How Novo achieves world-class fraud prevention and chargeback performance with Sardine

Like any fintech company, Novo knows that onboarding and user activation is critical to driving customer acquisition and retention. Today Novo has over 250,000 small business customers and has processed billions in transactions. But for Novo, trust is one of their key selling points.

The trade off between great user experience and great fraud performance is a delicate balance. Too much friction and you damage growth, too little and you damage user trust. Despite meeting fintech industry-standard performance, they believed that their customers, being small businesses, deserved higher levels of security and fraud protection. 

Today, Novo has a “best in class” chargeback rate on debit cards. The company increased protection capabilities past industry standard controls to reduce unauthorized disputes by more than 90%, helping to ensure the highest levels of fraud prevention on customer cards all while delivering a stellar user experience. We talked to Matt Vega, Director of Fraud at Novo, to learn how the flywheel of great user experience and user trust has been key to their success.

About Novo

Novo is a comprehensive financial platform solution for small businesses. Businesses rely on the debit card to manage operational expenses, and Novo provides perks like getting Stripe payments 95% faster. A multi-time honoree of the Inc. 5000 list of fastest growing companies and Forbes Fintech 50, Novo has served more than 250,000 small businesses, and processed billions of dollars in transactions. 

Better User Experience: Recovering 84% of “blocked” transactions.

Before working with Sardine, Novo met fintech industry standard volumes of disputes and chargeback-related fraud losses. To help protect their customers, Novo increased 2FA challenges and card friction, which impacted false positive rates and blocked transactions. 

The status quo was that customers who experienced a false positive event had to contact customer support, creating time and cost constraints for Novo and its small business customers. 

This is the default for much of the industry today. But Novo wanted to do better.

Sardine recommended adding friction, such as SMS approval or OTP verification, to potentially fraudulent card transactions. This allowed legitimate users to immediately confirm valid transactions, rather than facing blocked transactions or authorizations with no recourse. 

Novo now recovers 84% of blocked transactions by prompting a 2FA/OTP instead of declining.

The performance unlock: 90% reduction in chargebacks monitoring user behavior across every touchpoint.

Today Novo uses Sardine’s device intelligence and behavior biometrics at account opening, account funding and now for AML transaction monitoring and case management. Critically, the Sardine fraud and compliance platform is able to help spot user activity outside of transactions or onboarding that is both good and bad. As Matt Vega put it:

Novo achieved a best-in-class chargeback rate on debit cards (beating industry benchmarks) by taking a comprehensive approach to user behavior screening and fraud detection

Solving fraud is hard enough, tools should make it easier

Life for the fraud squad has historically been a patchwork of providers and data sources who don’t play well together. Fraud analysts need a tool that is responsive and can move quickly when new threats or attacks occur. As Matt put it:

Matt was a judge of a recent Sardine hackathon and helped vote for a new feature, designed to make the life of fraud analysts easier. Sardine’s ⚡ Auto Disputes feature helps pull together compelling evidence for a dispute of a chargeback. This can often take time and energy for issuers and merchants. Sardine ships 100s of new features every month, always in partnership.

How Novo gets the most out of Sardine

As Novo continues to grow exponentially, they know the key to sustainability is always ensuring fraud rates are low with growth. Teams like Novo have sophisticated in-house AI and Machine Learning talent who want to get access to the data, machine learned features and models to enhance their own work. 

Novo has built an in-house data engineering capability with expertise in fraud. As their head of data engineering explains:

Sardine is by data engineers for data engineers. While Novo uses the entire Sardine platform, they’re also able to benefit from the machine learning feature store, to train their own in-house ML models.

How AI is changing the financial risk spectrum

Matt said during an interview

AI can also be positive.

Both Novo and Sardine are machine learning natives. We’ve demonstrated the ability to use device intelligence and behavior biometrics to detect deep fakes consistently, because we’re looking for non-human behavior and device usage.

What’s next for Novo

Small businesses are the lifeblood of the US economy. It’s a cliche for a reason, it remains true and as small businesses, freelancers and fractional talents increasingly go online, and deal with high risk e-commerce and marketplace payments, Novo has its work cut out to continue to grow and achieve world class performance.

There’s no room for complacency. 

The way to continue to find the delicate balance is partnership. Yes, another cliche. But one that exists for a reason. It’s critical to reach outside the walls of your organization to improve performance and grow.

If you want to reach out, we’re here. Contact us to learn more. 

Disclosure

Novo is a fintech company; not a bank. Deposit account services provided by Middlesex Federal Savings, F.A., Member FDIC.  Physical and virtual debit cards issued by Patriot Bank, N.A., Member FDIC; pursuant to licenses from Mastercard® International Incorporated.  Mastercard can be used everywhere Mastercard is accepted.  Mastercard is a registered trademark of Mastercard International Incorporated.

Merchant Cash Advance products and services are offered by Novo Funding LLC (“Novo Funding”), a wholly owned subsidiary of Novo. Merchant Cash Advances require a Novo checking account.

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