Credit card fraud is hardly new, but the nature of that fraud is undergoing a major shift. In the past, nearly all scams were carried out by third party bad guys, but today it is cardholders themselves who account for nearly a third of fraudulent transactions. This shift has been driven by AI tools that make it easier for people to dispute charges, but also by social media groups that share tips for carrying out fraud in the guise of getting “free stuff.”
“It comes back to people thinking ‘this is a victimless crime, banks have a lot of money and I need money’, so people tell what they think are white lies,” says Shanthi Shanmugam, the CEO and co-founder of a startup called Casap whose AI suite helps banks and card companies handle disputes and chargebacks.
On Wednesday, Casap announced a $56 million Series B funding round led by Base10 Partners, which brings its total funding to $90 million since the startup launched in 2023. The company, which declined to disclose a valuation, also announced that financial giants Synchrony and Experian had joined the latest round as strategic investors.
Like so many startups these days, Casap’s secret sauce lies in its AI, which was trained using various large models, but has a so-called harness designed especially for dispute resolutions.
The reason its service is in demand is partly due to consumer protection laws, which do a good job protecting people from third party credit card fraud, but also place a high burden on banks and card companies when it comes to rejecting dishonest claims from cardholders.
“When you look at the rules that govern these disputes, they are written in a way that almost assumes that no one lies,” says Shanmugam.
This has led many financial institutions to simply agree to resolve all disputes in a customer’s favor if they are below a certain threshold. This is typically around $30, but Shanmugam says that in some situations, that cut-off can be much higher because banks are reluctant to devote the time and expense to an investigation.
Casap says its AI tools have significantly changed that calculation, and led to notable cost savings for card issuers. According to the startup, Casap customers have reduced first party fraud losses by as much as 51%, and boosted their chargeback win rate to 96% compared to the 60% industry average.
Shanmugam, though, touts Casap’s capacity to reduce the time it takes to resolve a dispute to just 8 days on average, which she says compares to traditional resolution methods that can take as long as 90 days. She adds that there is still the proverbial human in the review loop, but that the task they must address in each case is far more streamlined and less time intensive—often taking only 1-2 minutes to clear up.
Casap does not disclose the full range of indicators it uses to determine if a customer might be lying about a purchase they made, but Shanmugam said they include criteria like the physical location of a credit card and various spending patterns.
Casap, whose name is meant to convey “get your Case done ASAP,” has made its name handling first party fraud claims but intends to use the new funding to push into adjacent parts of bank and credit card companies’ back offices. That includes handling customer complaints and also collections services.
Prior to launching Casap along with Chime vet Saisi Peter, Shanmugam worked as a product manager at a number of prominent Silicon Valley companies, including Robinhood, Meta and Salesforce. The company’s other investors include Lightspeed Venture Partners, Emergence and Primary.