Increase conversion and reduce your online fraudWEDNESDAY, JUNE 25TH 2014GUISTHINIO RIRIHENA, TECHNICAL CONSULTANT

Agenda

Belgian e-Commerce landscape

E-Commerce fraud trends

The true cost of fraud

Fraud Prevention Solutions at Ingenico Payment Services

Fraud Prevention Expertise at Ingenico Payment Services

Case Studies

1 BE Ecom landscape

4

7.000

webshops

100 new

webshops every month

E-commerce in Belgium is expanding

5

2011 2012 2013

1.65Bn

2.06Bn

2.53Bn

Belgian e-commerce in value

Total turnover of all e-commerce transactions processed by Belgian

webshops (with a Belgian entity) over the Ogone platform:

+25.68% +20.65%

6

Belgian e-commerce in volume

Total volume of all e-commerce transactions processed by Belgian

webshops (with a Belgian entity) over the Ogone platform:

2011 2012 2013 YTD

18.23Mn

22.91Mn

27.65Mn

+24.86%+23.15%

7

12 3

Top 3 E-commerce industries

Top 3 remains Travel, Fashion and Ticketing

8

4%

10%

Foreign customers on BE webshops

25%

of the BE E-commerce volume

comes from foreign customers

2%

9

01/09/2012 17/10/2012 02/12/2012 17/01/2013 04/03/2013 19/04/2013 04/06/2013 20/07/2013 04/09/2013 20/10/2013 05/12/201340000

50000

60000

70000

80000

90000Christmas Shopping

2012

Early bookings

Bookings & Summer

sales

Back to school

Christmas Shopping

2013

12/01/2014

Shopping periods

10

Payment methods

2010

2011

2012

2013

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

48.7%

38.5%

34.0%

31.5%

24.3%

27.1%

25.6%

26.0%

11.6%

15.1%

21.2%

23.7%

10.7%

10.8%

10.0%

9.3%

VISA

Mastercard

Bancontact

Bank-Branded Pay Buttons

American Express

Maestro

PayPal

Other

Diners

Bank transfer

Diners Club

2 E-Commerce fraud trends

Fraud Prevention

Tools & technologies

Flow and integration with payment flow & infra

Resources and organization

13

Online « CNP » fraud in Europe

+21,2 %· CNP fraud increased by 21,2 % (2014 ECB report).

· 60 % of European fraud are CNP fraud.

14

Online fraud – trends and prospective view

· In 2013, no less than 1300+ large data breaches.**

· Stolen data volume increases heavily. In 2014, same volume than in 6 months than during full 2013.

Overview of largest data breaches during last years*

*Source: DataBreaches.net, IdTheftCentre, press reportsResearch: Miriam Quick, Ella Hollowood, Christian Miles, Dan Hampson

**Source: Verizon annual Data Breach Investigations Report

More (sophisticated) fraud to come.

15

eCommerce Fraud exposure – per country

15

0.000% 0.200% 0.400% 0.600% 0.800% 1.000% 1.200%0%

5%

10%

15%

20%

25%

30%

35%

40%

Belgium

Netherlands

France

UK

Germany

Spain

Austria

Italy

Switzerland

Denmark

Finland

Norway

Sweden

Fraud rate

Mar

ket g

row

th

Bubble = market size

The true cost of fraud3

17

Total cost of fraud

Direct Financial

Costs

Lost Revenues

Prevention Costs

18

What is your total cost of fraud?

Tolerant policy Tight policy

Low control, low awareness High control but intensive in resources

?

Missed revenuesDirect financial costs

Prevention costs

4Fraud Prevention Solutions at Ingenico Payment Services

20

Fraud Prevention @Ingenico Payment Services

8.000+ merchants· 3 suisses· Petit bateau· Sandro· Zadig&Voltaire· Decathlon· Royal Air Maroc· Mobistar· Jet Air

· EgyptAir· Cotswold· TUI France (Marmara)· Brussels Airlines· Coolblue· Conrad· Paylogic· BonPrix

· Secret sales· Orchestra· Thomas Cook· Christian Louboutin· Bose · LVMH· The Phone House· Bespoke

21

Fraud Prevention Portfolio

Fraud Detection Module

Accept / Deny decision

Tools: BL, risky countries, amount limit, 3-D Secure

Checklist-Accept / Deny / Review decision on single

criteria

-automated decision by real-time trx assessment

-Tools: Up to 70 criteria (BL, GL, WL, AVS Velocity Checks, GeoIP localisation, 3rd

party access

Scoring

-Accept / Deny / Review decision on scoring of all criteria

-Aim: automate decisioning by granular overal real-time trx assessment

-Tools: Up to 70 criteria (BL, GL, WL, AVS, Velocity Checks, GeoIP localisation, 3rd

party access

Fraud Expert-Industry templates,

-20 000+ rules

-Device Fingerprinting,

-Behavioral mapping

-cross-merchant experience-Flex3DS

Capabili

ties

Fraud Expert Checklist

Fraud Expert Scoring

Fraud Expert-Industry templates,

-20 000+ rules

-Device Fingerprinting,

-Behavioral mapping

-cross-merchant experience-Flex3DS

Managed ServicesOutsourced Manual Reviews

Consultancy & Reports

Managed ServicesOutsourced Manual Reviews

Consultancy & Reports

Fraud Prevention Product Portfolio

Ogone Fraud Expert

Tougher on Fraudsters, Simpler for You

Expertise & Technology combined

Full Flexibility, Full Control

23

Ogone Fraud Expert Full Flexibility, Full Control with 2 layers of protection

Merchantcontrolled

rules

OgoneFraud Expert

score

24

Transaction real-time flow with fraud check.

Order

Merchantrules

Expertscore

Globalfraudscore Manual review

ByYou

ByOgoneExperts

Accept

Block

or

25

Merchant rules – Checklist or Scoring

Payment

Cardholder: Nishanth ChandranCard type: MasterCardCard number: *************Expiry date: 12/16 CVC: ***

I confirm my payment

90+criterias

Max. cardusage

Min.amount

Max.amount

Card country

IP address

Airportdestination

Anonymousproxy

…

• Checklist: • Block, accept or review transactions• 90+ criteria• Automate decisions, one parameter

at a time

• Scoring: • Give a weighting to any or all of the

90+ criteria• Define the thresholds at which the

system will block, accept or put transaction on hold for review

26

Fraud Expert Checklist

27

Fraud Expert Scoring

28

Ogone Fraud Expert - Features

Industry templatesAutomatically implements and maintains

sector-specific risk profiles

Cross-merchant intelligenceAggregates the knowledge and experience

gained from other merchants

Cross-parameter checksDetects suspicious behaviour using more than 20,000 rules plus velocity checks maintained by our experts

Merchant-controlled rulesGives you control and flexibility with more than 90 rules you can configure to suit your business

Device fingerprintingIdentifies the unique device used for a

fraudulent transaction and improves tracking

Outsourced manual reviewOffers a manual review of suspicious

transactions by our teams of experts – at peak times, during the holidays or 24/7

Real-time behavioral mappingPerforms real-time correlation of transactions to closely track unusual behaviours

IP GeolocationDifferentiates between threats and genuine transactions by pinpointing the buyer's location

29

Device Identification

It identifies computers & devices used for a transaction beyond IP address, cookies etc.

700 Million + device profiled & growing  

Works in all Operating System & Browsers  

No change in customer interaction 

No additional load time  

No imposition to customer for software

30

Fraud Prevention with Device Identification

abuse

X Name: Mary PoppinsEmail:pop25@gmail.com123 Las vegas blvdLas Vegas, NV702-534-7698IP:206.45.95.01Geoloc: Nevadacc: 4563296511117777

Name: Abraham Zakariaemail: az@chase.com615 E. 35th StNew york, ny212-365-7878IP:94.115.85.10Geoloc: New yorkCc: 5125189074381930

Name: Aaron Wall email: a243@yahoo.com8 Hollyoke AveMinneapolis, MN 320-698-8354IP:72.138.11.9Geoloc: MinnesotaCc: 4123234534568759

suspect

suspect

??

31

Authentication tool : 3-D Secure

• For the following brands : VISA, MASTERCARD, AMERICAN EXPRESS, JCB & DINERS

• Allow liability shift towards issuer

• Fraud remain counted in the CTR ratio by the schemes.

32

3-D Secure : Diverse adoption per country

3-D Secure Deployment (transactions %) Authentication success (transactions %)

33

A flexible approach to 3-D Secure ? Flex3DS

Transaction flow of an order with Flex3DS

34

Flex3DS – Benefits & feature

Benefits and objectives: Increase acceptance rate and conversion based on country specifics

Minimize risk exposure

Flex3DS In practice: Dynamic activation of 3-D Secure:

• Define when to (de)activate 3-D Secure based on multiple parameters

• Define when to (de)activate 3-D Secure based on fraud risk check

Flex3DS : 2 (complementary) modes

• Ogone back office functionnality: define when to deactivate 3-D Secure based

on : BIN, Subbrand, issuer, amount, Fraud risk Score (incl. 90+ criteria) Simple

to configure

• Field value : activate 3-D Secure or not tell us for each transaction if you want

to Full flexibility

35

Flex3DS – some practical examples

Examples of configurations*:

I deactivate 3-D Secure if country is France or Germany

Can increase conversion for these countries where adoption is lower

I deactivate 3-D Secure for all amounts below €30

Will encourage spontaneous purchases

I deactivate 3-D Secure for all « non risky » orders (based on your fraud detection config.)

Will increase conversion for the majority of your transaction

Will minimize the risk and shift liability for the medium and high risk transactions

Note: you can define a rule to substract point or override any rule for a high risk

transaction that got a successful 3-D Secure authentication

*these are not recommendation but just examples in order to give you some practical idea on how Flex3DS can be used. Recommendations can be given after in-depth analysis of your business through an acceptance/rejection rate analysis.

36

Third Party integration

Fraud Prevention Expertise at Ingenico Payment Services4

38

Ingenico’s expertise to support technologies

A team of experts to support your business.

« Passive » Support :· Technical consultants specialized in fraud prevention to answer your

questions.

« Continuous » Support :· Manual Review of medium risk orders.· Customer-Dedicated fraud prevention consultant· « Periodic » or « Ad hoc » reports:Acceptance and Rejection rate monitoringRejection sources analysisChargebacks analysis3-D Secure Success/Failure/Abandon rate Measurement of customer ‘total cost of fraud’Rules/Process adjustements recommendations (based on previous analysis)

« Pro-active » Support :· R&D team monitoring global database and overall performance.· Specialized consultants informing merchants of « burst out » attacks while

they start.

39

Ogone Expert Manual Review

Benefits and objectives: Increase acceptance rate and conversion

Reduce costs

Manage growth and sales peaks

In practice: Individual and manual order review:

• By fraud analysis expert

• For all transactions identified as medium risk by Fraud Expert during real-time fraud

check.

Flexible activation based on needs:

• 24/7 – nights and week end – seasonal peaks

• For some payment methods or some accounts

5 Case Studies

41

• Mobile top up provider

• Propose recharge of 25 European mobile phone networks

• 50 000+ transactions per month

• Triple digit yearly growth since 2010

42

Larger volumes & better visibility led to more fraud

threats

International development. First stop: France & The

Netherlands

More fraud attempts, less conversionNarrowed margins

Key challenges

43

Situation before

30% of orders were blocked

Fraud rate above 1%

44

Implementation of Fraud Expert’s two layers of

protection

Use of the latest technologies such as Device

Fingerprinting

Better profiling of Positive and Negative customers

Loosen fraud rules and velocity checks

Outsource the reviewing of suspicious transactions

Solutions

45

After 2 month

+10.8%

-70%-35%

Increased revenues

Fraudulent transactions

Blocked transactions

46

They trust us

47

Air India Your Palace in the Sky

Flag carrier of IndiaFounded 15 October 1932109 Aircraft 60 Domestic destinations 31 International destinations 19 Countries

48

Key Challenges

Two brands Merger – Air India and Indian Airlines

Bottleneck in Scalability of Manual Review

Team Awareness

Cleaner fraud with IP, Card country and others matching

Travel agent VS Fraudster

49

Situation beforeBusiness discontinuity threatens…

90% of orders were

manually reviewed

Time taken for review was 8 hours

50

After 6 months

2 hours

Information available on

1 single screen

8 hours

Need to review data from

different sources

Lead time for manual review reduced

Reduced time between booking and flight…

Till Last Minute

For international & domestic flights

From 72 hours

Charge back rates fell from 0.34% to 0.01 %

REVIEW REVIEW

3-5%90%

51

Conclusion

Fraud losses were drastically reduced

Increase in ecommerce sales

Order acceptance up to 35%

Reduced Cost and time taken for manual review

Profiled Positive and Negative Customers

New routes were adopted easily

Q & APAYMENT-SERVICES.INGENICO.COMWWW.OGONEFRAUDEXPERT.BE