Keeping A Lid On Payment Fraud Joni Lovingood, CRM, CFE Corporate Property & Casualty Sales Specialist CUNA Mutual Group

Transcription

1 Keeping A Lid On Payment Fraud Joni Lovingood, CRM, CFE Corporate Property & Casualty Sales Specialist CUNA Mutual Group CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited 2015 CUNA Mutual Group, All Rights Reserved.

2 Today s agenda We ll cover: Fraud trends Tactics used by fraud perpetrators EMV progress report Mobile wallets and tokenization Effective strategies in fighting plastic card fraud 2

3 Card fraud comparison Global card fraud Up 18.5% year-over-year $16.31 billion in 2014 Up 3.7% year-over-year per $100 totaling $ U.S. card fraud Up 11.6% year-over-year to $ per $100 as compared to $ for the rest of the world in 2014 What is your metric and year-over-year fraud performance? Source: July 2015 Nilson Report, Issue

4 What do you think? What are the emerging types of consumer payment fraud trends in the marketplace? 4

5 Common consumer payment fraud trends Local Fraud ATMs PIN-less Debit Less than 50% of breaches are known Debit card compromises at ATMs are up 174% year-over-year PIN-less Debit volumes increased by more than 500% Source: Rippleshot Source: March 2015 LetsTalkPayments.com Source: March 2015 LetsTalkPayments.com 5

6 Key elements of protection 1 2 EMV Mobile Wallets 3 4 Internet Payments Fraud Mgmt 6

7 EMV recap EMV is an effort to provide a more secure payment card by using dynamic authentication Why use EMV technology? Europe saw an 80% reduction in credit card fraud after completing migration to EMV during the same timeframe, the U.S. has witnessed a 47% increase Fraud liability shifted to weakest link as of October 2015 More work to do: Initial cards have come with magnetic stripes and EMV EMV does not address Card Not Present fraud ATMs and gas stations coming soon EMV Internet Payments Mobile Wallets Fraud Mgmt Source: 2013, Discover Financial Services Source: 2012, EMVCO 7

8 What do you think? We re past the fraud liability shift that occurred on October 1 st, What are you seeing from a fraud perspective? 8

9 Fighting for space EMV Mobile Wallets Internet Payments Fraud Mgmt More than 150 mobile wallet options available 9

10 Selecting mobile wallet solutions Look for three key elements: 1. Tokenization 2. Encryption 3. Strong authentication options Also consider: Strong authentication options when provisioning virtual cards Cost Competition Ubiquity in the marketplace Consumers will select the winner, not credit unions Most likely not one winner 10

11 Typical payment card transaction Consumer Retailer Processor Card Networks Processor Financial Institution 11

12 Apple Pay basics Virtual Card Provisioning 1. Type in card information into your Apple Wallet or use isight to take a picture of your card 2. Using encryption, information (including device profile) is sent to the credit union to authenticate the member 3. A unique Device Authentication Number (DAN) is created, encrypted, sent back to the device and stored on the device s Secure Element along with keys to create a dynamic security codes for each transaction 12

13 Apple Pay basics In-Store Transacting 1. When completing a transaction at a NFC enabled terminal the device will recognize the signal across short distances and open the Apple Wallet 2. Authentication must then occur through Touch ID or a passcode 3. Secure Element sends the (DAN) and a transactionspecific dynamic security code In-App 1. Prepare your purchase through the retailers App 2. Apple Pay receives your encrypted transaction and re-encrypts it with a retailer-specific key before the transaction information is sent to the retailer 3. Secure Element sends the same information as an in-store transaction 13

14 Internet payments growth EMV Mobile Wallets Internet Payments Fraud Mgmt 14

15 Main types of fraud management services 1. Processor-based 2. Member-based EMV Mobile Wallets 3. Merchant-based Internet Payments Fraud Mgmt 15

16 Consumer Payments Credit Union Loss Scenarios 16

17 Consumer payment fraud examples CASE STUDY 1 Scenario $39 million credit union Card-present fraud on debit cards with no PIN Multiple gas station purchases at the same gas station Out-of-state Transaction performed within minutes of one another Mitigation Force PIN Globally Certain geo-locations Certain BINs Reduce velocity settings Target $ transaction amounts Identify CPP Block / Reissue affected cards Place cards in a higher risk profile Join local FCI Focus on member education to monitor transactions 17

18 Consumer payment fraud examples CASE STUDY 2 $2 billion credit union Scenario Card-present fraud with no signature required Debit transactions under $50 All transactions from large retailer Mitigation Use PIN-Less identifier to move transactions to a higher risk profile Target retailers by MCC code and/or text field Identify CPP Block / Reissue affected cards Place cards in a higher risk profile Join local FCI Focus on member education to monitor transactions 18

19 Consumer payment fraud examples CASE STUDY 3 Scenario $948 million credit union Variety of fraud on both debit and credit Fraud superseding expected fraud rules in place Credit union recently switched card processors Mitigation Check fraud rules and parameter setting regularly to ensure alignment with risk tolerance Ensure strong authentication when removing blocks from transaction or approving overseas travel 19

20 Risk Management assistance / questions Complete Ask a Risk Manager Contact a CUNA Mutual Group Risk Management Consultant at Visit the Protection Resource Access to RISK Alerts, white papers, webinars and training, risk insight dashboard, risk self-assessments Exclusive access for CUNA Mutual Group Bond policyholders Accessible through < My Services (UserID / Password required) 20

21 This presentation was created by the CUNA Mutual Group based on our experience in the credit union and insurance market. It is intended to be used only as a guide, not as legal advice. Any examples provided have been simplified to give you an overview of the importance of selecting appropriate coverage limits, insuring-to-value and implementing loss prevention techniques. No coverage is provided by this presentation/ publication, nor does it replace any provisions of any insurance policy or bond. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Insurance products offered to financial institutions and their affiliates are underwritten by CUMIS Insurance Society, Inc. or CUMIS Specialty Insurance Company, members of the CUNA Mutual Group. Some coverages may not be available in all states. If a coverage is not available from one of our member companies, CUNA Mutual Insurance Agency, Inc., our insurance producer affiliate, may assist us in placing coverage with other insurance carriers in order to serve our customers needs. For example, the Workers Compensation Policy is underwritten by non-affiliated admitted carriers. CUMIS Specialty Insurance Company, our excess and surplus lines carrier, underwrites coverages that are not available in the admitted market. Data breach services are offered by Kroll, a member of the Altegrity family of businesses. Cyber liability may be underwritten by Beazley Insurance Group. This summary is not a contract and no coverage is provided by this publication, nor does it replace any provisions of any insurance policy or bond. Please read the actual policy for specific coverage, terms, conditions, and exclusions. CUNA Mutual Group 2015, All Rights Reserved. 21