Data Analytics in the Corporate Payment Industry. Bret Hansen Vice President of Technology Services, U.S. Bancorp

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1 Data Analytics in the Corporate Payment Industry Bret Hansen Vice President of Technology Services, U.S. Bancorp

2 Agenda The Daily News Classifications of Complex Event Processing Maximizing Control, Compliance, Cost Savings Through Complex Event Processing Increase Business Stability & Opportunities Through Complex Event Processing U.S. Bank s Complex Event Processing Case Study

3 THE DAILY NEWS THE WORLD S FAVOURITE NEWSPAPER - Since 1879 A former Parks and Recreation director is facing fraud charges after making unauthorized personal purchases with a corporate credit card. She charged over $67,000 of unauthorized purchases. The head of Los Angeles County s Probation department said he has referred allegations of credit card fraud by his employees, as department officials are... Struggling to account for $79.5 million in County funding. Univ. of Maryland employee was convicted for $300,000 credit card fraud from the school over a period of two years. Ottawa bank employee charged with credit card fraud. The employee was ordering new credit cards for closed accounts.

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5 Do you want to save your company millions of dollars a year? Do you want to keep in good standing with your shareholders and customers? Do you want to prevent your company from failing? A well defined Complex Event Processing solution can do these things and more

6 Two Classifications of Complex Event Processing Computation-oriented CEP is designed to execute on-line algorithms Detection-oriented CEP is designed to detect event patterns.

7 Maximizing Control Through CEP Ford writes off $1billion in unnecessary inventory because the R&D department wasn t talking to the Purchasing department A Lehman Brothers employee had a keystroke error which cost the firm $6 million in trading losses W Hotel loses $175,000 honoring 413 on-line reservations for 749 nights posted at $25 instead of $259 PacBell is fined $27 million for mishandling and error

8 Maximizing Control Through CEP Maximizing Business Control Corporate Costs Corporate Policy Corporate Standards Corporate & Government Regulations

9 Maximizing Compliance Through CEP Maximizing Compliance Defining Compliance Rules Reduce Risk Automated Continuous Monitoring

10 Maximizing Cost Savings Through CEP High cost to manually audit transactions Labor Intensive Inefficient Error-prone Program Size $100 MM Average Transaction Size 1 $315 Total Transactions per Year $317,460 Cost to Audit per Transaction 2 $2.38 Audit Sample Size 20% Number of Audits Annually 63,492 Annual Cost of Audit per Year $151,111 References: Purchasing Card Benchmark Survey Results, Palmer & Gupta 2 NAPCP Understanding the Processing Costs and Related Costs

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12 Proactively Identifying Business Opportunities Auditing your business s data can Identify new business partners Identify new vendors to solve problems Identify cost savings

13 Increase Business Stability Automated Auditing Detect fraudulent activities real-time by associating time, people, and events together Reduce surprises Reduce cost of manual auditing Increase reliable outcome of error prone manual process

14 Increase Business Stability Continuous Auditing modeling Monitoring business processes Consistent Auditing trending Ensure corporate cash positioning is strong

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16 How to Mitigate These Issues? Reign in your audit costs? Reduce your risk exposure? Grow your commercial card program? U.S. Bank Payment Analytics

17 What is Payment Analytics? Enhances auditing practices by providing 100% commercial card transaction monitoring Alert: Notifies stakeholders via when rule violations occur Case: Allows users to track progress towards resolving an issue and violations over time Enhanced Reporting: Provides information that tracks credit card spending trends and data for forecasting purposes

18 How Does Payment Analytics Work? RULES Payment Analytics Cases Transaction Alerts

19 Moving from Reactive to Proactive $$$ Value of Action Detects relationships between transactions over time $ Proactive Reactive Event(s) Issue(s) Problem(s) Loss(es) Time 19

20 The Brains behind Payment Analytics Defined templates contain logical arguments (i.e., rules) WHEN THEN statements Client assigns parameters to the rules WHEN a transaction meets all the conditions of the rule THEN create a response Alert: Notifies stakeholders via when rule violations occur Case: Allows users to track progress towards resolving an issue and violations over time Enhanced Reporting: Data is updated as conditions are met 20

21 Available Rule Templates Unauthorized Merchant Categories Merchant Watch List Transactions Close to Single Purchase Limit Large Spend Increase over Average Spend Excessive Use of Convenience Checks Excessive Cash Withdrawals Weekend or Holiday Purchases Account Activity Exceeding Limits 21

22 Benefits Improve Compliance: Manage out-of-policy spend and detect fraudulent activities Enhance Control: Audit 100% of transactions versus a random sample Reduce Risk: Route flagged transactions to the appropriate personnel for review Increase Efficiency: Streamline the audit process with rules that are consistently and continually applied across all transactions Boost Cost Savings: Automate routine audit tasks Broaden Visibility: Record all case details in one central database Expand Revenue Share Opportunity: Realize growth incentives by identifying spend leakage 22

23 Contact Information If you have further questions or comments: Bret Hansen Vice President of Technology Services, U.S. Bancorp