NMI’s Payment Playbook Podcast – Episode 11: Scott Przybyla, Kount – An Equifax Company
Get ready for an exclusive ride into the intriguing world of online fraud prevention with Scott Przybyla, the Vice President of Global Channel Sales for Kount – an Equifax Company. This episode unravels the fascinating origins of Kount, its go-to-market strategy, and its evolution under the banner of Equifax. Understand Kount’s go-to market strategy consisting of direct and indirect sales, and the innovative white label channel strategy. Scott also walks through the history of fraud prevention and its evolution over the years.
Ever wondered about the intricacies of the fraud ecosystem and the critical roles of each player within it? Prepare for an exploration of the shifting fraud landscape, as we demystify the importance of personal security for consumers and the variety of threats that extend beyond mere payment fraud. We’ll also take a look into the future of fraud prevention. Discover how Kount, now under the wing of Equifax, is developing an end-to-end fraud and identity protection platform, combining physical and digital identity traits to create a more complete consumer identity profile. This is an exciting episode on fraud prevention you won't want to miss!
Greg Myers: Hi, Scott, and welcome to this episode of the Leaders in Payments podcast, where we’re looking at all of the things that happen before a transaction or, put another way, before money ever moves. And, of course, having a great fraud or threat protection strategy in place is definitely one of those things. So welcome to the show.
Scott Przybyla: Thank you, Greg. Glad to be here. Very happy to be here.
Greg Myers: Great. Well, tell our audience a little bit about yourself. A little personal and professional background info would be great.
Scott Przybyla: Sure, no problem. So, for everyone in the audience, I am the vice president of the global channel organization for Kount an Equifax Company. I’ve been at Kount for about five and a half years now. Ironically enough, most of my career has been in commercial real estate, so this online fraud prevention identity has been somewhat new to me, but really gotten to know it quite a bit over that time frame. I live in Boise, Idaho and have a family here. Never, ever, thought I’d be living in Boise, Idaho, but here I am.
Greg Myers: Well, great Well, tell us about Kount. So, what does Kount do?
Scott Przybyla: Sure, absolutely so. Kount is a company that was started officially in 2007. The core of Kount is payments fraud. That’s how we started in 2007. So, a lot of what you said in the opening about what happens before the money is actually passed. We were a company that was developed and put in place to make sure that fraudulent transactions weren’t happening online, that we stopped them before they actually happened.
So, again, Kount was started in 2007 and it’s had a pretty, very strong uprising and doing very well, to the point where, in February of 2021, Equifax bought us in February of 2021 to be their identity and fraud tool, moving forward. So we are all about identity and fraud pinging off literally hundreds of data points to make sure that, for example, Greg you, when you go to a site to purchase something, it’s your device, it’s your email, it’s your address, phone number, all those things, and there’s tons of data points making sure that it is actually you making that transaction. So, before the money is actually exchanged, you can have a very good feeling that this transaction is going to go through and it is you and it is correct. So that’s what Kount is identity and fraud, exactly what we’re talking about today.
Greg Myers: Okay, okay, perfect. So, before we dive in, just for the audience, could you explain a little bit about Kount? So Kount sells to merchants, but you also have sort of a white label channel strategy. Maybe talk about that a little bit before we dive in.
Scott Przybyla: Fantastic. Yes, so historically we’ve worked with merchants directly, so we have a direct and an indirect sales force. But what has happened? And even going back to the very first days of being in business, some of our very first clients were partner organizations, or and what I mean by partner organizations I’ll be more specific. So, if you can look at payment processors, gateways, e-commerce, marketplaces, any type of collaboration, anyone that has merchants under them, financial institutions, technology platforms we work very closely with that partner organization because there’s greater scale there. So, a company will white label Kount or will talk to Kount about white labeling, Kount an Equifax Company for their merchants that they service, that they may be doing other things for. So, in other words, taking the fraud and identity part out of the hands of what the partner is doing and letting us do it for them.
We have some very good examples of some companies that we do this with, and so right now you look at a very good mix of direct merchants who use us directly, and they may use multiple payment processors, multiple gateways, multiple acquires, whatever the case may be. And then we have a very strong partner organization which I run, and that partner organization is growing leaps and bounds because what we’re finding is the merchants themselves are looking for economies of scale and when you have larger organizations you get the drift. Here you have larger organizations that can have more buying power and it makes it more not only effective but cost effective and time savings to make sure that we are identifying the right transactions that are coming through for those merchants to accept.
Greg Myers: Okay, perfect, that’s exactly what I was looking for the audience to sort of understand a little bit about the go to market strategy. So, let’s go ahead and dive into the topic, which, of course, is fraud prevention, and can you give us a quick history of fraud prevention?
Scott Przybyla: Yeah, I think the history goes back quite a way. There’s always been, quote unquote, calling bad people trying to defraud people online there always has, for ever since online has been a thing. Our history and and what we talk about, fraud prevention is one of our founders, Dr. Timothy Barber, and our other founder, Brad Wiskirchen, who still runs our company today. They came up with the device ID device data collector too. Dr Timothy Barber patented it and it’s an interesting story because he actually did it, because he was selling a book online and he did it to protect those orders that were coming through and it just kind of opened up the realm of saying, hey, there’s a there there in this situation.
And so, in the past, where we’re and where I say earlier that we we’re focused on payment fraud, you had a lot of what we call stolen credit cards out in the marketplace when, let’s say, Greg, you got a hold of my credit card number and you were ordering stuff on my credit card for yourself.
We are able to tie all those data points together from a device, from an email, from a credit card number, from a ship to bill, to address, and there are literally hundreds of data points, whatever the merchant, end or partner is willing to give us.
So that history has evolved over time where it was truly payment fraud to begin with, but then you have things like account takeover fraud, you have things like card testing bots, all kinds of things that it developed in today’s marketplace that it’s really becoming a very complex situation where you are trying to protect yourself and the merchant or the partners trying to protect their collective group and also the end consumers as well, trying to protect themselves against these fraudulent activities that are going out there in the marketplace. And I know we’re going to get into it a little bit deeper as the conversation goes on, but that’s kind of the history and what Kount likes to talk about that. We were the first to the market to come out with a fraud tool and now there’s a lot of competitors out there in the marketplace as well, and that’s a little basic history of what’s happened with fraud, for it’s morphed into all kinds of things now.
Greg Myers: Well, you know, let’s talk about the different players and the roles that they have in preventing fraud. So maybe talk about that ecosystem that exists and if it’s different than it was and I’m assuming it is then it say five or ten years ago. Can you also talk about that?
Scott Przybyla: Yeah, sure, yeah, it’s definitely different than it was five to ten years ago. You know the ecosystem consists of a lot of different parts, as we know.
We actually have a presentation on the ecosystem that talks about from sponsor banks to issuing banks, to acquiring banks, to gateways, to payment processors, to e-commerce marketplaces. I think everyone’s taking a role in it now. How it’s changed is me as the merchant, back ten years ago, I was concerned about it, so I needed to get something to help me protect my company, my business against fraud. And what’s happening now, as you see all these different players stepping in and looking at ways that they can help within the ecosystem. So, it’s taking and what’s interesting, Greg, is the persona types that are interested in this.
Obviously, you have the risk department that’s interested in this, but what we’re finding is that you’re seeing financial officers, you’re seeing sales marketing, fraud managers anyone taking an active role because, as we know, with fraud and how it’s changed over time is it affects your accept rate, your decline rate, your charge back rate, which can affect a lot of other departments, not only including monetarily, but your image out there in the marketplace as well, which is very important right now.
So, you’re seeing a lot of different players take an active role, whether it be pre-transaction I know we’re not talking about post-transact we’re talking about, you know, before the money is exchanged. But there are a lot of different roles that are taking a part in here and everyone’s looking out especially in today’s economy which I know we’re getting to as well but especially in today’s economy making sure that everyone out there is protected, and you as the end consumer also. I’ll say this as well, the end consumer needs to be careful. Right now, we know of a lot of email phishing attacks and a lot of things texting, SMS, all kinds of things going on. We have to be careful and there are steps you can take to protect yourself as a consumer as well. But from a company’s perspective, everyone’s taking an active role in trying to stop fraud.
Greg Myers: Yeah, that’s interesting. That’s kind of a good segue into the next question, because for a long time and I think you kind of said this as it was all about fraud, and now it seems like there’s a lot more. Threat is a bigger word meaning it covers a lot of things, including fraud. Can you kind of speak to maybe what some of those other threats are? What is the broader thing that people are looking at beyond just, for example, like you talked about, payment fraud?
Scott Przybyla: Yeah, yeah, I’ll talk about a couple to begin with. A lot of us out there in the marketplace, as consumers, we have accounts with some of our favorite merchants, right? Well, it varies what you save on within your account, like my airline account that I use. Right, I have a lot of information in my airline account. God forbid anyone could go in and take over my account. What would that cost? That would cause a heck of a lot of stress for me, for the company that I do business with, if someone got in and stole my miles, got my credit card information, got my personal information, my address, all these different things that I have saved on my airline account.
So account takeover is a huge one right now, where companies are really looking at ways to make sure not only that, when, Greg, you set up an account at your favorite retailer, that it is you, that it is your location, it is your house, your device, your email address, so on and so forth, but they’re taking additional steps to make sure that every time you log into it, it is you, that someone else. You know the old saying, Greg, about passwords and the way some people treat their passwords, right. Well, a lot of these, a lot of these tools out there can help guess some passwords and God forbid I break. I have a fraudster break into one of my accounts. Okay, that would be a terrible thing for not only me but the company as well. There’s other things out there, like loyalty fraud, coupon abuse, different identity theft. So let me talk about a couple of those. To begin with, loyalty abuse another thing to account takeover, but using someone other’s loyalty points to get, like, let’s say, free pizzas.
Breaking into an account. Or let’s say, you have a one-time coupon trying to stop online, trying to stop that coupon from being used multiple times, which we’ve seen, that as well. Identity theft stealing the identity. So yes, they get my account information, but then they go and do other things with it. Affiliate fraud from an affiliate perspective, affiliate marketing perspective. There’s so many different types of fraud. I’m looking at on my screen right now the top 10 to 15 emerging fraud trends right now. That is actually going on in the marketplace and that’s where we can help. So, I talked about a few there. I’m more than happy to go into some other ones if you want me to.
Greg Myers: Yeah, I mean, what are some of the other current key trends you’re seeing today?
Scott Przybyla: Yeah, so the number one trend in 2023 is fishing, farming or whaling. We talked about that briefly at the beginning and we’re all getting those. Heck, I think I got three today on my personal phone from fake Amazon, right, so you know click on the link and something bad is going to happen at that point, right.
Then you’ve got the number two trend right now, in 2023, which is up 34% from last year, is what we call first party misuse, so it’s friendly fraud or chargeback fraud. So perfect example for this is let’s say, my 17 year old son is upstairs playing on Xbox and he doesn’t have a credit card. And let’s say he goes and buys something for one of the games that he’s playing. It’s on my credit card. Well, in my household I don’t do any of the bills. My wife does. Let’s say she sees that charge come through and she notices it and she calls the bank, say, hey, I didn’t make that charge. Well, how do you connect the dots there, right? So, with some of the tools that we have, the bank and the merchant can connect those dots and they can say something like this hey, I’m showing that’s off an Xbox device, off this IP address. Maybe that was you. And then my wife goes oh yeah, it was my son upstairs because he didn’t have a credit card, right? So, you save the sale, right.
And then the third emerging fraud trend right now is card testing. It’s still there, heck. In 2022 it was number two and in 2023 it’s ranked number three behind those first two that I mentioned. And card testing ties back to stolen credit cards. Right, I, as a fraudster, I try small transactions somewhere to see if they go through and then I hit it for a big one. Card testing is generally done via a computer program, algorithms, whatever so that it can hit a bunch of different things and see if it works. It’s also done on an individual basis as well, but that’s the basic of card testing and that’s number three.
Greg Myers: Okay, and what does all this mean to like the impact on consumers, the impact on the economy as a whole? Can you speak to that?
Scott Przybyla: Oh yeah, absolutely. So just some stats, real quick. Retail e-commerce sales for 2023 this year is expected to be around $6.3 trillion. That’s up from about 5.7 last year, and we all, we all know this COVID thing that was out there forced a lot of people online, right, Greg? You could agree to that, right? So, you know, looking at some stats that we’ve gotten some from some very trustworthy sources it’s expected to be over $8 trillion in 2026.
So, with that being said, there’s revenue being lost, obviously through fraud, for through digital fraud 2023, it’s close to $50 billion in lost to online fraud. That’s a staggering number and you’re seeing a lot of different indicators within the industry. You’re seeing over 100% increase in loyalty and promotion fraud, 79% increase in account takeover fraud, which we just talked about, and global chargeback volume for post transaction. Again, I know we’re talking pre is just blowing up as well. So how does this take effect?
Well, I can tell you, in the economy we’re in today, fraudsters prey on bad economies, down people or people who are struggling or whatever the case may be. That’s what they do, there’s no other way to say it, but they prey on those types of economies. In fact, their activity volume goes up during these timeframes. It’s always strong, but it goes up during these times in terms of a little bit tougher of an economy and it goes up. So how does that affect? Well, it affects it negatively all around, not only for the end consumer, but for every company, merchant acquire, issue or whatever the case may be. It affects everything in the marketplace today.
Greg Myers: Okay, okay. So, what is the future of fighting fraud or fighting against the bad guy look like in the next, say, five to seven years?
Scott Przybyla: I know I don’t want to talk about this, Greg, but chatGPT I don’t want to talk about it, but it’s something that that we all have to be aware of right now. Right, because there’s some articles out there if you go search for them about how fraudsters are using chat GPT. So, you know, it’s got to change. But what does the future look like? Well, the future looks like making sure that you have an end-to-end fraud and identity protection platform, and what I mean by that, and I’ll explain that in a little bit more detail. So, let’s take it from the partner perspective. Let’s say I’m an acquirer out there in the marketplace. I have to make sure that I’m bringing on good merchants. One of the other things we didn’t discuss is there’s a lot of businesses out there that are faking who they are. So, underwriting a new merchant onto your platform that needs to be really honed in to make sure that you’re not only validating the business but you’re validating the owners of the business as well and doing more steps to make sure that you’re bringing on good merchants. Then it takes you to the next step, which is okay. You have to have a fraud and identity tool, pre-transaction to make sure that you are screening those transactions that are coming in by the different data sources that we have available out there through our artificial intelligence and machine learning. You have to make sure that you’re prescreening that transaction before it goes through, because if you can stop it before it goes through, you cause, you stop yourself from having a lot of headaches on the back end. And then, finally, you have to have a post transaction tools post transaction tools that will help you. If a bad one does go through which it does happen I’d be lying to you if I said it doesn’t it does go through to help understand what was wrong with it. How can I deflect it, how can I get an alert all the different tools that some of the bigger companies out in the market put place have. And then, ultimately, if it does come to a chargeback, what kinds of tools do I need to properly fight that with the right amount of data to make sure that I win more than I lose? So, it’s an end to end type service that everyone’s looking for, and they’re not looking for the plug and play type of stuff where I have three or four different APIs that I have to plug into, because we want all that data to communicate, because it makes it better in the long run. So that’s what the future looks like. Is what? How can we have that end-to-end full screening?
The other thing I didn’t mention while you’re collecting this information, Greg, it’s always good to have identity as a key part as well, making sure you know I’m a consistent and good purchaser on a certain website. I won’t name the website, but I’m a consistent purchaser. When they see my key indicators come in my device, my email, it’s from my iPad that I have at home. Let me in, let me buy as much stuff as I can, let me identify the good consumers from the bad consumers so I can help drive revenue as well as a merchant. So, identity we can’t lose the thought of identity, because identifying your good ones and your bad ones can help with that moving forward.
So, I hope, hopefully, that was a decent answer on that.
Greg Myers: Yeah, absolutely so. Let’s take everything you’ve talked about and circle back to Kount and talk about how all of those trends and you mentioned several from account, takeover, obviously, identity, all those things, maybe talk about how you know how Kount is doing it and you know Kounts vision.
Scott Przybyla: Sure, absolutely. You know, before Equifax bought us, the best way to explain it is we were the digital online interface. Well, Equifax, as you may know, there are a lot of physical identity right, a lot of information about you know, when you go buy a home, go through the credit, check the mortgage and so on. Right, when you go to rent a house or rent an apartment, when you buy a car, they have a lot of physical identity traits?
One of our founders, Brad, says it’s the peanut butter and the chocolate of combining it together now that we have all this data from Equifax and from Kount. Yes, Equifax has been around a lot longer than us, but now that we have our all this data, it’s marrying it together and making sure that we are rounding out the true identity of who may or may not be coming to your website. So, working together and being bought by Equifax has provided us with a what I like to call another level of data tools that we have to combat, to combat fraud and also help with identity.
So, a lot of those things that I was talking about before, like I’ll give you a perfect example onboarding and underwriting a new merchant onto your platform. We didn’t do that before, in the past, Kount didn’t do that. Well, now that we have Equifax, guess what we can do that. So that was a tool that Equifax had that we molded within Kount an Equifax company. So making sure that you have all those identifying factors that, molded together, create a persona for you, for me, anyone else buying online that says, hey, Scott and Greg are good, let him through, let him buy as much as they want and you know what, if they’re buying a house, there’s their, here’s their credit score, here’s their, their work history, all of these different things that are that are coming into play. Not giving that information, but putting it in the form of a score. Greg, we don’t want to be passing PI information that’s not what we’re doing but creating it into a safety score, saying Scott and Greg are good, these other two, nope, not so good.
We’re seeing a history of bad behavior in the past and tying that all together and then taking the tools that we’ve had and we’ve developed and putting it on one platform to where, if you need one piece, go ahead same API. If you need to add two more pieces, add it with the same API, but just add the product. Having that Kount platform that we’re calling Kount 360 in the future. Having that platform where you’re not doing any developing and IT work, to get another API, same API. Let’s get it all in on the same pipes. You need to add this piece. Okay, nope, stop, you can shut off that piece. So, there’s different ways of doing it, but that’s how it brings it all back to Kount. We feel like we have the end-to-end solution now within our house and it feels pretty good to have that and be able to offer that to the marketplace.
Greg Myers: Yeah, just one further question. You mentioned the scoring, and I go back to a long time ago, in my past payments days. It seemed like that was a solution, like you, like a merchant could create their own scoring. Like whatever the numbers are, 50 and above, let the transactions go through 50 below, don’t? Is that still a Concept, or have we moved past that?
Scott Przybyla: It is still a concept, okay, but have we moved past it to a certain extent? But I will explain it from our point of view. We call our score omni score. What it does and, Greg, you explained it actually very well what it does is it creates a score based on our unsupervised and supervised machine learning models that are taking all this data in, and it creates an omni score. And the way you explained it was good, but I’ll just give you a little bit more detail. Let’s say our omni scores from 1 to 99, 99 being the safest transaction, one being the least safest.
Okay, so you may, as a company, want the ability to approve things that are 80 and over and decline, things that are 60 and under, and maybe take a role and reviewing the things between 61 and 79. Okay, manual review process. It is still a thing, but great. What we’re seeing is we’re seeing a lot of companies that are just letting the AI do the work, so they’re just saying so what you said is true.
We’re seeing a lot of companies, let’s say they’re a quick service restaurant, right, they don’t have time, they don’t have a team to do manual reviews, right, so they’re just saying we’re going to approve whatever’s over this score and bounce off these other policies that were in place for the specific merchant and then anything that’s below, just decline it. So, they’re letting the AI do the work, do the work. Because of the economy, some of these teams are being minimized or being put on other revenue generating things. So, a lot, a lot of companies are choosing just to have the AI do the work, but that still exists. I’m just telling you. It still exists, but a lot of companies are choosing to let AI do the work.
Greg Myers: Okay. Well, Scott, we’ve covered a lot of ground so far. Obviously about Kount and its history and where it is today and the value it brings to the marketplace. Is there anything else you’d like to add before we wrap up the show?
Scott Przybyla: Yeah, I think when you’re looking at an identity and fraud process operation whatever the case may be you need to make sure that you’re looking at a couple different things, and I’ll just mention three. You need to understand your risk strategy and what your goals are, because a good identity and fraud platform can help you grow revenue. I’ve seen it happen a lot of times where your accept rate is 90%. You want to get your accept rate up to 92, 93. That two or 3% represents, based on your average order value, a lot of revenue. You want to do that effectively, then.
So, the second piece is to minimize risk is to make sure that you are partnering with a company and I’ll say like Kount an Equifax Company that is getting data from all kinds of sources all over the globe. The fact that we do work with direct customers and with partners tells that story. So, Greg, you probably have a persona score on our system. I know I do in terms of your online activities. Just a score. Don’t know who you are, but it’s just a score.
So, you want to be able to make money, you want to be able to minimize risks, and then you want to have a tool and a process in place that maximizes operational efficiencies. That’s why I’m glad you brought up the last point about can you still do the score? Can you let the AI work? Because it’s absolutely true, maximizing efficiencies with a safe tool is vitally important so that your teams are doing the right things to drive revenue with those companies. So those three basic things I like to always drill down on. We call them positive business outcomes. That’s what we try to do for our partners and our customers out there in the marketplace today. So that’s all I wanted to have finished with.
Greg Myers: OK, I think that’s a great summary and I appreciate that, and I appreciate you being here. I know your time is very valuable, so thank you again for being on the show today.
Scott Przybyla: Thank you so much for having me.
Greg Myers: Absolutely, and to all you listeners out there, I thank you for your time as well, and until the next story.
00:01:56 – About Scott Przybyla
00:02:41 – About Kount - An Equifax Company
00:06:22 – The History of Fraud Prevention
00:08:44 – Roles of the Players in Fraud Prevention
00:11:12 – Threat Beyond Fraud
00:13:51 – Trends in the Marketplace Today
00:15:43 – Impact on Consumers and the Economy
00:17:38 – Future of Fraud Fighting
00:20:58 – Kount's Vision
00:26:11 – Top 3 Business Impacts