spot the fake Prevention is our mission. proactive next-generation fraud management to combat fraud and enable success. Postbank P.O.S.

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1 spot the fake Prevention is our mission. proactive next-generation fraud management to combat fraud and enable success. Postbank P.O.S. Transact

2 2 proactive is a next-generation fraud management solution with only one goal: to protect your revenue. Fast. With the most advanced hardware systems. Intelligent. A larger-thanaverage team of fraud specialists all highly experienced and well networked. Thorough. Real-time and near-time transactions. Even the basic package includes monitoring. Aware. With an extensive history database. Smart. As well as restricted lists, you can create specific positive lists. Foresighted. Extensive fraud simulations can be carried out on production data. Helpful. Fraud management workshops. Accurate. With customized rules. Transparent. With VIP reporting.

3 Contents 3 Introduction Big opportunities should be grasped with confidence and peace of mind...4 E-commerce and credit cards: security beats risk...5 proactive The fraud management strategies of Postbank P.O.S. Transact...6 At Postbank, fraud management is proactive...7 The key facts about proactive proactive. Three customer-oriented packages...8 proactive Basic All the peace of mind you need: proactive Basic...9 proactive Advanced More stringent, more customized: proactive Advanced...12 proactive Premium Made to measure: proactive Premium...18 Welcome to Postbank P.O.S. Transact Security when you need it...22 Contact details Questions?...23

4 4 Introduction Big opportunities should be grasped with confidence and peace of mind. Cashless payment in the form of card transactions has become an indispensable part of point-of-sale trading, and gives e-commerce a scope it would not otherwise have. E-commerce sales are a very fast-growing branch of the retail sector. EUR billions In 1999 it was worth EUR 1.25 billion in Germany. By 2011 this had increased to EUR 26.1 billion, and in 2012 the figure is around EUR 30 billion, with further growth anticipated. 1 The payment method with the greatest growth potential is the credit card. 2 The facts: More than half of online merchants already offer credit card payments. 27.3% of merchants surveyed reported a higher proportion of new customers after introducing credit card payments. Credit cards come first out of all the payment methods that merchants are planning to introduce. Consumers want the credit card option Because they are so quick and easy to use, credit cards are very popular with consumers. There are over 30 million credit cards in use in Germany alone, with over 400 million transactions being processed every year. This figure too is rising all the time. In online retailing, credit cards are the second most popular payment method after purchase on account. 4 No online merchant who uses credit cards is considering abandoning this payment method. 3 1 German Retail Federation/Statista Study by E-Commerce-Center Handel 2012/IZH6 with the support of Postbank P.O.S. Transact GmbH. 3 ibi research Universität Regensburg GmbH, Study by EHI Retail Institute, April 2012.

5 Introduction 5 E-commerce and credit cards: security beats risk. Online merchants offer credit card payments to satisfy customer demand for a fast, easy payment method that can be used anytime and anywhere. Merchants who offer this popular method of payment increase their sales, while a failure to do so inevitably means lower sales. spot the fake Can you tell at first glance which is the real Mona Lisa and which is fake? Our core competency is to tell the genuine from the fraudulent in credit card transactions by identifying barely detectable data forgeries, filtering them out and blocking attempted transactions. The advantage of the greater revenue generated by credit card sales is counterbalanced by a risk factor. Merchants face the risk of fraudulently obtained card details being used to make payments resulting in the loss of goods or services and the costs of handling the consequences. Fortunately, there is an ideal solution for merchants facing this dilemma. It is perfectly possible to maximize revenue by accepting credit cards while protecting yourself from risk and therefore enjoying maximum peace of mind. For online and mail-order merchants, this brochure explains just how advanced card fraud prevention and avoidance techniques are and how effectively lost revenue can be reduced. As well as peace of mind, there is another vital asset involved: trust. Merchants keep using our products because their trust has been vindicated in day-to-day use. They invest their trust in us, and in return they get a peace of mind that directly and tangibly increases security of sales, makes transaction processes more efficient, and dramatically reduces card fraud and resulting costs.

6 6 proactive The fraud management strategies of Postbank P.O.S. Transact. With Postbank P.O.S. Transact GmbH, merchants can rely on the expertise and service quality of an experienced partner with a successful track record in optimizing fraud prevention in card-based transactions. This means they can exploit the full potential of accepting all the most popular credit cards combined with maximum peace of mind in national, European and international transactions, whether online or by mail order. Card fraud before and after proactive E-commerce average Our products also give online merchants proof of preventive measures, protecting them from the payment of penalties to credit card organizations. Computers & software The facts: Postbank before proactive Postbank after proactive MasterCard (for comparison) Postbank P.O.S. Transact GmbH was founded in 2001 and is a wholly owned subsidiary of Deutsche Postbank AG. Dissatisfied with the fraud detection and prevention strategies then available for card transactions, and to create added peace of mind for merchants, service providers and other stakeholders, the company developed its own anti-fraud system. It was not long before the new system celebrated its first successes at the company itself. Card fraud in e-commerce at Deutsche Postbank AG fell by 70%, while for computers and software, instances of fraud were reduced by almost 80%. Thanks to our prevention system, Postbank currently has a very low payment failure risk of 0.25% for all online transactions. The average rate for credit card companies is much higher. Independent, international, successful Optimizing security in card transactions remains our primary motivation. We represent the front line in the fight against credit card fraud, not only as a rapid response group within the Postbank risk management team, where we detect suspicious activity and fraud strategies, but also in terms of our market position. Our expertise, efficiency, innovation and flexibility, combined with the network, infrastructure and professionalism of Deutsche Postbank AG, have made us unique in Germany. This is our recipe for success.

7 proactive 7 At Postbank, fraud management is proactive. Our fraud management solution proactive is the result of the up-to-the-minute expertise of our team members and the collective intelligence of our network. These are put to effective use in our prevention-based security system. So for online merchants, proactive represents an anti-fraud system with the highest potential for detecting and preventing fraud. The facts: The name of our anti-fraud product, proactive, sums up our promise to our customers. The name comes from the Latin pro ( before, in advance ) and activus ( being active ). Our fraud prevention technology is therefore designed to act in advance. Prevention is our mission. The success of proactive across Europe and its position as our core competency is based on two factors: our experienced experts and our professional network. Postbank P.O.S. Transact GmbH and our processing service provider employ over 20 highly trained experts. Not only do they have in-depth knowledge of mathematics, programming, and criminology, but thanks to daily professional fraud analysis and evaluations, they have up-to-theminute knowledge of fraud patterns. Our second strength lies in the powerful infrastructure of Deutsche Postbank AG and its international network. Our experts have contacts with credit card organizations, banks, the police, and law enforcement agencies. We also cooperate with industry organizations such as the EHI Retail Institute, ECC Handel, Händlerbund, and the German E-Commerce and Distance Selling Trade Association (bvh). Together, this amounts to a major information network providing collective intelligence. It provides industry-specific knowledge and raises awareness of special security requirements in different markets.

8 8 The key facts about proactive proactive. Three customeroriented packages. Halting fraudsters in their tracks: proactive works in advance to make sure criminal ideas, strategies and attacks come to nothing. This prevention strategy is always tailored to the individual requirements of the merchant. We do not offer a onesize-fits-all solution, but the optimum solution for every merchant be they a small or medium-sized business, a major retail chain or an international online store. The facts: proactive is consistently designed to minimize loss of goods and services. It is also designed to prevent over-zealous security mechanisms from blocking legitimate transactions. proactive is equally suitable for small and mid-sized companies, major chains, and international online stores. Deutsche Postbank AG offers a range of effective, made-to-measure fraud management services, tailored to specific customer and industry needs and the demands of international business, that reduce instances of fraud and minimize the costs associated with card fraud. To provide the right prevention solution for every business, we offer online merchants three effective proactive packages: proactive Basic, proactive Advanced, and proactive Premium. Our key services include: Real-time monitoring of transactions for active fraud prevention Near-time transaction analysis to detect fraud patterns Customer-specific consulting and services

9 proactive Basic All the peace of mind you need: proactive Basic. When merchants sign an acceptance contract with Postbank they receive all the services of the proactive Basic package, including proactive Real Time Basic, proactive Near Time Basic, and proactive News. This package is recommended for smaller and mid-sized online or mail-order merchants operating on a national level. spot the camouflage Our proactive fraud management also stamps out fraudsters who believe they are very clever and well camouflaged. We monitor all transactions in real time and block fraud attempts in milliseconds before the sale is completed. 9

10 10 proactive Basic The near-time service is available Monday to Friday, 8:00 am - 6:00 pm. Cases of suspected fraud are analyzed within 24 hours during these service hours. Cases that arise at weekends and on public holidays are processed on the next working day. The facts: proactive Real Time Basic Authorization requests sent to merchants are monitored, analyzed and evaluated in real time. The real-time monitoring of all transactions allows fraud attempts to be prevented before a sale is completed. The system offered by Postbank verifies authorizations using transaction-specific rules in a matter of milliseconds, so the speed of the transaction is not affected. These rules are continually updated by fraud management experts to reflect new fraud patterns and industry-specific factors. If there are grounds for suspicion, Postbank will reject the authorization request. If this happens, the request is not even forwarded to the card organization or issuing bank. As a result of the rejected authorization request, the transaction between the merchant and the card holder does not take place because the shop software is unable to complete the payment process. If the shop payment software is appropriately configured, the merchant can see that the rejection was due to suspected card fraud. The system monitoring service is available 24 hours a day, 7 days a week. based on the Postbank rule database. The sophisticated analysis is based on over 1,000 transaction parameters. With the help of this tool, losses from suspicious sales can be successfully reduced. If a suspicion proves justified, our expert team will contact the merchant to agree on the steps to be taken to avoid future fraud and fees and penalties. The near-time solution is especially useful for merchants who supply goods and services after a delay, such as mail-order companies, giving them time to check up on suspected fraud for themselves. The aim is to avoid rejecting transactions unnecessarily while reducing instances of fraud. proactive News News.Transaction, the newsletter published six times a year, keeps proactive customers informed about card fraud and prevention measures. The online newsletter is published on the first Tuesday of each publication month. This information is compiled for readers by Postbank specialists based on market observations, information from card organizations, research and analysis of fraud cases. Merchants can use this information to take active prevention measures to protect themselves against card fraud. proactive Near Time Basic Near-time analysis is used to detect fraud patterns and prevent them from occurring in the future. These measures and rules, performed by experts with extreme sensitivity, maintain the optimum balance between assuring secure transactions and avoiding uncertainty for the merchant. Our fraud management experts check and analyze suspicious sales using extensive transaction- and customer-specific rules

11 proactive Basic 11 proactive fraud management system Online purchase using card 1 payment. The merchant sends the data to Postbank through the payment service provider. The proactive fraud 3 prevention system uses defined rules to analyze authorizations and transactions. Analysis of 4 suspicious transactions by a fraud detection team. Fraud analysts 5 continually evaluate the data and ensure continuous improvements to the rules, which impacts immediately on the monitoring of transactions. Fraud analysts 6 Bank Payment service provider Merchant notified 7 in case of alarm. Fraud detection team

12 12 proactive Advanced More stringent, more customized: proactive Advanced. Our second package, proactive Advanced, comes with a range of additional measures and modules for the secure processing of credit card transactions. In addition to the features of the proactive Basic package, it includes address verification during authorization and post-processing, workshops and webinars on preventive loss minimization, and customized card management, for example through the use of additional customized restricted lists. spot the anomaly proactive can be tailored to the merchant s specific needs. The system denies transaction access to unverified customers and only lets them through where there is no fraud or deception only a legitimate sale.

13 proactive Advanced 13 proactive Advanced includes extra modules on top of the proactive Basic package: restricted list/positive list, Electronic Address Verification Service, Manual Address Verification Service, and the Fraud Education webinar. These modules are recommended for major chains and international online stores or mail-order companies. The facts: proactive Advanced restricted list In contrast to standard card restriction lists, with proactive Advanced the merchant can independently opt to block certain cards, BINs, or whole countries for a set period of 90 days for his own sales portfolio. All authorization requests for cards on the restriction list will be automatically rejected. Restrictions can be imposed based on: Previous negative experience with certain cards and their holders or issuers However, exceptions can also be defined. Specific cards and issuers/bins can still be accepted if the merchant chooses to accept them (see proactive Advanced positive list). proactive Advanced positive list The positive list contains card data which the merchant has specifically chosen to accept. The merchant can choose independently, for his own sales portfolio, to accept certain cards for a defined period of 365 days. These cards will then be processed as normal in future authorization requests. These cards will not be included in near-time fraud analysis and there will be no further checks or merchant notifications for the cards on this list. The specified cards for example from defined risk countries are usually the subject of near-time analysis and are classified as high-risk by the system. However, to the merchant these cards are used by important customers with high sales volumes usually regular or at least verified customers. Previous negative experience or business strategies involving cards from certain countries Actual suspicious cases relating to cards/bins, discussed between Postbank and the merchant, for which a restriction was agreed as a preventive measure.

14 14 proactive Advanced Restricted list The decision to block a card is 1 always taken by the merchant, who authorizes Deutsche Postbank AG to do so. The merchant takes into account the applicable legal conditions. Card numbers are collected 2 and if necessary stored and sent to Postbank in accordance with the PCI-DSS standard by the merchant or the merchant s service provider. Once the blocking message is 3 received, the card is blocked in proactive. All subsequent authorizations 4 and sales for this card holder number are rejected (realtime). The card is blocked for 90 days. Positive list The decision to accept a card is 1 always taken by the merchant, who authorizes Deutsche Postbank AG to do so. The merchant takes into account the applicable legal conditions. Should cases of fraud be made 2 possible nonetheless with these cards, the merchant is liable for losses incurred by him or Postbank. Card numbers are collected 3 and if necessary stored and sent to Postbank in accordance with the PCI-DSS standard by the merchant or the merchant s service provider. Acceptance is valid for days. The cards are then processed normally in further authorization requests and no longer considered in the neartime fraud analysis.

15 proactive Advanced 15 proactive Advanced Electronic Address Verification Service The Electronic Address Verification Service (AVS) is a special security feature only offered by a small number of acquirers. It allows online and mail-order merchants to check that customers are using payment cards legitimately. Because the online merchant cannot physically compare the signature on the sales slip with the signature on the card, and PIN authentication cannot be used, a different method of verification is required. Because verification takes place immediately, in contrast to the proactive Advanced Manual Address Verification Service there is no delay in the merchant s authorization process. This requires the merchant or the merchant s service provider to have a specific infrastructure. In order to use the service, when an authorization request is presented the address details must be entered in the fields specified in the technical specification. Postbank supports the proactive Advanced Electronic Address Verification Service in all available authorization protocols (GICC and KAAI). Only some countries/markets support electronic address verification systems. These include the USA, Canada and the United Kingdom. For all other countries we offer the proactive Advanced Manual Address Verification Service. Electronic Address Verification Service The merchant uses the 1 proactive Advanced Electronic Address Verification Service to undertake immediate address verification as part of the regular payment process. As part of the authorization 2 request, the address details are forwarded to the bank which issued the card (issuer) by Postbank. In addition to the standard 3 authorization checks, the issuer checks the address data provided that this service is supported. The numerical components of 4 the address data are checked: the postal code and numerical parts of the first line of the address (usually the house number). The merchant can use the 7 results to decide whether to accept the payment and provide the goods or services. Postbank provides the 6 merchant with the result in the authorization response in a specific code 1. 5 The issuer provides the result of the address check as part of the authorization response, independently of the Postbank authorization status.

16 16 proactive Advanced proactive Advanced Manual Address Verification Service The Manual Address Verification Service module is available as part of the Advanced package. The online or mail-order merchant, who is particularly anxious to avoid risk where high-value sales are concerned, or perhaps has initial suspicions, sends an inquiry to Postbank with the address details. Within two service days the merchant will be notified whether the identity of the card holder matches the card details, so he can decide at his convenience whether to ship or withhold the goods. This module is a useful security tool for merchants who supply goods and services after a delay, allowing them to obtain extra security should they be in any way suspicious. Merchants use the proactive Advanced Manual Address Verification Service to perform address verification quickly, at short notice and without the need for any special infrastructure. Manual Address Verification Service The merchant calls Postbank s 1 specialist hotline or faxes the card holder number and address received from the customer for verification. The specialist contacts the 2 bank which issued the card and passes on the relevant information. The issuer checks the address 3 data. The card number and address 4 data are checked to see if they match. The merchant can decide at 7 his convenience whether to ship the goods or hold onto them and obtain extra security should he be in any way suspicious. The specialist contacts the 6 merchant (by phone/fax) and gives him the result within 2 service days. The issuer provides the 5 specialist with the result of the address check.

17 proactive Advanced 17 proactive Advanced Fraud Education These webinars provide expert advice on successful card fraud prevention, tailored to the merchant s own business, in a compact and effective format. The service consists of three phases: Analysis of the company s situation, taking into account industry, customer structure, and sales patterns. Follow-up web and phone conference to discuss typical fraud patterns and steps for early fraud detection and prevention. Review of implemented measures and if necessary updates and additional measures. proactive Advanced Fraud Education The workshops take the 1 form of a web and phone conference where the fraud management experts from Postbank interactively explain the content to the merchant. The merchant views an online presentation with sound provided by phone. The merchant s questions are discussed and answered on this platform. As well as advice, the merchant 4 is provided with electronic documentation containing all the important information. This includes a presentation of the analysis results and recommendations. Following the online workshop, 5 documentation of agreed and recommended measures for other discussed issues is provided. The second workshop 6 conference takes about an hour. During this time, the merchant receives updates and additions to the original documentation. The experts at Postbank 2 attach great importance to the merchant understanding the principles of the card acceptance process and the links with card fraud and prevention. For teaching purposes, 3 the number of merchants participating in the workshop conference is limited to six. The first workshop conference lasts two hours on average.

18 18 proactive Premium Made to measure: proactive Premium. proactive Premium allows merchants to take advantage of tailored fraud prevention services whenever they need to, as an addition to proactive Basic. The available modules include Custom Rules, VIP Monitoring, Alert, Fraud Reporting, and Consulting. spot the oddity With proactive there are no limits to the individualization of fraud prevention rules. Even large international merchants can adapt the rules specifically to their business. Even in high-risk markets, this means merchants can tell who is a genuine customer and who is only pretending to be.

19 proactive Premium 19 We recommend this package to major merchants operating in high-risk markets. A detailed description of the services on offer would be beyond the scope of this brochure. For free in-depth information, please contact our sales team or one of our sales partners. Please refer to the Contact Details. The facts: proactive Premium Custom Rules Custom rules are a made-to-measure service. Deutsche Postbank AG will define and test specific fraud monitoring rules for the individual merchant. At the merchant s request, the rules will also be continually developed on the basis of the available data. As an addition to proactive Real Time Basic, custom rules are taken into account in real-time transaction monitoring. These rules essentially use the same information as the basic real-time fraud monitoring rules, but because they are tailored to the individual merchant they are specifically adapted to the particular features of the merchant s sales patterns. proactive Premium VIP Monitoring VIP Monitoring is offered to Premium customers as a way of checking and evaluating suspicious transactions in near time on the basis of extensive data. Suspicious cases are immediately subjected to thorough analysis and evaluation by Postbank s own fraud management experts or service providers. Should the suspicion be confirmed, a Postbank fraud management investigator will call the VIP merchant immediately to try to prevent any loss arising from this specific transaction. Steps will also be agreed on to avoid subsequent fraud and additional fees and penalties, again in near time. This service is performed within no more than 30 minutes on the basis of the priority classification of VIP customer cases. It is available to VIP customers on working days, Monday to Friday 8:00 am to 6:00 pm and Saturdays 8:00 am to 1:00 pm. proactive Premium Alert With this exclusive, fast and direct service, if fraud is suspected, Premium customers receive an alert during the payment process, allowing them to react as quickly as possible. If a suspicious case is detected in the near-time fraud analysis, the merchant receives an notifying them of the facts and listing recommended measures. alerts can prevent losses as well as preempting future losses. In the near-time fraud analysis provided with proactive Basic, transactions are checked using stricter and more extensive rules than in the real-time verification. If a suspicious case is detected in the near-time analysis, an immediate notification is sent to an address specified by the merchant (usually an inhouse fraud prevention officer).

20 20 proactive Premium This alert identifies the suspicious transaction and prompts the merchant to wait before shipping the goods or rendering the service, to verify the transaction carefully and, in the event of doubt, to credit the transaction amount back to the card holder. The contains a link to the Security area on the Postbank website, where the recipient can find support and additional information. This is also where merchants can access various safeguards (IP check for e-commerce, request for copies of ID, and the proactive Advanced Manual Address Verification Service). If the fraud management experts at Postbank believe the suspicion of fraud is confirmed, they will contact the merchant within the scope of the Near Time Basic package by phone in addition to the alert. proactive Premium Fraud Reporting Fraud reporting means the complete documentation of recent fraudulent activity affecting the merchant together with expert evaluation and recommended measures. The proactive Premium Fraud Reporting module lists: Suspected cases of fraud Transactions reported as fraud by card organizations Fraud chargebacks (card holder complaints) Fraud-related retrieval requests Fraud Reporting also contains a statistical part showing: Ratio of declines to sales Total number of declines, divided into proactive declines and issuer declines Ratio of chargebacks to sales Ratio of fraud alerts (categorized by credit card brand) to sales Risk to profitability: a case study The problem A European merchant sells service vouchers. It regularly experiences a small number of fraud cases. These result in a large number of chargebacks. The merchant faces high chargeback costs. The solution Implementation of the Postbank real-time fraud prevention program proactive Extensive simulations performed in collaboration with the merchant, followed by definition of rules with proactive Premium to monitor transactions

21 proactive Premium 21 The fraud report is supplemented by a qualitative assessment by Postbank s fraud management experts and a list of recommended measures. The report, in the form of an Excel spreadsheet, is sent to the merchant on a monthly basis for the reporting month by the fourth working day of the following month. It is sent to the merchant s chosen address. proactive Premium Consulting proactive Premium Consulting includes an extensive range of tailor-made consulting services on fraud management: Definition of individual rules Individual simulations of transactions and transaction models to create optimum rules Verification of the effectiveness of existing rules using real transaction data Fraud reduction workshop Individual projects All consulting services are available on working days (Monday Friday) by arrangement with the merchant. With proactive you can... Achieve significantly below-average fraud rates Cut back on your own resources Protect your revenue Make your processes more efficient Keep costs down and generate higher margins Protect your competitiveness Avoid fees and penalties

22 22 Welcome Security when you need it. Business is all about seizing opportunities. Especially when you are given the chance to optimize your business success by making better use of market potential. As an e-commerce merchant, you are ideally placed to do this. By offering credit card payments you can exploit national, European and global market opportunities by responding to the consumer demand for a fast and easy payment method. The risk is manageable: with an experienced anti-fraud specialist at your side, you have access to methods and resources that minimize potential losses through card fraud. We can offer expert advice and deploy the most effective risk management strategy for your needs. The principle is very simple: security beats risk. If you want to develop your e-commerce business, do business with confidence, accelerate your business and seize opportunities, then we have something in common. Welcome to Postbank P.O.S. Transact GmbH.

23 Contact details 23 Questions? If you are interested in credit card acceptance with proactive, call us today and we will be happy to tell you more about the new fraud prevention system from Postbank. Postbank Card Acceptance Service Phone: Fax: Disclaimer Please note that this document has been produced with the greatest care and using careful research, and is for general information purposes. However, we can accept no liability for the content of this document. Only contractual agreements between Postbank and its contractual partners shall be definitive.

24 Postbank P.O.S. Transact Postbank Card Acceptance Service D Nürnberg Phone: Fax: Postbank P.O.S. Transact GmbH Frankfurter Strasse D Eschborn Postbank P.O.S. Transact 100 % chlorine-free bleached pulp POS Valid at: September 2012