Kount - Financial Fraud Detection Solutions/Service Company

The Quintessential Technology Source for Corporate Financial Professionals

Kount: Are You Tracking the ROI of Fraud Protection?

CIO VendorBradley J. Wiskirchen, CEO If you are the leader of the finance function in your organization, there are plenty of things that can keep you awake at night. Your organization’s financial performance – including all the risks and variables that come with it – is your responsibility and you must correct, mitigate and explain it. And if these day-to-day accountabilities aren’t enough, you and your team have to keep up with the ever-expanding threat of fraud and its impact on your bottom line.

As criminals gain more sophistication and new vulnerabilities are exposed, many organizations consider fraud a cost of doing business – a risk to expect and mitigate. And the right fraud program also presents opportunities beyond simply minimizing your exposure. Instead of just being on the defensive, a fraud solution can enable new opportunities to expand your business.

The Direct Costs of Fraud

Making your fraud solution work harder for you starts by gaining a full picture of how fraud impacts your business. Several are easy to measure- such as the loss of products or merchandise, chargeback fees, shipping costs, labor and other transaction-related expenses. These direct losses are the most tangible, especially for those selling physical goods. Digital goods aren’t immune either, as upfront production expenses spanning R&D to Marketing are also at risk. Regardless of your business model, fraud costs add up quickly especially when bigger orders come with an increased risk of being fraudulent.

Beyond these losses, there are the overhead costs of fraud prevention. Payroll for fraud teams, IT capital expenditures, and outside service contracts are just a few fraud-related expenses that can be difficult to forecast, given the need and situation.

"We give data that not only helps to fight fraud but also helps clients identify who their good potential customers are which ultimately enables upselling, cross-selling or reselling of products and services with confidence or even deliver tailored customer experience and rewards"

For organizations developing an in-house solution, capital expenses may get even more intensive, as more software and hardware is required. Servers, storage, network switches and other equipment have a purchase cost and require ongoing power, cooling, maintenance and a host of other fees to install and operate. And, like many significant technology-related investments, hardware ages into obsolescence and requires additional investment down the road. While outside fraud management tools may minimize many of these expenses, other costs – depending on the model (subscription, transaction fees, etc.) – are another line item under operating costs.

The Cost of Not Doing Business

Seeing fraud as a cost of doing business, even at a minimal 1% of overall transactions, is still a hefty price tag that reshapes how you do business. If you project $15 million for your annual sales, but expect 1% of orders to be fraudulent transactions, your true sales goal is actually $15.15 million. Depending on your average purchase ticket, this may require you to generate thousands more successful orders to hit your target.

And this is an area where your fraud management solution can translate a challenge into opportunity, both by capturing unrealized sales and protecting your customer experience.

What makes our AI solution superior to some of the other newcomers is we have powered and backed the technology with over ten years of data and human intelligence

The opportunity cost of legitimate orders wrongly declined due to suspicion of fraud doesn’t show up as a line item on the income statement, yet pyments.com pegs revenue lost to false positives in worldwide eCommerce and mobile commerce to be as high as $118 billion per year. This staggering number is driven by decline rates that are nearly triple (2.6% average for domestic orders) the actual incidence of U.S. fraud averages (around 0.9%). In other words, nearly 2/3 of those orders your fraud team turns down every day are likely valid orders.

The cost of this lost sale is more than your average ticket. According to a Javelin survey, 42% of cardholders stopped shopping or limited shopping at merchants who declined their cards. For a $25 million per year merchant processing 2,000 orders a day, that adds up to losing about 7,700 customers every year due to sales insults. And this doesn’t account for alienating a first-time customer, which undercuts your customer acquisition costs – meaning every marketing dollar spent to attract and convert them to a customer was wasted.

Sales Enablement Via Better Fraud Management

Brad Wiskirchen, CEO of Kount, a leading innovator of solutions for fraud and risk management, has a unique perspective on fraud protection and its direct influence on sales. Kount was created to stop online credit card fraud plaguing its sister company, which was suffering from chargebacks and the increasing financial burdens that come with fraud.

More than a decade later, Brad notes that Kount has “mastered the ability to separate the sharks from the whales, irrespective of how the former deceits as the latter.” Kount's experience, backed by industry-leading technologies, enables it to go beyond the traditional model of fraud protection. While its ability to detect and prevent fraud nearly eliminates the costs detailed earlier, it also offers unique insights that can also increase sales.

A fraud prevention team armed with the right solution can enlighten revenue-generating departments in their organization to view fraud prevention as a profit center. From just the payment, the fraud prevention team gains many customer insights including purchasing behavior, conversion rates and details on products and services. With the right fraud solution, they can even see insights about geographies and times of the day as they relate to sales.

“We give data that not only helps to fight fraud but also identifies who their good potential customers are, which ultimately enables upselling, cross-selling or reselling of products and services with confidence – even the ability to deliver tailored customer experiences and rewards,” adds Brad. As such, many clients relying on Kount for fraud prevention have experienced up to a 30 percent increase in sales.

New Threats on the Horizon?

This year, online fraud losses are projected to cross $30 billion.

Rich L. Stuppy, COOFraudsters target the well-established e-commerce channels and follow businesses into emerging channels. Some of the newer loopholes criminals are exploiting include mobile commerce, peer-to-peer payments systems, loyalty programs and application fraud via automation and voice assistants.

“The next wave of fraud is already here. What we are seeing is confident, secure enterprises falling victim to fraud through mobile apps and online stores, to a degree that it has not been seen since the first big e-commerce and fraud wave of the early 2000s,” notes Brad.

In the early 2000s, Kount was one of the only fraud solutions to anticipate the explosion of mobile-based transactions when it was a fraction of overall sales. It also employed artificial intelligence long before the term drowned news cycle after news cycle.

“What makes our AI solution superior to some of the other newcomers is we've backed the technology with over ten years of data and human intelligence. Expert level guidance and informed business decision-making capabilities must be employed in tandem with cutting-edge, automatable technology algorithms. We are the only solution that provides all of it without the need for on-premise software installation or months of training,” adds Brad.

Protecting All Aspects of the Payment Ecosystem

Some of the big names such as PayPal and Chase Paymentech use Kount’s technology and expertise to shield themselves as well as their customers from fraud. Companies in the apparels, travel and hospitality, online streaming, gaming and telecommunications industries have partnered with Kount.

These notable names rely on Kount because of its innovation – from machine learning to behavioral biometric technologies. While machine learning helps to map suspicious behavior of fraud rings and identify these threats before they strike, behavioral biometrics has emerged as a promising tool to prevent automated or scripted deceptions. By identifying and mapping an individual’s unique method/pattern of login, the biometric tech can detect bots in addition to fraudulent users.

Enabling Customer Success

The numbers speak for themselves when it comes to what Kount enables organizations to do. A leading fitness website was able to reduce chargeback by a factor of 65 percent while they simultaneously increased operational efficiency through Kount’s automated workf low tools. A popular IT retailer reduced the need for manual transaction reviews by half while increasing their online sales by 23 percent. A leading online travel agency was able to achieve a 50 percent reduction in bookings declined for fraud prevention and reduce bookings f lagged for review by 83 percent. “A company has even used Kount data to prevent human trafficking,” notes Brad.

This type of versatility to enhance sales, along with the assurance that a company’s bottom line will be protected from all types of fraud, gives Kount’s clients one less thing to lose sleep over.