Why E-commerce Protection ‘Flips the Script’ in Retail

The cost of fraud is increasing in the e-commerce space — and enterprise fraud prevention solutions such as Kount are focused on combatting it.

A report by Lexis Nexis that surveyed 801 retail and e-commerce risk and fraud executives in the U.S. and Canada prior to and during the coronavirus shutdown found that fraud has cost U.S. merchants more in 2020 than it did last year — and that the average number of attempted and successful fraud attacks has also increased, which feels particularly high-risk at a time when much of consumers’ shopping has shifted online due to COVID-19. Its report also revealed that every $1 of fraud now costs U.S. retailers $3.36 compared with $3.13 in 2019.

And solutions such as Kount come in to pour oil on retail’s troubled waters. The firm’s fraud prevention solution began as a panacea to e-commerce merchants facing fraud and large losses and progressed into a data-driven, AI-operated powerhouse. Signaling the firm’s ongoing growth and reach in retail, Kount recently partnered with FreedomPay to form a fully integrated identity trust solution that will allow for international expansion.

Here, Brad Wiskirchen, chief executive officer of Kount, talks to WWD about its solution, current market dynamics and what’s ahead in retail.

WWD: What was the genesis of Kount? What’s the story behind the brand?

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Brad Wiskirchen: Kount is the first purpose-built, enterprise fraud prevention solution. Kount was founded out of necessity. In the early Aughts, e-commerce merchants were struggling with fraud, racking up large losses, and under constant threat of penalties from credit card companies for excessive chargebacks. As the legend goes, the plans for Kount were sketched out on the back of a napkin over a sushi lunch. In 2007, Kount launched in Boise, Idaho. Innovation drives Kount, and as the leader in digital fraud prevention, the company holds 39 patents with nine pending. The company received an $80 million investment from CVC Capital Partners in 2016, which contributed to the company’s growth. Kount expanded into its global headquarters in the heart of downtown Boise in 2019.

WWD: What is the current state of identity trust in retail? What are the dynamics? How is it evolving?

B.W.: Identity trust and fraud prevention go hand in hand and are critical in today’s retail environment. Digital transformation has accelerated years’ worth of growth in a matter of months in 2020. More consumers are doing more business online, and more retailers, especially those that historically relied on brick-and-mortar sales, are turning to digital experiences. But it’s key to remember that a poor customer journey turns away good customers, whereas a seamless experience that’s free from fraud encourages repeat visits and builds brand loyalty.

Digital identity trust establishes the level of trust or risk behind any interaction at any point in that journey. It’s easy to look at fraud prevention as simply a matter of protecting against losses. But effective e-commerce protection flips the script. If a retailer can determine high trust levels, they’re likely engaged with a good customer. They should greet that shopper with a VIP experience. A low-trust, high-risk shopper could indicate fraud, which retailers can block or challenge with step-up authentication. With Kount, retailers can determine identity trust in real time at any step in the customer journey.

Brad Wiskirchen, ceo of Kount. Image courtesy of Kount. 

WWD: Let’s talk about the AI-powered technology behind Kount. How is it differentiated in the market? Why is Kount’s offering unique?

B.W.: Kount’s AI simulates an experienced fraud analyst by weighing the risk of fraud against the value of the customer but on a faster and more scalable basis. Kount’s AI uniquely combines unsupervised and supervised machine learning, which allows businesses to detect and prevent new and emerging fraud as well as learn from historical outcomes.

Kount’s AI gives each transaction a safety rating called Omniscore, which merchants can use to automate decisions, increase approval rates, eliminate manual reviews, and deliver personalized customer experiences. The result is fewer false positives and more good transactions that generate revenue. There are many characteristics of Kount that make the offering unique, but one of the biggest differentiators is Kount’s breadth and depth of data. Kount’s AI links the Identity Trust Global Network, which provides signal data from 32 billion annual interactions from around the globe, more than 75 industries, and more than 50 payment processors and card networks.

WWD: What changes has Kount seen across brands during the pandemic? Have brands’ needs changed?

B.W.: The coronavirus pandemic changed consumer shopping patterns almost overnight, with dramatic changes in transaction volumes for companies engaged in e-commerce. Some industries saw big drops in transaction volume, which made fraud activity all the more. Other industries — like vitamins and supplements, home office equipment, electronics and crafts — saw huge jumps in e-commerce transaction volume. While the outcome is different, both situations created unique fraud prevention and identity trust needs.

Meanwhile, e-commerce models also changed overnight. Demand jumped for buy online, pick up in store, curbside pickup, and other similar models. As consumers adapt to mobile order-ahead and BOPIS, that shift is likely to be permanent. This means brands need to further protect even more aspects of the customer journey and establish identity trust quickly and accurately to continue to scale.

WWD: How is the consumer journey evolving, and what role does Kount play in that journey?

B.W.: Merchants have long grown accustomed to interacting with their customers face to face. But as a result of the pandemic, consumer buying habits have changed, with many pivoting to the digital world for almost any kind of purchase.

Kount plays a role in two sides of this. On one side, new channels and selling models require fraud prevention. Businesses that are new to e-commerce may be caught off-guard at the proliferation of fraud. On the other side, merchants must adapt to offer the same personalized customer experience they’d give if they were making a sale face to face. To do that, they must have access to enormous amounts of data and be able to make sense of that data. Kount holds the key to the actionable customer insights that will be a requirement for those hoping to excel in the digital space in 2021 and beyond.

WWD: What will Kount tackle next? What does the future hold?

B.W.: It’s increasingly clear that fraud prevention is no longer about the point of payment or login but, rather, a full customer journey and experience. Businesses that adopt a strategic mindset can protect and elevate the entire customer interaction. A personalized digital experience, informed by actionable customer insights, is important, as consumers choose the brands that cater to their interests and buying needs. Data is an essential foundation that helps businesses gain a better understanding of the way consumers behave online. Data gives businesses the keys to deliver targeted customer experiences. While Kount continues to make advancements in the industry, pushing the limit on what’s possible, our core mission will always be to do whatever it takes to protect our customers from digital fraud.

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