Hak5 Case Study
Decrease in decline rate
Darren Kitchen developed an affinity for coding as an 8 yr-old boy on a computer that was two years his senior. At the age of 22, Kitchen founded Hak5, a cybersecurity company, in a townhouse in Williamsburg, VA. What began as a 24/7 live-streaming, podcasting, DIY video hacking series, way before Twitch existed, quickly found commercial success once their online store was founded. The company now boasts YouTube’s longest running channel with almost a million subscribers, offers an award winning podcast, and an inclusive cybersecurity (a.k.a hacker) community. The Hak5 online store sells leading pentest gear, hardware and software that aids individuals and businesses to identify security vulnerabilities that can be exploited, to preemptively secure their IT systems.
The Fraud Problem
After fielding endless requests from Hak5 fans, seeking purchasing opportunities of products that were discussed or created for Hak5 video podcasts, Darren Kitchen, Founder and CEO of Hak5, finally decided to commercialize the company. Starting with a few bespoke, made-to-order items in his living room, the business quickly ballooned into multiple product lines sourced in various countries and a 5000 sqft warehouse in California. The logistical nightmare of scaling the rapidly growing company quickly overwhelmed Mr. Kitchen.
The category of tasks that took up the most resources with the least amount of return was the battle against fraud. Being burned early on with high value fraudulent orders, Darren knew he could not ship out orders without reviewing them for fraud, and took upon himself the responsibility of fraud prevention. There were several pain points Darren was facing. The most pressing stemmed from false declines. In an effort to reduce fraud chargebacks, Darren implemented rigid rules, such as not shipping to any address other than the billing address, that caused many legitimate customers to be declined. Equally damaging was the negative reaction to Hak5 efforts to obtain verifying data in its fraud prevention efforts, such as requesting images of ID or proof of physical possession of the credit card being used. Furthermore, being enormous proponents of online privacy and cybersecurity, Hak5 virtually trains their fans on how to use proxies and mask their identities, resulting in a significant portion of their customer base having an online appearance eerily similar to that of a fraudster’s or scammer’s and made fraud detection much more difficult.
Darren, who makes a habit of applying the 80/20 rule to everything, knew unequivocally that spending endless hours manually reviewing orders was highly inefficient, and that a fully automated solution was imperative.
The First Attempt
Hak5 opted to use Signifyd to automate fraud prevention. At first the solution seemed to weed out fraud well enough to deem the partnership a success, but that assessment did not last. After 2 years of service, Kitchen became concerned with the lower than expected approval rates that the Signifyd system produced. When he tried to decipher the logic behind the algorithm’s decisions, he was met with esoteric acronyms and an unresponsive Signifyd team. Disgruntled customers were reaching out, perturbed by their declined orders, and the Signifyd solution did not allow Hak5 any recourse in resolving the mistaken classification. The system lacked flexibility and a merchant controlled ‘Block List’ and ‘Allow List’ that could override a Signifyd decline. The problem got so bad that Darren found himself devising ways to “trick” the Signifyd system to allow those orders to go through. The solution was causing more problems than it was solving and Darren realized it was time to look for a better solution.
The search for an effective solution took Darren to the Shopify App Store where he began with reading Signifyd’s customer reviews. He figured he couldn’t be the only one struggling with the system, and he was right. His experience and sentiments were reflected in the feedback of many frustrated Signifyd customers.
His next step was to peruse the Shopify business profiles and app reviews of the other players and services in the fraud prevention space. NoFraud easily emerged as the frontrunning candidate meeting all of Hak5’s requirements: NoFraud was fully automated, yet still allowed for merchant involvement. The solution provided merchant maintained ‘Block/Allow’ lists, and the reviews of NoFraud customers all reported a high level of responsiveness and collaboration from the NoFraud team. Additionally, there were several 5 star reviews from former Signifyd customers, which solidified Darren’s decision to try NoFraud’s solution.
Integrating With NoFraud
The largest obstacle to switching from Signifyd to another solution was the fear of the cost of transferring from one system to the other. Being intimately familiar with all things computer and technology related, the Hak5 team anticipated that an architectural change in the eCommerce machine would carry a heavy price tag in terms of lost or delayed orders during the transition.
However, their fears were entirely for naught. The entire integration took less than one hour. What they presumed would involve multiple departments and a lengthy back and forth procedure, involved just one engineer and a salesperson who guided them through all the code changes, API changes, and private app updates over the phone.
Darren describes the relief he felt watching that very first order sail smoothly right through the Shopify and NoFraud systems. The order was approved and payment was captured almost instantly.
The NoFraud Difference
The usability and transparency of the NoFraud system gives Hak5 the confidence that the system is making the correct decisions. When needed, Hak5 has control over orders and can make individual decisions, such as ‘always allow’ or ‘never allow,’ and they can even accept phone orders. Their decline rates have declined 40%, bumping up their approval rate from 93% to 95%, chargebacks have decreased 55%, and legitimate customer declines have all but disappeared.
“The difference between Signifyd and NoFraud is akin to the difference between day and night. NoFraud understands how businesses operate, it is obvious that they have worked with eCommerce businesses of this size, they are familiar with the pain points eCommerce merchants face and they care about our success. I can easily see how managing fraud manually and poorly could literally bankrupt a company going through exponential growth. I am relieved and grateful to have partnered with NoFraud.”Darren Kitchen
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