Cybersource Payment Management SummitJune 1, 2017

Using KPIs and Payments Data to Drive Your Business:A Fresh Perspective

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Founded in 2001 and headquartered in Silicon Valley, Glenbrook’s core team is composed of executives with broad exposure to the payments industry, including business management, marketing, technology, operations, and risk management.

WHO ARE WE?

Glenbrook offers strategy consulting, research, and industry education programs. We sit at the intersection of traditional payments providers seeking growth and revenue, and Innovators seeking to change the status quo.

WHAT DO WE DO?

Clients include players from across the traditional and emerging payments value chain:§ Banks, processors, networks§ Merchants, billers, corporate treasuries, governments§ Fintech enablers, investors and emerging technology providers.

WHO DO WE SERVE?

About Glenbrook Partners

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About Chris Uriarte• 19 Years payments strategy, operations and

product development experience• Global payments and fraud specialist with

Glenbrook Partners• Former CTO at Retail Decisions (ReD – Now

Part of ACI Worldwide)• Former VP, Head of International Operations at

American Express• Former Chief Payments and Strategy Officer at

Vesta Corporation• Advisor and board member to a number of

FinTech startups

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Payments Key Performance Indicators (KPIs) are Boring!

# KPI Calculation

1 Post Settlement Fraud Detection Rate # of "no" from "Approved" from PreSettl + PostSettl / # of "Customer FINISHED Checkout" # of orders cancelled as fraud / total number of orders taken

1 Pre Settlement Fraud Detection Rate # of "no" from "Approved" / # of "Customer FINISHED Checkout"2 Payment Reversal Fraud (manual) Review Rate # of "YES" from "RealtimeMerchant Detection…" from PreSettl+ PostSettl+ PayReversal/ # of "Customer

FINISHEDCheckout"no. of orders reviewed real-time or offline / total number of orders taken

2 Post Settlement Fraud (manual) Review Rate # of "YES" from "Realtime Merchant Detection…" from PreSettl + PostSettl + PayReversal / # of "Customer FINISHED Checkout"# of orders eviewed/total # of orders taken

2 Pre Settlement Fraud (manual) Review Rate # of "YES" from "Realtime Merchant Detection…" from PreSettl + PostSettl + PayReversal / # of "Customer FINISHED Checkout"

3 Pre Settlement Validation Rate # of "YES" from "TXN details validated…" / # of "Customer FINISHED Checkout"# of TXN "yes" validated / total # TXNs attempted (successful and failed)

4 Pre Settlement Authorisation Rate # of "YES" from "Payment authorised" / # of "Customer FINISHED Checkout"# of "Yes" successful TXNs / total # TXNs attempted

5 Pre Settlement 3rd Party Conversion Rate (Authentifiaction) # of "YES" from "Successfully authenticated" / # of "Customer FINISHED Checkout" should be against total # TXNs attempted(successful and failed)

6 Pre Settlement Confirmation Rate # of "YES" from "Order Confirmed" / # of "Customer FINISHED Checkout" should be against total of all orders attempted so including successful and failed.

7 Post Settlement Collection Service Rate # of Invoices from "Collection Service" / # of "NO" from "Settlement Successful?"7 Post Settlement Collection Service Rate # of Invoices from "Collection Service" / # of "NO" from "Settlement Successful?"8 Post Settlement Paid / Settlement Rate # of "YES" from "Settlement Successful" / # of "Order Confirmed" agreed9 Post Settlement Retry Success Rate # of transactions successfully retried/total # transactions retried10 Payment Reversal Reversed / Chargeback Rate # of "Payment reversed by Customer or Issuer" / # of "Order Confirmed" agreed11 Payment Reversal Representment Success Rate # of chargebacks won/total no. of chargebacks represented12 Payment Reversal Dispute Success Rate same as above?13 Payment Reversal Refund Rate # of "Payment returned to customer" / # of "Order Confirmed" agreed14 Payment Reversal Collection Paid Rate # of "YES" from "Collections Paid?" / # of "YES" from "Collections Service?"

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…Boring, but Critical!

You will struggle to understand

the true impact that payments

has on your business today

AND tomorrow

unless you have comprehensive

understanding of your

KPIs

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Data is Great, But…

Data that isn’t actionable is useless.

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The Case for Driving Your Business off of KPIs

• Enable business decisions to be tied back to trends

• Alert you to specific problems – immediate and long term

• Provide reasoning and justification for budget planning, hiring and expansion

• Monitor third-party vendor performance

• Measure performance down to the employee level (e.g. manual reviews, agent performance)

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KPIs Can Range from Simple to More AdvancedSimple KPI A More Advanced View

Bank Authorization Approval / Decline Rate

• Breakdown of declines aggregated by BIN and auth reason category

• Ratio of hard declines to approvals

Chargeback Rate • Map rate vs. Run Rate• Chargeback rates per card brand in

reference to network fraud threshold rules

Fraud System Approval /Decline Rate • % of fraudulent transactions being sent to manual review or declined

Fraud Manual Review Rate • Fraud manual review decision success (false positives rate across all reviews)

Average Manual Review Time • Average review time by agent (top/bottom 5%)

• Distribution of reviewer actions by agent

Average Payment Cost • Payment cost broken down by geography• Payment cost variation vs. benchmarks

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But, Relying on KPIs Can Present Challenges

• Lack of standardization across merchants and vendors

• Data overload and analysis paralysis: Too much data isn’t always good a thing

• Getting to right the data can be a chore in and of itself

• Merchants have tremendously different variances in what KPIs are most important to them

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Different Merchants Have Different Views as to What KPIs are Important to Them

ACCEPTANCE RATE RISK DECLINE RATE MANUAL REVIEW RATESEGMENT

97% 3% 6%PHYSICAL

85% 20% 0%DIGITAL

90% 8% 5%TRAVEL

70% 18% 0%GAMBLING

Your industry has unique characteristics. Your business is unique.

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So Where Do KPIs Come From?

KPIs

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Data that Influences your KPIs Comes from Inside and Outside of Your Organization

• Traditional Calculated KPIs based on transaction flows and key touch-points

• Conversion rates• Staff Performance• Cost of payments / operations

• External studies and surveys• Market trends and insights

from your vendors• Collaboration with other

merchants• Industry forums and

conferences

INTERNAL SOURCES EXTERNAL SOURCES

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Looking Internally For the Right KPIs: A Structured Methodology

Data by itself is useless, but we can use a structured methodology to get to the right data that we need

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Looking Internally For the Right KPIs: A Structured Methodology

• IDENTIFY

• SOURCE

• AGGREGATE

• ANALYZE

• AUTOMATE

I. S. A. A. A.

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IDENTIFYING Which KPIs are Critical to You

• Examining your end-to-end transaction flow for critical decision points and metrics

• Identifying key contributors to cost and customer satisfaction

• Asking internal stakeholders what how they define success

• Taking a first try at developing creating KPIs based on what you’ve discovered

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IDENTIFYING Which KPIs are Critical to You

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SOURCING Key Data Points and AGGREGATING Them Into an Accessible Place

• Determining the exact sources for the key data points that you’ve identified• Gateway and acquirer reports and data feeds?• Fraud system provider data?• Internal customer service system data?

• Putting the data in a place that is accessible and format that is usable

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ANALYZING Data andAUTOMATING Reporting and Analysis

• Using the aggregated data that you’ve to calculate your KPIs and drive action

• Integrating reporting tools

• Automating reporting and alerting

• Automating future forecasting – This is KPI Nirvana!

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A Critical Mistake: Ignoring the Future

Your KPIs need to

look at the state of

your business today

AND

tomorrow!

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Looking Into the Future Can Be Scary(But gives you time to react!)

Current Rate Future Forecast

KPI Rate(Last 30 days)

Count(Average per day, Last

30 days)

Count(Average per day, based on future

predicted volumes)

Fraud Manual Review Rate

2.24% 946 1342

Great rate!We’re handling

this just fine!Uh Oh!

Now What?

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Tips for using the ISAAA Methodology

• Take it slow – a phased approach

• Focus on what’s important: Too much data can be confusing

• Find someone in IT to be your friend

• Future forecasting is as important as seeing what happened yesterday

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Looking Externally for Help with KPIs• Other merchants – find friends inside and outside of your

industry

• Industry benchmark reports• Cybersource Fraud Survey• LexisNexis Total Cost of Fraud Survey

• Industry Mailing Lists, Conferences and Media• Merchant Risk Council• DRF Payments Ed Forum• Glenbrook’s Payments New and Payments Views

Realms of KPIs: A Starting Point

ACCEPTANCE

COST

FRAUD

© Glenbrook Partners, LLC 2017 22

Bank acceptance, “Bad BINS”, Soft vs. Hard Declines, Refund rates

Declines, False Positives, Manual Review Rates,

Avg. Time to Review,Chargebacks, CB Win Rate

Domestic vs. Int’l trends, Downgrades, Cross

Boarder Fees, Acquirer and Gateway Fees

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But Payments Data Isn’t Just Useful for KPIs

• Premium card• Spends >$80 over

ATV• Never had an NSF

Decline

• Uses a variety of pre-paid cards

• Spends less than ATV• Has trouble with

frequent declines

What can we learn based on how people pay?

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Identifying Premium Cardholders

BIN-based data helps identify premium cardholders.

• Premium card holders can be targeted for appropriate marketing campaigns

• Targeted upsell at the checkout page can drive additional revenue

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Increasing Conversion with Prepaid Cardholders

BIN-based data can help identify pre-paid cardholders.

Soft declines on pre-paid cards can drive attempts to “save the sale”:

• Offering the ability to use an additional payment device (split tender)

• Alternative payment methods, such as PayPal Credit or Affirm

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Driving Conversion and Reducing Fraud Based on Transaction History

• Known card• Good transaction history• Key attributes match history

(IP, Device ID, Browser, etc.)

• New card• No transaction history• High value transaction or

other potentially risky attributes

No Payer AuthenticationNo Manual Review

Send for 3D Secure Authentication

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Driving Consumers to Payment Devices that will Increase Conversion

Shopify Q3 Earnings Call, October 12, 2016

Identifying Apple Pay, Android Pay, Visa Checkout and Masterpass users as early as possible and prominently presenting them with those checkout options helps drive conversion.

Shopify reports a 200% increase in conversion for online merchants who offer Apple Pay

Keep Up With Payments

PAYMENTSNEWS

Payments NewsCurated News Feed – Web, RSS, email digestwww.paymentsnews.com

PAYMENTSVIEWS

Payments ViewsPayments Industry Commentary – Blogwww.paymentsviews.com

PAYMENTSON FIRE

Payments On FirePayments Interviews Series – Podcastwww.paymentsviews.com

Mailing Listwww.glenbrook.com/list

28© Glenbrook Partners, LLC 2017

Schedule of Events

Two-DayPayments Boot Camps

• May 16-17, 2017 – Atlanta

• Oct 3-4, 2017 – San Jose

• Oct 17-18, 2017 – New York

• Dec 5-6, 2017 – Palo Alto

One-DayPayments Insight Workshops• May 18, 2017 – Atlanta

Digital Payments

• Oct 5, 2017 – San JoseGlobal Payments

• Oct 19, 2017 – New YorkDigital Payments

• Dec 7, 2017 – Palo AltoInnovation in Payments

© Glenbrook Partners, LLC 2017 29

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Thank you Chris Uriarte

chris@glenbrook.com

+1 732 371-3383