accenture leadership series: online fraud is here
TRANSCRIPT
Sponsored by Vesta Corporation
Online Fraud is Here - What’s Your Strategy?
About Vesta
Payment Expertise- $12 billion in transaction volume processed annually- Over 20 years of experience processing digital payments for global brands
Loss Prevention Expertise- Experts in high risk CNP transactions: ticketing, mobile, virtual gift cards- State of the art risk management evaluation platform
Leading comprehensive payment gateway with proven fraud protection.
Chris UriarteChief Payments Officer
Leads development of global payments products and services
American Express VP & Head of Int’l Operations and Implementations
– Chairman’s Award for Excellence– Amex Pinnacle President’s Award
ReD Chief Technology Officer– Led the company in product, research,
development and strategy growth to over 19 billion annual card transactions
– Industry recognition
– InfoWorld Magazine CTO 20 Award
– Presented at countless industry conferences and industry trade organizations
Online Digital Products
What’s your Strategy?
Online Fraud is Here…
Growth
Prevent Fraud, Increase Revenue
VulnerabilityHow business processes & practices influence digital product fraud
SolutionsStrategies supporting the digital lifestyle that every retailer should consider
What is the Digital Experience?
55% of
U.S. adults own smartphones
as of 2013
12
3
Confirmationnamecard
#$
1
Ticket
APPnamecard
#$
Consumer preferences are changing and demanding convenience through digital products
Growth
$2B2013 eBook
(20% of all book sales)
>$5B2014 Music Download
(39% of $15B globally)
>$118B2014 Digital Gift Cards
(8x more than 2012)
$57B2013 Digital
content sales globally
Digital Gift Cards
• Part of overall payment strategy• Increase in average spend
• Opens new shopping channels• New customers
Opportunities
Challenges• Immediacy of delivery• Customer experience• Must be mobile enabled• Lack of detailed fraud and data elements• Minimal purchase data elements• High attack rate• Ease of monetization
Gift Card Growth
2012 2013 2014 2015 2016 $-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
Gift card spend & eGifting spend ($Billions)
Source: CEB TowerGroup, “Gift Cards State of the Union 2013”
Growth
Growth of eGift purchases
Growth of card-not-present purchases
Increase in fraud
Vulnerability
600+ Data breaches reported in 2013
30% over 2012
Identify Theft Resource Center, “ITRC 2013 Breach List Tops 600”, Feb. 20, 2014
Cards affected by data breaches in past year40+
Million Source: Bloomberg Business Week, Michael Riley, Ben Elgin, Dune Lawrence and Carol Matlack, Mar 13, 2014;
Vulnerability
The fraudster’s price for a stolen card’s data
$1
Retailer Challenges
EMV Liability Shift
Fraud App / Acct Takeover
Counterfeit
Mail Nonreceipt10%
30%
50%
70%
2001 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘08 ‘10 ‘11 2012
Card Fraud in U.K. 2001-12
Card-Not-Present
Source: UKPA
Increased ComplexityMerchant Time to Assess Risk10
mins 4 hr 24 hrs1 hr 48 hrs
Financial Risk
High
Low
Laptops
Dog SuppliesChildren’s Clothes
eBooks
Physical Gift Cards
Watches
Virtual Gift Cards
Online Gaming
Travel
Fraud Control Lifecycle
Time lag for solutions to take effect
Valu
e of
frau
d
Time2006 2013
Familiarity with weaknesses and
technology increases fraud
Solutions implemented to reduce fraud
Fraud rises as new technologies are
cracked and new weaknesses found
New solution is implemented to
reduce fraudImplies
innovation
How Fraudsters Turn Data into Dollars
1Obtain Stolen Payment Data
How Fraudsters Turn Data into Dollars
2Purchase
Digital Products
Music Digital Goods
Online Gaming eBooks
How Fraudsters Turn Data into Dollars
3Monetization of
Goods
Acquire Product Access
Sell Product Access
Finding Balance
• Guard retailer from high risk of digital product fraud without being at the cost of lost sales or a good customer experience
Objectives Challenges• Provide a low friction customer
experience• High risk of immediate delivery• Often high false positive rate
Fraud Management
What’s Your Strategy?
Digital Fraud Management
Complete Outsourcing
In-House
• Increase resources
• Difficult to review
• Adds more third party tools
Third-Party Services
• Create new segmentation
• Develop fraud strategies
• Increase out sort rate for reviews
• Segment all digital products to a third party
• Use service with option for indemnifying transactions
• Form partner relationship with vendor
Criteria for Success
Complete Outsourcing
In-House
• Use existing resources and systems
• Achieve same KPI levels
• Same customer experience
Third-Party Services
• Equal or better than current in-house
• Achieve same KPI levels or better
• Same customer experience
• Equal or better than current in-house
• Achieve same KPI levels or better
• Same customer experience
Fraud Management
How did you determine your
strategy?
Strategy Drivers
Customer driven
Too much fraud?Stop selling the product!
Cost driven $Operationally driven
• Customer experience is king
• Card-not-present transaction
• No physical address required for delivery
• Instant delivery of product, that is easy to monetize in a secondary market
• Driving competitive growth as part of an overall customer acquisition strategy
• Traditional fraud prevention solutions won’t work
Challenges of Digital Sales for Online Retailers
Measuring Success
Will this be your experience?
Authorization Decline Rate
5% - 35%
Risk Decline Rate
3% - 20%
Settlement
60% - 90%
Chargeback Rate
0% - 1%
Net Settlement
Your Strategy: Assess, Plan & Execute
Assess the current state of your program• Will it provide the level of loss prevention for new digital products?• Will it provide the highest level of customer experience? Equal to other products?
Plan• Can you segment payment and risk processing by SKU or other segmentation?• Do you have segmented KPIs in place today?• Standard ROI matrix or process? Decision threshold?• If implementing an in-house solution do you have the resources?
Execute• Will you be able to implement and reach success milestones, KPIs?• How will implementation impact current processes?• Do you have the systems, training and people resources to reach your goals?
