Riskified SWOT Analysis

Riskified's ability to process an ever-increasing volume of transactions is a significant strength. The company achieved a record $39.5 billion in Gross Merchandise Volume (GMV) during the fourth quarter of 2024, marking its highest quarterly performance to date.

This upward trajectory continued throughout the year, with total GMV for 2024 reaching $141.2 billion, representing a robust 15% increase. Such substantial growth underscores the growing confidence merchants place in Riskified's platform to manage and secure their online sales.

Riskified's core strength lies in its sophisticated AI and machine learning, enabling real-time fraud detection and prevention. This technology boosts genuine transaction approvals, reducing chargebacks and lost revenue for e-commerce businesses.

The company exhibits strong financial health, achieving positive Adjusted EBITDA for six consecutive quarters through Q1 2025. Its robust balance sheet, with approximately $357 million in cash and no debt as of Q1 2025, provides a solid foundation for future investments and operational stability.

Riskified demonstrates exceptional client retention, with a 100% renewal rate on its top 20 contracts in Q1 2025, nearly half of which were multi-year agreements. This loyalty is complemented by significant new business acquisition, with enterprise contracts over $1 million annually increasing by over 70% in 2024 compared to 2023.

Strategic expansion into new product categories, such as money transfers and payments, is a key growth driver, with revenue from these areas surging by approximately 90% year-over-year in 2024 and an impressive 190% in Q1 2025. Furthermore, international diversification is evident, with 80% of top new customer acquisitions in Q1 2025 being international, particularly in the APAC and Outer Americas regions.

Riskified has experienced a noticeable dip in its gross profit margin, falling from 55% in the first quarter of 2024 to 49% by the first quarter of 2025. This trend is concerning because it occurred even as gross profit itself held steady, suggesting that the cost of generating each dollar of revenue has gone up.

This compression in the gross margin could signal that Riskified is facing higher operational expenses or is under pressure to lower prices to stay competitive. Either scenario directly impacts how much profit the company makes on every transaction it processes, potentially hindering its ability to reinvest and grow.

Riskified's financial performance in 2024 and early 2025 shows a concerning trend of slowing revenue growth and declining retention rates, with Net Dollar Retention (NDR) at 96% in Q1 2025. The company continues to report GAAP net losses, with $13.9 million in Q1 2025 and $34.92 million for the full year 2024, despite achieving positive adjusted EBITDA. Furthermore, gross profit margin contracted from 55% in Q1 2024 to 49% in Q1 2025, indicating rising costs relative to revenue.

The company is also facing headwinds in specific market segments, notably High-End Fashion, Tickets Travel, and the Home category, with the Home vertical experiencing a year-over-year decline in 2024 and a significant merchant churn in Q3 2024. Riskified's market capitalization, ranging from $500 million to $700 million in late 2024/early 2025, is considerably lower than industry peers, potentially limiting its access to capital and creating a competitive disadvantage.

Riskified is well-positioned to broaden its existing multi-product platform, moving beyond its foundational chargeback guarantee to encompass a wider array of merchant needs. This strategic expansion into new use cases presents a significant growth avenue.

The company's recent financial performance highlights this opportunity, with substantial year-over-year growth in revenue from new products, especially within the money transfer and payments sector. For instance, in Q1 2024, Riskified reported that its newer products, like fraud prevention for money transfers, contributed meaningfully to its top line, showing a strong demand for these expanded services.

The expanding e-commerce fraud prevention market, projected to reach $186.82 billion by 2030 with a 21.45% CAGR, presents a substantial growth avenue for Riskified. As businesses globally grapple with rising fraud losses, estimated at $48 billion annually, there's a clear and growing demand for advanced protective technologies. Riskified is also well-positioned to expand its multi-product offerings beyond chargeback guarantees, tapping into new merchant needs and revenue streams.

Riskified's global reach is a key opportunity, with significant merchant onboarding occurring outside the US, particularly in the APAC region and Outer Americas. Strategic partnerships, such as the one with Ixopay, and achieving AWS Accelerate Partner Status in 2024 further enhance its market penetration and integration capabilities. The company can also leverage advancements in AI to bolster its machine learning models, enabling proactive detection of sophisticated fraud tactics like AI-generated synthetic identities.

Broader economic challenges directly impact e-commerce, which in turn affects Riskified's revenue streams tied to Gross Merchandise Volume (GMV). For instance, a slowdown in consumer spending, a common macroeconomic headwind, can lead to reduced transaction volumes for merchants, consequently lowering the revenue Riskified generates from its services.

Riskified's own financial performance is demonstrably sensitive to these macroeconomic shifts. The company's previous adjustments to its financial guidance, anticipating a slower-than-expected macroeconomic recovery, underscore this vulnerability. This sensitivity means that widespread economic downturns or persistent inflation could significantly dampen the growth prospects for Riskified.

The increasing sophistication of fraud, particularly with AI-powered attacks, presents a significant threat, as fraudsters leverage tools like deepfakes to circumvent identity verification, making traditional methods less effective. The rise of 'friendly fraud,' where legitimate customers dispute charges, adds another layer of complexity, demanding constant adaptation from companies like Riskified to maintain robust defenses without impeding legitimate transactions. This persistent evolution requires continuous investment in advanced detection and prevention technologies.

The e-commerce fraud prevention sector is crowded, with many companies competing for business, impacting pricing power and making it harder to gain significant market share. Broader economic challenges directly impact e-commerce, which in turn affects Riskified's revenue streams tied to Gross Merchandise Volume (GMV). For instance, a slowdown in consumer spending can lead to reduced transaction volumes for merchants, consequently lowering the revenue Riskified generates from its services.

Riskified faced significant customer attrition in 2024, directly impacting revenue, with a notable churn event involving a major merchant in the home goods sector exacerbating this issue. Challenges in improving Net Dollar Retention (NDR) and Annual Dollar Retention (ADR) pose a substantial threat to Riskified's growth trajectory.

The global push for enhanced data privacy, exemplified by regulations like GDPR and CCPA, presents a significant challenge, potentially escalating compliance costs and necessitating substantial overhauls in how data is managed, possibly limiting access to the vast datasets essential for training and refining their AI-powered fraud detection models. For instance, a 2024 report indicated that companies spent an average of $3.15 million on data privacy compliance, a figure likely to rise.