How Does Riskified Company Work?

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How does Riskified protect online businesses?

E-commerce fraud is a massive problem, costing merchants billions annually. In this environment, Riskified offers an AI-powered solution to help businesses approve more good orders and prevent fraud.

Riskified's platform uses artificial intelligence to analyze transactions in real-time, distinguishing legitimate customers from fraudsters. This allows online merchants to reduce losses from fraud and chargebacks, while also minimizing the number of good customers who are mistakenly blocked.

Riskified's core functionality revolves around its AI engine, which analyzes a vast array of data points for each transaction. This includes information about the customer, the device used, payment details, and historical transaction data. By processing over $140 billion in annual GMV, the company continuously refines its fraud detection capabilities. This sophisticated analysis enables merchants to approve more orders, thereby increasing revenue and customer satisfaction. For businesses looking to understand how their offerings fit into the market, a Riskified BCG Matrix analysis can be insightful.

Riskified's core operations revolve around its AI-powered platform designed for e-commerce fraud prevention and risk intelligence. The company's primary value proposition is to help online businesses reduce fraudulent transactions and chargebacks while simultaneously boosting approval rates for legitimate orders. This is achieved through advanced machine learning models that analyze transaction data and online interactions, utilizing vast datasets to make real-time decisions on transaction legitimacy.

AI-Powered Fraud Prevention

Riskified employs sophisticated machine learning models to analyze hundreds of millions of data points. These models assess transaction data and online interactions in real-time to determine the legitimacy of each order.

Chargeback Guarantee Model

The flagship Chargeback Guarantee product means Riskified financially backs approved orders. If a transaction approved by Riskified results in a fraud chargeback, the merchant is reimbursed the full amount, significantly reducing merchant risk.

Expanded Product Portfolio

Beyond its core guarantee, Riskified offers Adaptive Checkout to optimize conversion rates by tailoring checkout flows based on risk. Policy Protect, introduced in 2024, allows merchants to manage customer-facing policies to combat abuse.

Seamless Integration and Operations

Riskified integrates with major e-commerce platforms like Shopify and Magento, and offers API solutions for custom needs. Their fraud review process is invisible to customers, occurring post-gateway authorization for a frictionless experience.

Riskified's operational processes are fundamentally digital, with a strong emphasis on technology development and direct sales. The company's platform integrates smoothly with popular e-commerce systems, ensuring that the fraud review process happens after gateway authorization and remains invisible to the end customer, thereby preserving a positive shopping experience. This approach, combined with strategic partnerships, such as with AWS Marketplace, helps expand its reach within the e-commerce ecosystem. What truly sets Riskified apart is its combination of AI-driven scale with human expertise, which enhances the efficiency of fraud teams. This unique blend, coupled with its commitment to a 100% chargeback guarantee, directly translates into tangible benefits for merchants, including reduced financial losses from fraud, improved authorization rates leading to increased sales, and enhanced customer satisfaction due to fewer mistaken declines. Understanding the Target Market of Riskified is crucial to appreciating how these operations serve specific business needs.

Key Benefits of Riskified's Approach

Riskified's unique operational model provides significant advantages for online retailers.

• Reduced financial losses from fraudulent transactions.
• Improved authorization rates, leading to increased sales revenue.
• Enhanced customer satisfaction by minimizing false declines.
• Streamlined chargeback management and revenue recovery processes.

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Riskified's core business revolves around a chargeback guarantee model, where merchants pay a fee for each transaction that Riskified approves and guarantees. This performance-based approach aligns the company's success directly with that of its merchant clients.

Chargeback Guarantee Model

Merchants pay a fee for each transaction approved and guaranteed by Riskified. This 'pay-for-performance' structure ensures Riskified is compensated only for successful outcomes, directly benefiting the merchant.

Revenue Growth

In Q1 2025, Riskified reported revenue of $82.4 million, an 8% increase year-over-year. For the full year 2024, annual revenue reached $327.52 million, a 10.05% growth from 2023.

Diversified Product Offerings

Revenue from products beyond the core chargeback guarantee saw substantial growth, increasing by approximately 90% year-over-year in 2024. These newer solutions now represent about 10% of total new bookings.

New Product Revenue Surge

The Money Transfer & Payments sector experienced a remarkable 90% year-over-year increase in new product revenue in Q1 2025. This contributed to an overall 190% surge in new product revenue compared to the previous year.

Tiered Pricing and Customization

Monetization strategies include tiered pricing based on annual sales volume and specific merchant requirements. While exact pricing is customized, plans like 'Shop Protection Plan' and 'Never Decline Plan' have fee structures ranging from 0.7% to 2.4% for certain order types.

Profitability and Margin Trends

The company has maintained positive Adjusted EBITDA for six consecutive quarters, reporting $1.3 million in Q1 2025. Full-year 2025 Adjusted EBITDA is projected between $18 million and $26 million.

Riskified's approach to revenue generation is multifaceted, extending beyond its foundational chargeback protection. The company's strategic expansion into new product categories, such as Adaptive Checkout, Policy Protect, and Dispute Resolve, is a key driver of its growth. This diversification not only broadens its market appeal but also enhances its value proposition for e-commerce businesses seeking comprehensive fraud prevention and operational efficiency. Understanding the Marketing Strategy of Riskified provides further insight into how these revenue streams are cultivated and expanded.

Key Financial and Operational Metrics

Riskified's financial performance in early 2025 indicates continued growth and a focus on profitability. The company's ability to maintain positive Adjusted EBITDA for an extended period highlights its operational efficiency and sustainable business model.

• Q1 2025 Revenue: $82.4 million (8% year-over-year increase)
• Full Year 2024 Revenue: $327.52 million (10.05% growth over 2023)
• Projected Full Year 2025 Revenue: $333 million to $346 million (1.7% to 5.6% growth)
• New Product Revenue Growth (2024): Approximately 90% year-over-year
• Q1 2025 Adjusted EBITDA: $1.3 million
• Projected Full Year 2025 Adjusted EBITDA: $18 million to $26 million
• Q1 2025 Gross Profit: $40.5 million (flat year-over-year)
• Q1 2025 Gross Profit Margin: 49% (down from 55% in Q1 2024)

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Riskified has consistently advanced its AI-powered platform, introducing new capabilities like 'Policy Decisions' in June 2024 to combat sophisticated fraud. The company also launched 'Auth Rate Enhance' in March 2024 to boost e-commerce revenue and expanded its 'Dispute Resolve' platform in January 2024 for better chargeback management. These moves highlight Riskified's commitment to evolving fraud prevention solutions.

AI-Powered Platform Enhancements

Riskified continues to innovate its AI platform, with new features like 'Policy Decisions' launched in June 2024. This aims to address increasingly complex fraud and abusive behaviors faced by online merchants.

Revenue and Conversion Optimization

The introduction of 'Auth Rate Enhance' in March 2024 focuses on improving transaction approval rates. This directly contributes to maximizing e-commerce revenues by optimizing how transactions are processed with card issuers.

Streamlined Chargeback Management

Further enhancing its value proposition, Riskified expanded its 'Dispute Resolve' platform in January 2024. This move simplifies the process for merchants to manage and resolve chargebacks effectively.

Financial Performance and Retention

Riskified achieved positive Adjusted EBITDA for six consecutive quarters, reporting $1.3 million in Q1 2025, with projections for $18 million to $26 million in 2025. Revenue grew 8% year-over-year in Q1 2025 to $82.4 million, exceeding 2024 guidance with $327.5 million.

Competitive Advantages and Market Position

Riskified's competitive edge stems from its advanced AI platform, which analyzes vast transaction data for real-time decisions. Its pioneering 100% chargeback guarantee transfers financial risk to merchants, ensuring cost predictability and aligning incentives. This approach, detailed further in a Brief History of Riskified, has solidified its relationships with leading e-commerce brands.

• Technology leadership in AI-driven fraud prevention.
• Unique business model offering a 100% chargeback guarantee.
• Extensive data network from over a billion prior transactions.
• Strong relationships with global e-commerce leaders.
• Recognition as one of CNBC's World's Top Fintech Companies in 2024.

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Riskified operates within a dynamic and expanding e-commerce fraud detection market, projected to reach $73.96 billion in 2025. The company is a significant player, competing with other notable firms in the space. Its unique chargeback guarantee and AI-driven platform are key differentiators, contributing to high customer retention. Expansion into international markets is also a notable aspect of its current strategy.

Industry Position

Riskified is a prominent entity in the e-commerce fraud prevention sector, a market expected to grow substantially. The company's competitive edge is bolstered by its 100% chargeback guarantee and advanced AI technology.

Key Differentiators

The company's commitment to a 100% chargeback guarantee and its AI-powered Riskified platform are central to its market appeal. This approach has led to a 100% renewal rate among its top contracts in Q1 2025.

Geographic Expansion

Riskified is experiencing significant international growth, with a majority of its new clients in Q1 2025 based outside the United States. This indicates a successful expansion into regions like APAC and Outer Americas.

Competitive Landscape

The company operates in a competitive environment with other established fraud prevention providers. Maintaining its market share requires continuous innovation and adaptation to evolving fraud tactics.

Despite its strong market standing, Riskified faces several challenges. Macroeconomic conditions, including high yields and potential inflation, could affect consumer spending and transaction volumes. The company has also seen a decrease in its gross profit margin, falling from 55% in Q1 2024 to 49% in Q1 2025, indicating margin pressure. Intense competition and the increasing sophistication of fraud, often amplified by generative AI and Dark Web activities, pose ongoing threats. Workforce restructuring may also introduce short-term operational disruptions and impact employee morale. Additionally, while the chargeback guarantee is a selling point, there are suggestions it might contribute to a higher rate of false declines, potentially affecting merchant conversion rates.

Risks and Challenges

Riskified navigates a landscape marked by economic uncertainties, competitive pressures, and the evolving nature of online fraud. Managing these factors is crucial for sustained success.

• Macroeconomic factors impacting consumer spending.
• Margin pressure, as seen in the gross profit margin decline.
• Intensifying competition and sophisticated fraud methods.
• Potential operational impacts from workforce restructuring.
• Concerns regarding false declines associated with the chargeback guarantee.

Looking ahead, Riskified is focused on profitable growth and strategic expansion. The company has reaffirmed its 2025 revenue guidance, expecting between $333 million and $346 million, with Adjusted EBITDA projected between $18 million and $26 million. Key initiatives include further geographical expansion into promising e-commerce markets, diversifying its product offerings to combat various forms of abuse beyond payment fraud, and forging strategic partnerships to enhance its integration within the e-commerce ecosystem. The company is also prioritizing the enhancement of its technology platform and the expansion of its sales and marketing operations. This focus on innovation and operational efficiency is designed to ensure continued revenue generation and long-term shareholder value, building on the Growth Strategy of Riskified.

Future Outlook and Strategy

The company's future trajectory is shaped by its commitment to strategic growth, technological advancement, and market expansion. Riskified aims to leverage its platform to capture greater market share and deliver value.

• Continued geographical expansion into high-growth e-commerce markets.
• Product diversification to address policy abuse and account protection.
• Enhancement of the AI technology platform and sales efforts.
• Focus on profitable growth and operational efficiency.

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