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Insight Bite
CLEAR, EXPERT, INFORMED SECTOR FOCUSED NEWS.

RICHARD BAKER
Managing Partner
The rise of digital payments has created new opportunities for financial fraud, stoking demand for software that can detect suspicious payment activity.
Nasdaq is cementing its hold on this growing market with the acquisition of Newfoundland-based Verafin, which provides a cloud-based software platform helping more than 2,000 financial institutions to detect, investigate, and report money laundering and fraud.
Following regulatory crackdowns over the last decade, the market for software that can serve compliance and surveillance needs has heated up, with stringent requirements for AML and compliance being introduced just as new technologies like process automation and machine learning have become available for automating investigations and pooling transaction data.
At the same time, the rise of commission-free trading has led to falling revenues for exchanges, making the growing market of financial fraud detection software an attractive area for expansion.
“The problem of detecting money laundering and fraud hasn’t been solved very well yet,” said Nasdaq SVP of market technology Valerie Bannert-Thurner in an interview. “With our acquisition, we are doubling down on our belief that this is an area that is being disrupted and where we can have a big impact.”
Under Nasdaq, Verafin’s technology will be made available to a network of over 250 banks, exchanges, broker-dealers and regulatory authorities that already use the firm’s existing trade surveillance tools.
Prior to the acquisition, Verafin snubbed several previous suitors, including private equity buyers and strategic players. This suggests widespread demand for financial fraud detection software, which is benefitting not only from regulatory tailwinds, but an ever-growing volume of online payments – particularly in the wake of the pandemic.
As volumes of online payments continue to increase, and criminals dream up more sophisticated ways of moving funds, the financial fraud detection software market is only likely to grow, making it likely that we will soon see more strategic partnerships and acquisitions in this sector.
Richard Baker | Managing Partner