebacks for a range of companies from large-scale global fintechs to banks.”

Spade earned the support in a much more stringent environment. MacTavish said investors’ bars are much higher, and they expect more. In exchange, the right partners provide critical support.

“Where you are going with revenue and growth still matters, but people are still taking a bet that you’re going to be a generational outcome,” MacTavish said. “Our conversations with Flourish showed our alignment between the things around fintech infrastructure, the deep understanding they’ve seen before. (With a) SaaS company, they realized that building infrastructure is a little different. It takes time. 

“Not only do we have an alignment of the thesis, but they’re also just fundamentally good people. I think when you’re building a relationship with somebody, and you’re going to spend for 10-plus years as an investor, the goal should be that you want to connect with them deeply, you want them to share your values, you want them to be the kind of people you would want to have around and be deeply involved in your company for a very long time.”

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  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.