As published on Wolfe Research June 26, 2020
We had the opportunity to host Kount Chief Customer Officer, Rich Stuppy for a discussion on recent eComm/Omni trends, card-not-present (CNP) fraud, and services including offerings that improve fraud and authorization rates. Kount is a leading provider of fraud prevention solutions around eComm/CNP to over 6,500 merchants globally offering a number of products that leverage its comprehensive transaction and identity data to enable real-time decisioning, while machine learning is leveraged to identify behavioral anomalies and common good behaviors. Partners/customers include Chase Paymentech, Braintree (PYPL), Worldpay (FIS), Barclays, BlueSnap (FISV/FDC, BAC), among others. Overall, Kount noted seeing accelerated trends in digital including eComm/Omni and contactless generally persisting with higher demand for services (CNP fraud/security).
eComm Trends: Initially, as the pandemic developed, Kount saw a rush from physical spending to digital overall with specific verticals like health and wellness seeing outsized growth. In aggregate, Kount saw CNP transaction volumes increase as it processes across industries not specific to sectors that experienced deep declines like travel. Further, the company sees volumes into June at elevated levels with CNP remaining strong but slightly decelerating to closer to pre-COVID levels as the economy normalizes. That said, Kount believes that a meaningful percentage of the shift from physical spending to online will persist as consumer behavior has adapted to the new norm which is in-line with our recent checks that anywhere from 30% to 75% of consumers will keep using eComm more than before. Kount also highlighted seeing a demand for Omnichannel capabilities such as contactless, buy-online pick-up in-store (BOPIS), delivery initiatives, and ship from store as companies leverage their physical and digital presence.
Fraud Trends and Services: As volume continues to shift from physical POS to eCommerce, CNP fraud levels have also increased. The company believes that fraud rates, which were accelerating in-line with eComm trends, have now surpassed those levels and continues to grow above CNP growth driving a demand for fraud/security/cyber solutions as fraud has become more sophisticated and fraudsters attempt to take advantage of recent stimulus disbursements. Kount has several partnerships including WP/FIS, MA, V, Braintree, and other PSP gateways and acquiring banks which it provides risk assessment and customer intelligence services, typically in the pre-authorization space, helping clients improve auth rates and reduce different types of fraud (friendly fraud, criminal fraud, etc.). Many of Kount’s services are packaged and resold by customers/partners, while the company also competes in some aspects with PSPs. See our recent notes on CNP fraud/security offerings for MA here, and our deep-dive report on Visa services including CNP fraud services opportunities here.