Steve Rouse, chief operating officer of Kount, bills the Boise, Idaho anti-fraud software provider for e-commerce merchants as a four-year-old company “with about 13 years of experience.” The company that evolved into Kount actually began as one of the merchants it now serves, Rouse explains. In the late 1990s, Rouse and the team at Kount operated an online business that sold e-books and software called ClickBank. It got into fraud prevention simply as a way to address its own needs as a merchant.
“We quickly figured out as an online business that you have to have fraud protection, so we invented some technologies that really underpin the fraud protection business today like device fingerprinting and proxy piercing,” Rouse says. “Those are technologies we invented and patented to protect our own merchant business.”
Rouse says it became quickly apparent that the anti-fraud technologies patented by ClickBank could sustain a separate business. But, the company instead decided to sell some of its technology. It reacquired the patents and rode out a seven-year non-compete before launching Kount four years ago.
Scoring and Rescoring
Kount provides a highly customized SaaS offering that delivers risk assessments on e-commerce transactions in real time.
“We have a very sophisticated rule engine that we give the merchant,” Rouse explains. “We recommend some initial settings to start with and from there they can create their own rules around a rich set of variables that are coming in in real time.”
Rouse notes that Kount is able to deliver risk scores and analysis on every type of merchant. Depending on the merchant and its tolerance for risk, it can use the score generated by Kount to make the right decision for itself.
“No two merchants are alike,” he says. “Every merchant has a different tolerance for risk. If I’m selling digital goods that essentially have no cost of goods sold, I might want a chargeback rate of .7 or .8 percent to maximize sales. But, I’m under 1 percent so I’m still square with Visa. If I’m selling laptops I may want that chargeback rate to be .1 percent because I don’t want people stealing laptops I’m not going to get paid for. Every merchant is a little different.”
Rouse also says Kount is able to differentiate itself by how it acts after a transaction is scored.
“Most other services will do a risk assessment, provide a score or some feedback and they’re done,” he says. “With Kount, we’ll see an order today that leads us to give a low risk score. Then, we’ll continue to monitor the order for several days and if we see activity from that particular consumer that causes us to be concerned, we’ll rescore and alert the merchant that the score has changed. A retailer could actually pull that product off the truck before it fulfills the order. We call that dynamic scoring.”
For the last year Kount has concentrated on expanding its distribution through strategic partnerships with clients that boast extensive merchant bases. The company signed an agreement with noted e-commerce payments processor Chase Paymentech to offer a private-label version of its software to Chase merchants.
“We spent most of last year doing a technical integration with them that is now complete,” he notes. “Chase goes out to Visa net and gets the bank auth at the same time they go to Kount and get the risk opinion. They merge the two together and reply to their merchant in real time. So the merchant now has great visibility into the overall riskiness of the transaction and it all happens in real time.”
The company also signed similar agreements recently with LexisNexis, Planet Payment, and Vindicia . Kount also sells directly to merchants, but Rouse believes signing partnerships with larger distributors is a roadmap for success.
“We’re that little company quietly doing the laundry behind the scenes, which is a great distribution model for us,” he says. “In Chase Paymentech’s case they have 450 sales reps, so we can bolt onto their team and it’s a force multiplier. We’re happy to be the experts behind the scene that help them have a successful program. It’s working very well for us.”