Ballerine brings open source to banks’ risk and identity decision-making

A new startup is launching out of stealth today with $5 million in seed funding as it looks to bring its flavor of open source to risk decision-making software in the finance sector.

Ballerine, as the startup is called, helps banks, fintechs and similar financial organizations automate key decisions around their KYC (know your customer) and KYB (know your business) obligations, including verifying the identity and associated risks of doing business with a particular person or company. The platform ingests data from websites, social networks and company registries (e.g. the SEC), sanctions credit agencies and PEP databases, among other global sources, and integrates various tools to support customer onboarding, underwriting and transaction monitoring.

For example, an online bank will no doubt want to onboard new business customers with minimal friction, but it has to balance this “need for speed” with their duties to adhere to relevant regulations, ensuring that they’re not taking on a business that may be prone to fraudulent activities. When a business customer tries to open an account, they will usually have to provide information such as addresses, legal names, registration numbers and so on. The bank can then connect Ballerine’s API to its internal systems, with Ballerine then running the bank’s customer data through all its own databases to verify the business.

“The goal here is to verify that the business is legitimate and that the people opening the account or applying for the loan are authorized to do so,” Ballerine co-founder and CEO Noam Izhaki explained to TechCrunch. “The bank doesn’t need to integrate or commercialize directly into any of these databases, it all goes through one integration to Ballerine.”

However, Ballerine goes beyond verification to assess the specific risks, too.

“This might involve checking if the business or its owners appear on any government watchlists, or if their behavior patterns match those of known fraudulent actors,” Izhaki continued. 

Other use-cases might include underwriting, where a business is applying to a bank for a loan. Ballerine analyzes the business’s financial data including credit history to establish what risks there may be in lending it money, and can help the bank decide the terms of the loan based on the associated risk factors. This monitoring is continuous, too, even after a business has been onboarded or received a loan as the risk landscape may evolve over time.

Founded in 2022, Ballerine raised a small venture round last year off the back of its participation in Y Combinator’s (YC) summer program. Today sees it announce a $5 million seed investment led by Israel’s Team8, with participation from YC, Vera Equity and a slew of angel backers.

Deployment

Ballerine can be deployed entirely as a back-end product that integrates with a company’s existing systems and data sources, including CRM platforms, fraud detection systems and compliance tools to power their identity-decisioning services.

However, Ballerine also offers a hosted version replete with a front-end for companies that want more of an off-the-shelf product.

Financial institutions currently have several alternative options to achieve what Ballerine promises, including running manual risk-verification processes which is a lengthy, resource-intensive endeavor. Or, they can develop their own semi-automated toolset by plugging together different products, such as Onfido for identify verification and Seon for fraud, something that Izhaki says is fairly common among some big fintech companies.

“This approach is very complex, requires lots of R&D resources and runs the risk of getting you ‘locked in’ with a point solution,” he said. “It also makes it very difficult to optimize these processes, which are critical and expensive.”

Elsewhere, companies might choose proprietary SaaS orchestration tools such as Persona or Alloy.

As an open source project, though, Ballerine gives companies more options as they scale, as it affords them greater control over deployment and feature availability — they can extend the functionality themselves if they wish.

“As companies expand into new lines of business and geographies, they often need new features and integrations that may not be supported by the vendor,” Izhaki said. “With Ballerine, companies can contribute and customize the infrastructure to meet their specific needs, giving them control over mission-critical processes.”

The business of open source

It’s worth noting that while the core Ballerine platform is open source, available on GitHub under an Apache 2.0 license, the commercial entity behind the project has developed proprietary features, integrations and tools as part of its monetization strategy. This includes enterprise-grade hosting, data backup and disaster recovery services, audit logs, personally identifiable information (PII) vaulting and more, though not all of these are currently available.

Indeed, Ballerine recently launched a hosted SaaS incarnation of its product for businesses that want more of an oven-baked product with minimal configuration demands, though this is not publicly available yet.

“We are currently serving clients ‘under the radar’ to ensure the reliability and readiness of our platform for production, before onboarding larger customers and showcasing it on our site,” Izhaki said.