A number of newer solution vendors exhibited their wares at Merchant Risk Council’s MRC Vegas 2023 conference. Two of those solutions were Dodgeball and Kipp. We spoke with the co-founders of both companies about what they feel makes them stand out from all the other existing solutions on the market today.
Dodgeball is a “fraud-stack as a service” provider that launched its product just last month. The goal of the company is to enable merchants to orchestrate their preferred combination of fraud solutions all the way from user signup to chargeback management with one, simple integration.
The company and solution were born of founder and CEO Adam Hiatt’s frustration finding and integrating an appropriate stack of anti-fraud solutions for a medium-size hospitality merchant named Lyric five to six years ago. There were individual solutions that solved specific fraud issues but no blueprint or ready-made solution suite for tackling all of an organization’s fraud problems that was suitable for a medium-sized merchant.
“I was the solution buyer and was dealing with rolling out fraud engines, background checks, data enrichment, identity verification and the whole nine,” says Hiatt. “It was whack-a-mole. And there was one quarter where we saw 5% of our revenue go out the door to fraud.”
Dodgeball’s fraud stack has been available to the market for less than a month, but it is already integrated with fraud solution providers SEON, Deduce, People Data Labs, Sift, Kount, Twilio and the company expects to add significantly more solutions in the near future in-line with customer demand.
“We’re in early days and there is so much more we want to build here” says Hiatt. “Our goal is to be integrated with everybody here in that room [the exhibition hall at MRC Vegas 2023].”
As to how Dodgeball plans to acquire customers, it is currently adopting a developer-first marketing approach with a free-tier to allow developers to play around with the product before talking to salespeople. The idea is to help fraud-fighting decision-makers get buy-in from their organizations by bringing onside engineering teams early in discussions. It’s an approach that Hiatt calls product-assisted sales.
Dodgeball also isn’t necessarily targeted at large Fortune 500 enterprises, but at the growing market of medium and even non-Fortune 500 large-size companies growing in the online economy.
“We want to democratize the ability to fight fraud,” says Hiatt. “10% year over year fraud growth is happening somewhere, and its not just to the Fortune 500 companies. Tools needs to be available to the companies that wouldn’t traditionally be the obvious buyers.”
Hiatt concludes, “Fraud is a customer experience problem and being able to see that journey and allow people like me five years ago to actually take control of that is what Dodgeball is about.”
Kipp on the other hand, is a completely different kind of solution – one not focused on fraud prevention but on tackling risk from the angle of merchant-issuer cooperation. Like Dodgeball, the Israel-based startup is offering a new approach to solving an old problem.
Kipp addresses the problem of issuer declines due to perceived cardholder risk, whether due to insufficient funds, fraud or falling afoul of bank-specific policies for approving transactions.
The Kipp platform enables collaboration between merchants and issuers on two levels. The first level enables both parties to address the cost of risk to approve more transactions. If the issuer is about to decline a transaction because of a risk issue, the platform enables the issuer to estimate the cost of the risk and then allow the merchant to pay a premium to cover the cost of the risk, thereby allowing enabling the issuer to accept the transaction. The second level of collaboration on the Kipp platform is the sharing of real-time data between the merchant the issuer in order to reduce the issuer’s false positives and enable the issuer to make smarter decisions. This aspect to the Kipp platform was born from the observation that merchants typically have more data on customers that enables them to better assess the risk posed by a cardholder for a specific transaction. Sharing this data with the issuer should, Kipp believes, lead to more transactions approved.
“There are a lot of conversations lately about the need for more collaboration between issuers and merchants,” says Nir Levy, co-founder and CTO of Kipp. “Lots of companies try to find ways to improve issuer authorization rates, but almost none of them do it by fostering collaboration between issuers and merchants. [We] are taking a unique and innovative approach of putting these two entities together because when the cardholder is clicking the payment button on the checkout page they are actually simultaneously a customer of both the merchant and the issuer.”
Besides its new business approach to an old problem, Kipp’s advantage, according to Levy, is that it has the ability to serve major issuing banks from the get-go. ” “We didn’t invent the wheel…but we took all the right ingredients of payments technology: performance, scalability, redundancy and security and we made sure our platform meets all these criteria,” Levy adds, “As an example our platform responds to the banks very quickly in order to be a inherent part of the authorization flow and we can do that for a large scale of transactions.”
One issue that remains to be seen with Kipp’s approach is whether merchant’s will be willing to pay risk premiums of several percentage points to see more transactions approved. However, Levy sounds confident, taking the success of buy now pay later (BNPL) solutions as an indicator of merchant’s willingness to accept higher fees to grow their customer base.
“The merchant pays between 3 and 6 percent for a [BNPL] transaction that could have been approved by credit card, with a 1-2 percent fee,” says Levy. “They are actually cannibalizing their card-based business, which is cheaper than BNPL.”
Levy believes it only makes sense that merchants would be willing to pay a similar size premium to save transactions for which they would otherwise lose their entire profit margin. Kipp’s Levy also points out that not only does a merchant save their profit margin by paying the risk premium, but they also earn the lifetime value of a potential returning customer who would otherwise be insulted by the card decline and shop elsewhere.
Both Dodgeball and Kipp seem to be addressing interesting fraud and risk problems. Time will tell if they succeed in penetrating the market.
This article was contributed by Ronen Shnidman
