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Get on the Road to Less Online Fraud - Specializing in Powersports and Automotive

posted on: Thu Jun 01 2017

If you missed our webinar “Get on the Road to Less Online Fraud - Specializing in Powersports and Automotive,” this blog post provides a convenient summary recap.


  • Brendan Baker, Editor, Motorcycle & Powersports News
  • Don Bush, VP of Marketing, Kount

The webinar explored current fraud issues and best practices to stop fraud and grow revenues for the powersports and automotive industry.


Don kicked off the discussion by quickly summarizing four current fraud issues:

  1. Account Takeover. Fraudsters hijack legitimate accounts and then exploit them for illegitimate gains.
  2. Fraudulent Account Creation. With the dramatic rise in data breaches, it’s now possible for fraudsters to use real data to piece together synthetic identities that look real and exploit them for illegal purposes.
  3. Transaction Fraud. Bad payments (that may look good) using stolen credit cards or identities.
  4. Limited Data Collaboration. Issuing banks, payment processors, and merchants all have a piece of the fraud puzzle, but they tend to work in silos and not share the intelligence they individually have.

Next, Don and Brendan looked at the top US retail eCommerce market segments, with Auto & Parts in the top three at $46.2 billion for 2017.

Top 3 Sales Categories

Don noted that fraudsters follow the money, which makes these three segments top fraud targets – and oftentimes products bridge multiple categories (Alpinestars boots, GoPros, and GPS Bike Computers). The discussion then moved on to how fraudsters are becoming much more sophisticated. This point was illustrated by reviewing two actual fraud attacks: one in 2015 and a second attack in 2016. In just one year, the level of sophistication the quality of the data, and the fraud amount increased dramatically.

Shane then posed a poll question to the audience: “What is your top concern with online fraud?” Over 50% of attendees chose the financial impact of fraud on the company.

Top Fraud Concerns

Don and Brendan talked about these concerns in the context of fraud stories from well-known names in the industry, including AutoZone, Advance Auto Parts, Dragonfly Cycle Concepts, JEGS, Twisted Throttle, and USP Motorsports. Some common trends include:

  • When chargebacks start to increase, online powersports and automotive e-commerce operations typically become more suspicious and decline more orders and/or increase the number of manual reviews.
  • Big orders can be dangerous: a dealer who celebrated a $5,000 order saw it turn into fraud.
  • Another merchant reported they weren’t getting chargebacks anymore, but then discovered it was because they were manually reviewing almost every order (which is expensive and does not scale).
  • Products especially targeted for fraud include GPS units, Alpinestars boots, and GoPro cameras.

Don and Brendan next looked at 3 elements involved in fraud:

  1. Tools - an entire underworld of dark web resources and fraudulent software make it easier than ever for fraudsters to set up compromised eBay sites to resell stolen merchandise, hijacked PayPal accounts to process transactions, etc.
  2. Data - more than one half billion data records were compromised in the first half of 2016.
  3. Opportunity – in every country where EMV (also known as chip and pin) has been implemented, eCommerce fraud has increased as fraudsters have found it harder to succeed at counterfeiting physical credit cards and so moved to the online world. In the US alone, fraud related to EMV policies increased 27% in 2016.

The discussion next turned to how online businesses can balance fraud and chargeback reductions against lost sales due to false positives. False positives refer to legitimate transactions that only look suspicious and wrongly get turned down. Don shared data about fraud rates and decline rates that indicated online eCommerce operations are actually turning down too many orders. In the US, it’s about 2% of all transactions and internationally it’s as high as 6% of all transactions.

For example, MasterCard indicates that in their network they see $9 billion a year in fraud, but $112 billion a year in false positives (i.e., good orders that looked suspicious but were actually legitimate).

So, how do you avoid turning down good orders, avoid spending too much time on manual reviews, yet still guard against chargebacks and fraud losses? Don and Brendan outlined four best practices:

  1. Real-Time Analytics. Multiple, advanced fraud screening technologies (Device Fingerprinting, Proxy Piercer, Transaction Velocity, Persona™ Technology, Cross-Merchant Linking, Geolocation, etc.) that analyze massive amounts of data in real-time.
  2. Fraud and Risk Data Orchestration Hub. When questions arise that the screening process can’t resolve, it’s vital to have the ability to check in real-time other data sources for information like email addresses, mobile phone numbers, credit records, chargebacks associated with a card, etc. to confirm whether or not the transaction is legitimate.
  3. Advanced Artificial Intelligence and Machine Learning Technology. All this data would be overwhelming for humans to look at, assess, and make decisions in milliseconds. But artificial intelligence and real-time machine learning have the computing and processing power to review hundreds of millions of transactions and identify risky behavior.
  4. Experienced Human Intelligence. You cannot underestimate the human factor. Artificial intelligence and machine learning should be reviewed by experts with in-depth fraud expertise and results should be refined by a business owner who knows their business intimately.

Don closed the presentation by asking the question “what would you do without fear of fraud?” His advice: get a fraud solution in place so you can confidently expand into new markets, new territories, new channels, and even new countries. Below is a summary of recommended best practices:  

  • Audit your current system on an annual basis
  • Most companies should outsource their fraud management
  • Look into your own data to determine normal behavior
  • Place multiple layers of technology in the way of fraudsters
  • Employ a data-driven solution
  • Consistent and ongoing training of staff

During the live Q&A, Don and Brendan answered questions from attendees, including the following:

What about companies that are maybe too small to have a complete fraud prevention system?

  • Several Kount payment processor partners - PayPal, Braintree, BlueSnap and others -- include fraud prevention as part of their payment processing base service. Contact Kount to find out how you can get both payment processing and fraud prevention in one solution.
What about online fraud as it relates to lenders and power sports financial institutions? It seems to be a risky area. Many consumers are applying for fraudulent loans that are putting the dealers and lenders in a bad position. How can they mitigate that?
  • Kount’s fraud prevention works for any card-not-present transaction. It also verifies data in loan or credit applications (applicant street address, annual income, mortgage payment amount, etc.)
What are some warning signs that we are getting hit with higher rates of fraud?
  • Chargebacks are an easy place to start. Also, ask these questions: have manual reviews increased, have declines increased, have refunds increased? Are you getting a lot of overnight or expedited shipping orders at five minutes to 5 pm? Are a lot of orders going to certain cities where there are re-shipping centers to re-direct stolen merchandise? It’s also important to have a system that can recognize all those different signals and help you figure out how to address them.

To view a recording of the entire 60-minute presentation, please visit the Kount webinar page: Get on the Road to Less Online Fraud - Specializing in Powersports and Automotive.