GM Financial, the financial services arm of General Motors that offers auto loan financing and leases to customers, extended its partnership with Spring Labs as part of a $23 million Series A investment in the technology startup announced Wednesday morning.
Spring Labs, founded in 2017, is building what it calls the Spring Protocol, a set of products that will start to be rolled out in the next year aimed at helping financial services companies with identity verification and fraud prevention. Its products are built on a combination of a blockchain and anonymization technologies that use advanced cryptography.
“We think it can be a complement for identity verification for the entire financial services industry... but we are also actively in a dialogue about how our technology can be used away from financial services as well,” Spring Labs CEO Adam Jiwan said. “It has pretty broad applicability of having an information exchange that is highly secure but also respectful of consumer privacy considerations.”
One application is in the auto industry, where the need for innovative fraud prevention methods is rapidly becoming more urgent. Auto financing fraud caused primarily by customers making purchases under fake identities increased fivefold from 2011 to 2018, costing the industry more than $4 billion last year.
GM is one of several major automakers, including BMW, Honda, Ford and Groupe Renault, that are members of the Mobility Open Blockchain Initiative, which launched in May 2018 to examine new applications of blockchain.
“GM Financial is excited to deepen its relationship with Spring Labs, and we look forward to the launch of the Spring products,” Mike Kanarios, Chief Strategy Officer at GM Financial, said in a statement. “We believe they have the potential to better protect our customers from fraudulent activity.”
Jiwan said Spring Labs will use the $23 million it raised in this round to expand its team from 35 to 50 and help launch its first five products in the next year. GreatPoint Ventures led the round of financing, and other investors included Michael Novogratz’s Galaxy Digital, The Pritzker Group and Multicoin Capital.
“GM is just one of our 25 leading financial institution partners, and our pitch to all of them has been the same, which is we’re going to allow you do what you do in ordinary course better, cheaper and more securely and more accurately,” Jiwan said. “Fraud is a big business, and developing technologies that really can alter the economics of fraud and therefore can dramatically lower fraud costs is one that all financial institutions are quite interested in.”