Regardless of the company, its industry, its customers or location, online fraud remains top of mind. As cybercriminals become increasingly sophisticated, pure reliance on user authentication is no longer enough to keep the barbarians out of the gates. The urgency of robust and multilayered fraud detection systems becomes especially clear against a backdrop where card-not-present fraud is likely to grow by leaps and bounds in the wake of the EMV liability shift from last year.
In an interview with PYMNTS, Bradley Wiskirchen, CEO of fraud protection tech firm Kount, detailed the landscape of online fraud, where it is going, and the challenges and opportunities that confront innovative fraud detection.
PYMNTS: What is the most innovative thing that you have introduced into the market and what value did it deliver to the stakeholder group that was its target?
BW: It’s hard to pick just one – but here is one that I think underscores our approach to innovation. On a visit with one of our payments processor partner a few years ago, we noted that merchant aggregation points—acquiring banks, payment processors, gateways, etc.—needed a comprehensive set of tools to protect them, and their merchants, from fraud losses. Ideally, that solution would simultaneously provide both the merchant aggregation points and the merchants with opportunities to increase their revenues. From that meeting, Kount Central was born.
At the time, nobody was talking about a solution like Kount Central. But, as fraud began to move upstream in the ecosystem, the need was clearly there. And the reception to the solution by merchant aggregation points has been terrific.
I’d say the reception has been so good because when we created Kount Central we innovated “all the way around the solution.” We concentrated on easy integration, appropriate pricing, sales support, client success, and four profitable (for the merchant aggregation points) use cases. Those four profitable use cases are all right-sized for the type of concerns merchant aggregation points have, allow the merchant aggregation points to become a trusted advisor to their merchants (and in doing so, increase the stickiness of the relationship, add value for every merchant in their portfolio — from the smallest to the largest, and provide a solid mechanism for the merchant aggregation points to grow their own sales, and offer value-added services without doing a lot of work.
PYMNTS: Where do you look for innovative ideas and why?
BW: The ecosystem in which we operate. We identify problems, challenges, and points of pain through hundreds of annual interactions with clients, prospective clients, industry analysts, and other industry experts. We try to see the issues from the merchant’s eyes, which gives a unique perspective. So we are really “outside in” innovators. The world is changing fast and we need to have very strong information pipelines to alert us to the wants and needs of merchants and merchant aggregation points (again, acquiring banks, payment processors, gateways, etc.) alike. Once we’ve identified problems, wants, or needs, we evaluate the urgency, pervasiveness, and value of each. Then we consider whether, and if so to what extent, the solutions are close to our core competencies—because, like every company we have finite time and energy resources. As such, what we “don’t do” is just as important to our business as what we “do.”
The world is changing fast and we need to have very strong information pipelines to alert us to the wants and needs of merchants and merchant aggregation points
PYMNTS: What do you think that most people underestimate about innovating in payments?
BW: I’d say most people underestimate how easy it is for the bad guys, and how hard it is for the good guys—and getting harder with each passing year.
Why is the job of a fraud fighter getting harder? The landscape has changed drastically over the last two years for everyone involved with card-not-present transactions. For example: (a) there is an unprecedented amount of data available due to data breaches — over 1,500 REPORTED data breaches in 2014 alone; (b) EMV launched in the United States last October. It replaces the static data on a mag stripe with dynamic data on a chip, thereby making card duplication much harder and cutting down on counterfeiting and fraud at the point of sale.
But as it does so, eCommerce fraud goes up. And since the U.S. is the last major market to convert to EMV, the fraudsters have used Europe, Canada, and other geographies as teething rings to refine their processes and develop best practices for thievery; (c) we are in the middle of an enormous mobile evolution, and it's changing the way we live and conduct business.
When the processes we use to engage in commerce change, when they evolve, gaps in those processes invariably follow; and (d) there are a number of new payment tools available to, and business processes being adopted by, card-not-present merchants, that promise new opportunities for revenue generation.
But they also bring with them new learning curves and challenges for those fighting fraud (e.g. bitcoin, and same-day delivery of products). But, fortunately, the good guys have Kount — and we’re happy to help.
PYMNTS: How would you define your company’s approach to innovation?
BW: Collaborative. The Kount team identifies problems, challenges, and points of pain through hundreds of annual interactions with clients, prospective clients, industry analysts, and other industry experts. The team then works collaboratively to identify any number of potential solutions to those challenges. Then, in an open, honest, and fearless manner, the team narrows those potential solutions to the solution, or solutions, it wants to concentrate on developing and getting to market using its agile methodologies. The effectiveness of this process is very clear — as Kount has consistently been the first to market with most of the key technologies used in fraud identification and prevention today.
But, very importantly, I believe that the Kount team consciously creates solutions that bring a balanced approach to fraud control that its clients — merchants, acquiring banks, payment processors and gateways — need in order to be successful. We also refuse to chase fads or buzzwords — instead, [we have] concentrated on delivering real, tangible value to clients.
For example, Kount has used machine learning as a key driver of its core solution since its inception 8 years ago —before it was “cool” to say you were using artificial intelligence in fraud control. Over 20 patents have already been issued to Kount, including the first-known patents for device fingerprinting.
PYMNTS: What person or company do you think “gets” innovation and why – and, conversely, who or what has missed it and why?
BW: I think that Remitly “gets” innovation. They’ve taken a service that’s been around a long time, and is long in the tooth, money transfer, and made it exciting. They’ve done it by making money transfer faster, more reliable, and more secure. And they’re constantly adding features and services that are in adjacent spaces, but that haven’t historically been provided by money transferors. They’re a company to watch. Full disclosure – they are a client, and a partner, of Kount.
PYMNTS: What advice would you give a young innovator in this space and why would you tell her to heed it?
BW: Opportunity is everywhere in this space. Look for processes and products where people say “we’ve always done it that way.” Then use today’s technologies to make those processes or products better, drive more revenue, create more customer loyalty, attract new markets, and so on. There’s PLENTY of room in this industry for improvement and innovation. Frankly, it’s an exciting time to be in payments.
Bradley Wiskirchen joined Keynetics in 2005 and helped the firm become one of the Pacific Northwest’s largest privately held technology companies. Kount has become the premier fraud prevention solution for card-not-present merchants, and affiliate marketing giant ClickBank has grown to be one of the world’s largest online retailers.
Among his many industry and community involvements, Wiskirchen serves as the Chairman of the Board of Directors of the Salt Lake City Branch of the Federal Reserve Bank of San Francisco. He is also the co-founder and former Chair of the Idaho Software Employers Alliance (ISEA) which merged with the Idaho Technology Council (ITC) in 2010. Additionally, Wiskirchen has held board positions with the Boise Metro Chamber of Commerce, Boise State University Office of Technology Transfer, FUNDSY, Discovery Center of Idaho, Intermountain Venture Forum and many other organizations.
Prior to joining Keynetics, Wiskirchen was a partner in the law firm of Holland & Hart, where he managed the firm's Business Entities and Transactions Practice Group. His experience includes mergers and acquisitions, technology transfer and licensing and debt and equity financings.
He was awarded a J.D. from the University of Notre Dame, and a B.A. from Brigham Young University.