Casap Raises Record $25 Million to Fight First-Party Payment Fraud using AI

The Silent Epidemic: AI Startup Secures Record $25M to Combat the 'Perfect Crime' of First-Party Fraud

SAN FRANCISCO — Casap, an artificial intelligence startup focused on payment dispute resolution, has secured $25 million in Series A funding led by Emergence Capital, with participation from Lightspeed Venture Partners, Primary Venture Partners, SoFi, and others. The investment brings the company's total funding to $33.5 million—setting a new record for venture investment in the payment disputes category.

"We're essentially building a fraud detection system for the perfect crime," explained an executive close to the company. "When legitimate consumers intentionally dispute valid charges to keep products without paying, it creates a nearly undetectable form of theft that traditional systems can't catch."

The Shadow Economy of "Friendly Fraud"

First-party fraud—sometimes euphemistically called "friendly fraud"—now accounts for a staggering 30-50% of total fraud losses across financial institutions. Unlike the sophisticated hacking schemes that dominate headlines, this fraud vector involves everyday consumers falsely claiming they never received packages or services they actually did.

The numbers are sobering. Consumer losses to all fraud climbed to $12.5 billion in 2024—a 25% year-over-year increase, according to Federal Trade Commission data. Meanwhile, LexisNexis reports that first-party fraud rose to 36% of all scams in 2024, more than doubling year-over-year.

"It's the perfect storm of economic pressure, ease of disputing charges online, and limited consequences," noted a fraud prevention specialist who has tracked the trend for over a decade. "For financial institutions, it's death by a thousand cuts."

Artificial Intelligence as Financial Detective

Casap's platform approaches the problem differently than legacy systems. Rather than relying on rigid rules or manual reviews, their technology deploys AI agents to analyze evidence, predict dispute outcomes, and automate essential actions across the entire dispute lifecycle—from initial intake to chargeback filing and customer communication.

The system's crown jewel is a proprietary fraud score that flags suspicious consumers and merchants proactively—essentially functioning as what industry observers call a "FICO for friendly fraud."

Early results appear promising. Chartway Federal Credit Union and MidSouth Community Federal Credit Union—among Casap's first clients—report over 51% reduction in fraud losses, positive return on investment within weeks, and the ability to handle increased case volumes without additional staff.

David vs. Financial Goliaths

The payment disputes arena is dominated by entrenched giants. Card networks like Visa operate Visa Resolve Online, through which over 80% of Visa chargeback cases flow. Mastercard leverages Ethoca Alerts, which provides real-time dispute notifications that reduce chargebacks by 30–40%.

Meanwhile, core processor vendors like Fiserv and FIS offer integrated dispute management systems that banks have relied on for decades.

"The incumbents have massive distribution advantages and existing relationships," commented a banking technology analyst. "But they're built on legacy infrastructure that's increasingly ill-suited for the AI era. That's the opening Casap is exploiting."

The Human Cost Behind the Numbers

For financial institutions, the consequences of first-party fraud extend beyond balance sheets. Credit union employees describe overwhelmed fraud departments drowning in manual reviews while racing against regulatory deadlines like Regulation E's 90-day dispute window.

"Before implementing AI-driven systems, we had teams working nights and weekends just to keep up with dispute volume," revealed an operations leader at a mid-sized credit union. "The emotional toll on staff was immense, especially knowing that many disputes were likely fraudulent but impossible to prove."

On the consumer side, legitimate disputes face longer resolution times as systems buckle under the weight of fraudulent claims—creating a vicious cycle that erodes trust in financial institutions.

Building a Data Moat in Contested Waters

Despite promising early traction, Casap faces significant headwinds. Integration with legacy core banking systems remains complex and time-consuming. Incumbent providers could accelerate their own AI enhancements or bundle similar features at marginal cost.

Perhaps most critically, financial institutions require explainable AI to satisfy regulators and audit teams—balancing model sophistication with transparency remains a delicate challenge.

"The key differentiator will be data," observed a fintech venture capitalist not involved in the funding round. "Whoever builds the largest dataset of dispute outcomes and fraud patterns will create an insurmountable moat. That's the race happening right now."

Beyond Disputes: The Broader AI Banking Revolution

Casap's ambitions extend beyond dispute resolution. The fresh funding will support expansion of its AI decision-making capabilities, hiring, and development of broader use cases to eliminate friction across the payments lifecycle.

"We're seeing customers ask to 'Casap' additional post-transaction workflows," noted a source familiar with the company's roadmap. "That suggests the potential for a much larger platform play beyond the initial dispute focus."

The Investment Outlook: Risk and Reward in Fintech Infrastructure

For investors eyeing the payment dispute resolution space, Casap represents both opportunity and uncertainty. The global fraud detection and prevention market is projected to grow from approximately $32 billion in 2025 to between $65.7 billion and $246.16 billion by 2030-2032, depending on which market research firm's estimates you trust.

Analysts suggest that specialized AI solutions targeting specific financial workflows could command premium valuations compared to general-purpose enterprise software, particularly if they demonstrate clear return on investment metrics like Casap's early case studies.

However, investment professionals caution that early enthusiasm should be tempered by questions about customer acquisition costs, sales cycles, and competitive dynamics. Casap must rapidly amass dispute data to continuously train and improve AI models before incumbents can replicate their approach.

Financial technology ventures focusing on back-office automation typically require significant capital to reach scale—and with $33.5 million raised to date, Casap will likely need additional funding rounds to fully realize its vision.

As always, past performance doesn't guarantee future results, and investors should consult financial advisors for personalized guidance before pursuing investments in private companies or adjacent public equities in the fraud prevention space.