By Tamas Kadar, Founder and CEO of SEON
The COVID-19 pandemic has created a paradigm shift across many industries, with companies migrating to the online space to survive while countries throughout Europe have and continue to enter lockdowns. Now that this change has taken place it’s unlikely that consumer behaviour will revert to the way it was prior to the pandemic, as many customers – even those previously reluctant to adopt an online life – are now comfortable with eCommerce being a staple point of their shopping experience.
This is a hugely positive change for business owners too. By embracing their newfound online capacities there is boundless opportunity to diversify, expand and reach a whole new customer base. But before they do this, they must make sure they have all the necessary security measures in place – especially in our current climate.
The COVID-19 fraud problem
With online transaction volumes remaining higher than before COVID-19, the online space has become fertile ground for fraud. This is because it usually increases in line with online activity, which explains why business owners have seen such an increase in fraudulent activity throughout the pandemic.
Yet, many are struggling to find fraud prevention solutions that allow them to respond to fraud as fast as they did to the pandemic. The truth is the fraud prevention industry is lagging behind in terms of what services should be available for businesses. The pandemic has made it clear that companies need solutions that can be quickly integrated and suit businesses of all sizes, but this is not the case. Most fraud prevention solutions take weeks to integrate and are limited by what sized company they can cater to.
The fraud industry needs to start cultivating an environment where new, innovative solutions can flourish and resolve these pain points. Escaping engrained habits is very much possible for entrepreneurs in the sector and SEON is proof of that. It’s Co-Founder, Bence, and I created a fraud prevention solution that can be integrated into a business’s structure near-immediately and is suitable for businesses of all sizes – a far cry away from what was available before.
Challenging outdated perspectives
But it was not all plain sailing. Bias can often hamper the growth of start-ups outside of traditional hubs such as London and Munich, meaning it is difficult for entrepreneurs and business owners to secure the investment needed in order to scale. With their business’s credibility under question, it is often an uphill battle for investment.
This is especially true for Central Europe. Bence and I found this out the hard way. When getting SEON off the ground, we found that many European investors were sceptical when it came to start-ups from Central-Eastern Europe. Countries from this region are often seen as Eastern bloc countries, playing catch-up with the rest of the continent in terms of living standards and infrastructure.
Still, we see launching SEON in Hungary as not only a blessing, but an advantage when it came to creating a unique product that the fraud prevention industry was desperately in need of. Being outside a typical start-up hub has resulted in the company being more creative, more agile and, contrary to many seed level businesses, more resilient. Due to this innovative approach to fraud prevention and our persistence, SEON did get the attention of investors, and has successfully raised €1.6M in seed funding to date (with endless runway) from PortfoLion, part of the influential OTP group.
Making the most of the talent pool
Starting up in Hungary also greatly reduced our outgoings, allowing us to use the investment we secured to grow. This is because the talent pool in Eastern Europe met the needs of the business. It is naturally abundant in mathematics, computer science and AI-based skills, which has provided us with the human capital necessary to develop and maintain our fraud solution, without having to set up office elsewhere.
In addition, with our product being digital, we could service businesses all over the world from our location. Not only did this mean that we didn’t have to invest in new staff and new offices straight away, it also meant that we were able to generate revenue on a global scale, which has helped us manage costs.
Being one of the few start-ups to be profitable just two years after launch, the funds we generated were then used to set up our new office in London. It was starting up in Hungary though that made this possible.
The change that’s needed
From first-hand experience, Bence and I knew that the fraud prevention industry needed to change, even before businesses found themselves facing new levels of risk during the COVID-19 pandemic. After setting up our own budding crypto exchange, we were repeatedly hit by fraud and could not find a tool that could be implemented fast enough to stop it. Our solution was to build our own – and that is what SEON has become today.
Our advice to entrepreneurs new to any industry is to not lose hope due to your location. Use it to your advantage, be creative and know what gaps are in the market. Our response to any preconceived notions about businesses that come from Central Europe, or operate outside of business hubs, is our story – it shows that you cannot judge a business by its location.