E-commerce merchants battling fraud that comes from multiple directions often need to use several different solutions that don’t always mesh well, bogging down the checkout process and inadvertently blocking good transactions.
A San Francisco startup called Bolt is taking aim at those errors with a fraud-detection service that analyzes each e-commerce transaction in real time and guarantees no chargebacks, a pitch analysts say is becoming more common among fraud-solution marketers.
Bolt says its twist is that it pushes all of a merchant’s transactions through the funnel of Bolt’s proprietary payment processing service and a checkout page, magnifying details of each transaction to quickly spot and block fraud.
“Because we power the checkout experience, we can quickly analyze all the relevant data about each specific transaction on the front and the back end,” said Ryan Breslow, the company’s 23-year-old CEO and co-founder who dropped out of Stanford University to launch the firm in 2016.
Bolt’s checkout page appears to be fairly routine, requiring shoppers to enter their name, shipping address, email address and phone number. But Breslow said the direct connection between payment processing and the checkout page is Bolt’s key to blocking fraud.
“Because we host the fields on the checkout page, we can compare the credit card details with the transaction details in a superior way for tracking accuracy and spotting the discrepancies that signal actual fraud,” he said.
The concept requires participating merchants to adopt Bolt for their merchant processing, and switch over to using Bolt’s proprietary checkout page, which can be easily substituted for the default checkout page on most popular e-commerce shopping platforms with plug-ins Bolt supplies, according to Breslow.
Bolt has piloted its service with 100 merchants over the last two years, using an approach that leverages artificial intelligence and machine learning to measure factors including shoppers’ devices, location, behavior and personal information to weed out fraud, frequently running deeper tests to check its own accuracy, according to Breslow.
Bolt sets its pricing by matching merchants’ existing processing fees and charging a separate per-transaction fee that’s in the “low single-percents,” and varies by the merchant’s volume and transaction mix, with a zero fraud liability guarantee.
Merchants that have used Bolt see higher overall sales because the service doesn’t block as many legitimate transactions as many other fraud-screening services, according to Breslow.
“Merchants are seeing double-digit revenue increases because more sales are going through because of the accuracy,” Breslow said.
Analysts say the number of payment processing and e-commerce fraud solutions promising no fraud losses is rising, and their benefits to merchants vary widely.
“While no chargebacks sounds great, the trade-off usually are higher transaction fees for businesses that are already operating on thin margins, and the risk associated with disbanding your in-house fraud team,” said Julie Conroy, research director at Aite Group.
A niche group of merchants is experimenting with zero-fraud models, but most large merchants continue to keep their fraud controls under their own control, Conroy said.
There’s no doubt chargebacks are a growing problem for merchants—for a variety of reasons—a trend that is driving new services promising to eliminate these headaches, said Raymond Pucci, associate director of research at Mercator Advisory Group.
“The fraud-screening solutions category has become a crowded field as many emerging fintechs have joined more established security solution companies, while solutions from merchant acquirers, card networks and issuers are also on the rise,” Pucci said.
Breslow said he’s found strong support from investors, and has raised a solid pile of funds from undisclosed sources to support a team of about 30 data engineers and technologists.
He’s also aware of the risks payments startups face, including one of the biggest flame-outs in mobile payments history—a concept called Clinkle backed by a Stanford dropout that raised $25 million in 2013 for a mobile app meant to serve as an online wallet, before it cratered. “Clinkle never launched and it never had any customers, whereas we’ve been at this for over a year and we have over 100 merchants on board,” he said.