A CFO’s Take On Growing Businesses In A World Full Of Unknowns
This will be the first holiday season in roughly 40 years when Black Friday isn’t quite happening on the day after Thanksgiving. That isn’t to say Black Friday isn’t happening at all — a fact that Karen Webster and Kount Chief Financial Officer Scott Klossner observed in a recent discussion about the rapidly realigning shape of the digital landscape. Just ask Amazon: Black Friday promotions aren’t happening on only one day this year at the eCommerce giant, but will start in October and run for weeks.
But Klossner said there’s nothing to suggest that Black Friday as we all knew it — a single, post-Thanksgiving day of massive discounts at crowded brick-and-mortar stores — will ever come back to what it was in the past, even after the pandemic.
“I think a year from now, Amazon believes there’s going to be a huge swath of people that go, ‘hey, I actually like this a lot better,'” he said. “People don’t actually want to go get mauled in the mall or at Walmart. There’s going to be a major shift here.”
And that major shift will be a lot bigger than just Black Friday. Klossner, whose firm helps eCommerce companies fight fraud, expects everything to shift — how people shop, how they work, how they travel and how they spend their free time. People have digitized their lives — and, in many cases, have found that they not only like it, but also prefer it to what came before, he said.
Klossner said that means the time has come for firms to evolve in a world where change is certain, but the exact shape and nature remains uncertain.
A Tale Of Two Pandemic Economies
As Klossner noted, the coronavirus hit some economic segments like a wrecking ball, but provided others — especially those engaged in eCommerce — with what can only be described as a boost.
It was a high-pressure time, but Kount has been able to help many new and existing customers address their market changes through being a real partner, invested in one another’s success. But weathering COVID-19 isn’t easy. Klossner said it takes massive amounts of coordination and communication, from the top of the organization on down.
And while many businesses have seen revenues soar due to the pandemic, some haven’t been nearly so lucky. Many have seen their revenue streams slashed to ribbons, leaving them cash-strapped and in a tough place when it comes to paying their bills.
Moreover, Klossner said the pandemic has also brought lots of new firms to Kount’s door. He said many had security processes that worked well enough in a pre-pandemic world, but needed more advanced protection as their sales suddenly skyrocketed.
“All of a sudden, they start to see that fraud is becoming a bigger problem, because the fraudsters are following where the money goes — getting more innovative and more aggressive in their tactics,” Klossner said. “If a merchant wasn’t prepared for that, they’re in some real deep trouble. Everybody’s suddenly going, ‘holy cow, we gotta stop this!'”
However, he noted that companies have to stop fraud in the right way. Klossner pointed out that bringing fraud figures down to zero is the easiest thing in the world — deny every transaction and no fraudster will ever get through. Of course, no legitimate customers would get through, either.
So, the goal isn’t to achieve zero fraud: It’s to lower fraud as much as possible, while still preserving a friction-free, seamless commerce experience for the good customers. That means considering a risk-adjusted return profile.
Leveling Up Security Mechanisms
While the rapid innovation that has swept a business world committed to full digitization has been incredible, Klossner said it’s also come with a downside: Fraudsters have also raised their game, going well beyond Nigerian prince scams and poorly written phishing emails.
“The fraudsters have gotten really, really smart over time,” he noted. “They evolve, and one of the things they’ve learned is that they need to attack companies in real time, meaning they can’t set up standard rules and just let them sit there and see how they go.”
A “set-it-and-forget-it” strategy that lacks advanced artificial intelligence (AI) and substantial data is pretty much doomed to fail, Klossner warned. Instead, businesses need to battle against fraudsters in real time, leveraging AI to quickly spot novel fraud attempts and shut them down before they succeed.
For Kount, the secret sauce is in identifying a consumer and evaluating more than whether they are who they say they are. Klossner said the firm aims to move to the next questions, like “is this consumer trustworthy?” or “do they have a long history of abusing return policies or initiating questionable chargebacks?”
The company’s Identity Trust Global Network “gives our customers the capability to identify [consumers] via our global identity network,” he explained. “Because we have such a broad swath of billions of transactions in our data network, we can actually look at the customer who may be a first-timer at a high-end department store, but has shopped at many other places. Combine the identity piece with the AI, and we’re able to utilize this data to block all kinds of fraud — even what’s termed ‘friendly fraud.'”
The thing that makes the current environment both exhilarating and terrifying for every business is that no one is really sure what’s next — or even if that answer will be the same everywhere. Constant innovation is key.
For instance, Klossner noted that travel won’t see an immediate turnaround even when there’s a COVID-19 vaccine. More likely than not, it will take a few years before travel firms get back to something roughly akin to pre-pandemic business as usual.
But he said that in other places — commerce in particular — what was once defined as “normal” might never come back. Consumers have found digital equivalents they like, and are now more likely to stick with them even after the pandemic winds down.
“I think it’s going to be interesting to watch in terms of how this will evolve,” Klossner said. “I [believe] it will never go back to the old norms, but how far from them will we get? I don’t think anyone can answer that for certain as of yet, but a very differently shaped ‘normal’ is emerging in a lot of segments. Firms need to be ready to roll with that in real time – or risk being displaced by competitors that can.”