and fraud online Paul Stanley - Chief Executive Officer 23 November 2012

Transcription

1 Dynamic management of risk and fraud online Paul Stanley - Chief Executive Officer 23 November 2012

2 Agenda Growth in fraud and online commerce The requirements for effective fraud prevention Best practice examples New standard for cross-industry collaboration

3 Growth of online commerce Online Payme ent market size ($ $m) 1,600,000 1,400,000 1,200,000 1,000,000, 800, , , ,000 0 $727bn $1.4tm Online commerce forecast* to record compound annual growth rate (CAGR) of 23.1%, US and Chinese markets to draw level in China poised to overtake in early f 2013f 2014f 80% percent of North American and European online sellers to expand into Brazil, Russia, India, Africa, Japan or China by 2013** Source: * Datamonitor ** Gartner

4 Global card fraud $ BN Global card fraud losses Global card fraud losses reached 12 $6.8 billion in expected to 10 reach $10 billion annually by Card fraud losses in UK increased 6 by 9% Jan-June June 2012, to 185 million 4 2 UK online banking fraud losses also 0 increased, by 28% Source: Nilson Report 2010 ReD prevented $2 billion in attempted online payment fraud Jan-Oct 2012 Attempted fraud increased by 7% in volume and 48% in value over this period

5 Fraud has a product lifecycle continuing to innovate is key Solutions implemented to reduce fraud Value of fraud Familiarity with weaknesses in cards and technology drives the value of fraud up Time lag for solutions to take effect New solution implemented to reduce fraud Fraud begins to rise as new technologies are cracked and new weaknesses are found Time Source: Datamonitor

6 Fraud prevention for online merchants

7 Requirements for effective online fraud prevention - merchants Fraud decisions in milliseconds Support for multiple payment types and channels Solutions tailored to sector and customer needs Global data and support for international expansion Collaboration across the payments value chain

8 The need for speed Challenges Instant delivery e.g. digital download Click & Collect Order before 6pm, receive the next day Smaller delivery windows (e.g. digital goods) provide a greater window of opportunity for fraudsters Implication Need for intelligent, real-time fraud prevention solution Ability to instantly accept, challenge or deny transactions Different fraud strategies for different fulfilment deadlines

9 Click & Collect in 15 minutes Challenges Sales blocked to good customers by fraudsters testing cards High manual review costs Rejecting, insulting & losing genuine customers Turning away transactions from high-risk postcodes Solution Unlimited bespoke rules on unlimited variables Real-time processing supporting all payment types Clear KPIs against which to monitor

10 Proliferation of channels Challenges Customers purchase via multiple l channels difficult to know how they will engage next time Volumes of customer data in different places/channels Different fraud profiles per channel Providing a seamless customer experience across all channels Implications A flexible and customised fraud strategy for each channel Fraud strategies must be different but channels must not operate as silos Increased data must be utilised to enable better decisioning

11 Complexity of the payment landscape Challenges Visa & MasterCard are regulated country-by-country, y y, not globally Many payment types to support Multiple technical integrations and maintenance Merchant security requirements (PCI) Multiple currencies and languages Reporting & reconciliation Implications Requires ability to accept and screen all payment types for maximum customer satisfaction (ensure customers don t go elsewhere) Need for a fraud solution which is payment agnostic

12 Enabling multi-channel retailing across Europe Challenges Grow online channel to maintain competitive position Take advantage of international markets Offer customers alternative payment types Throughout, maintain excellent customer service Solution Customised fraud strategy ReD Shield implementation Regular risk reviews and rule updates Results Enabled over 500m new channel revenue Enabled acceptance of alternative payment types such as PayPal Used tools such as time on file to seamlessly migrate customers across channels

13 ReD profile segmentation Same day/next day delivery Mobile payments Non registered / registered PayPal / alternative payments Call centre sales Click & collect International ReD Shield real-time fraud prevention for ecommerce merchants High risk technology Aligned to customer service proposition Marketing segments 3D Secure status Risk strategies aligned to business requirements

14 Rules tailored to sector needs Travel Sample rules More than x txns in y days More than x cards per y More than x amount in y days Internal negative lists Internal positive lists Card origin IP origin i Passenger details Origin Destination One way / return Class of travel Time to departure Payment method Product type Flight Hotel/car Accessories

15 Rules tailored to support international expansion Challenges High transaction volumes during kit launches and promotions - reviews must not delay despatch Concerns about expansion into high risk markets Solution Customised fraud strategy ReD Shield implementation Regular risk reviews and rule updates Results Chargebacks now 0.22% Manual reviews now 7% - down by 71% Club now confident to offer delivery worldwide

16 Fraud prevention for merchant acquirers

17 Fraud prevention challenges for acquirers Maintaining a healthy merchant portfolio and managing attrition Predicting likelihood of collusive or fraud-targeted merchant activity Profiling merchants and monitoring ecommerce behaviour/transactions Recognising fraudulent merchant applications Stopping fraud trends such as forced authorisations' and authorisation reversals Predicting Bust-Out frauds Managing and supporting merchants new to e-commerce (to minimise regulatory penalties and fines) Offering fraud prevention as a value-added service to merchants

18 How financial institutions are combating card fraud Implementation of Chip and PIN Increased PCI DSS compliance among retailers Rollout of Dynamic Data Authentication (DDA) Rollout of updated chip cards (with integrated circuit card verification value icvv) Use of sophisticated fraud detection tools (real time/analytical/ profiling) Widespread use of Verified by Visa and MasterCard SecureCode Continued education of merchants on how to protect POS/PIN devices from attack Continued investment by cash machine owners in technical defences

19 Scalable, tailored fraud prevention Powerful transaction monitoring and risk management Predictive fraud detection ti for credit, debit and private ReD PRISM scalable label cards fraud prevention for acquirers and issuers Sophisticated neural models built to individual customer needs Taking multiple factors into account, to ensure robust decisioning Combining real-time decisioning with post-authorisation monitoring, for optimal combination of speed and analysis Scalable and adaptable a long-term solution keeping pace with changing patterns of fraud

20 The power of PRISM 100% transactions Tailored neural models Positive and negative databases Real-time rules l i l i Near-real-time analysis of fraud events

21 PRISM Proof Positive Card Issuer # Cards Debit - 7+ million Credit million # transactions Debit - average 4.5 million daily Credit - average 1.3 million daily # PRISM users 35 FTE PRISM client since 1999 Debit Scoring Credit Scoring PRISM delivered: Credit - Analysis and Review Debit Real-Time Credit Real-Time 50% reduction in fraud losses $1.1 billion annual loss avoidance (credit card) 3 basis points (credit card)

22 Cross-industry collaboration

23 Fraud prevention across the payments value chain PRISM Merchant Monitor and predict merchant behaviour Acquirers Network Switches PRISM Real Time Real time fraud management Card Issuers RULESPLUS PINPOINT ReD Shield Real time fraud management Industry Hot Card File PoS fraud protection RED1 Gateway International payment gateway Merchants ReD Fraud Xchange Consumers PRISM Near Real Time Near real time fraud management Analysis and review

24 ReD Fraud Xchange

25 In conclusion Dynamic, real-time management of payment fraud is essential Solutions should be tailored to deliver maximum benefit Access to global data and experience gives you a fighting chance Cross-industry collaboration is the ultimate goal

26 ReD A specialist in fraud mitigation and secure payment gateways Global presence and experience Global solutions, tailored to individual customer need Industry leading foresight and expertise Trusted by the world s biggest brands

27 Thank you Paul Stanley, Chief Executive Officer Tel: +44 (0)