CNP EXPO ReD on Fraud Challenges for International Expansion
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Fraud Challenges for International Expansion Generating LIFT Chris Harper Senior Director, Sales, ReD
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Chris Harper, Retail Decisions, explored the fraud prevention challenges for online merchants seeking to take advantage of growth opportunities in new markets. He discussed the importance of understanding the different fraud profiles of target countries and differing consumer attitudes towards online security and alternative payment channels. He provided practical examples of these differences and their implications for risk and fraud prevention. Examples also illustrated the importance of access to global fraud intelligence and flexible fraud strategies that can be adapted quickly to changing circumstances, as merchants learn more about the countries into which they are expanding. Topics such as tailoring fraud strategies and rules by country, channel or payment types were also covered.
Transcript of CNP EXPO ReD on Fraud Challenges for International Expansion
Fraud Challenges for International Expansion
Generating LIFT
Chris HarperSenior Director, Sales, ReD
Generating LIFT Local Knowledge Intelligence Flexibility Tailoring
What’s different about cross-border fraud detection?
Differing status of EMV implementation Weaker authentication and verification services in many countries Differing consumer attitudes to online security Cultural and language barriers
Chip and PIN rolled out in 2004 -
2004 2005 2006 2007 2008 2009 2010 20110
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Phone, internet and mail order fraud (Card-not-present fraud)Counterfeit (skimmed/cloned) fraudFraud on lost or stolen cardsCard ID theftMail non-receipt
The UK experience post EMV implementation - movement of fraud to CNP channels
100% compliance achieved by February 2006
Fraud heat map of Los Angeles Online transactions with cards issued in France
What’s different about cross-border fraud detection?
You probably don’t know the delivery hotspots and local fraudster MOs
IP City Attempted Fraud Rate % Volume % Attempted FraudParis 1.7% 18.0% 17.3%
Marseille 3.1% 2.9% 5.1%Lyon 2.4% 3.4% 4.7%Caen 3.8% 1.9% 4.0%
Rennes 2.1% 3.1% 3.8%Orleans 2.7% 2.0% 3.2%
Lille 1.8% 3.0% 3.1%Toulouse 1.9% 2.8% 3.0%Nantes 1.7% 2.6% 2.5%Bezons 1.8% 2.2% 2.3%
Bordeaux 1.7% 2.3% 2.1%Others 1.6% 55.7% 48.9%Total 1.8% 100.0% 100.0%
IP City Attempted Fraud Rate % Volume % Attempted FraudParis 1.7% 18.0% 17.3%
Marseille 3.1% 2.9% 5.1%Lyon 2.4% 3.4% 4.7%Caen 3.8% 1.9% 4.0%
Rennes 2.1% 3.1% 3.8%Orleans 2.7% 2.0% 3.2%
Lille 1.8% 3.0% 3.1%Toulouse 1.9% 2.8% 3.0%Nantes 1.7% 2.6% 2.5%Bezons 1.8% 2.2% 2.3%
Bordeaux 1.7% 2.3% 2.1%Others 1.6% 55.7% 48.9%Total 1.8% 100.0% 100.0%
Profiling your customer
Card number
Amount
Purchase velocities
Billing / shipping details
CV2 AVSShopper history
Global negative lists / merchant specific positive lists
Marketing/loyalty programmes
Product / delivery / customer details
Payment details / 3DS responses
Merchant Confirmed Frauds and Blacklisting
Issuer, Scheme and Chargeback Files
Country – Specific Industry Hot Card Files
Stolen Personally Identifiable Information sold within Online Forums
Other sources of fraud intelligence Remember OFAC compliance ….
Access to global intelligence supports entry to new verticals / countries and enables faster adjustment of rule strategies
Merchant Type: # Hits : Value: Avg Txn Value:European Retail Merchants 5870 £651,348 £110.96
Virtual Goods Merchants 1476 £60,880 £41.24
Global Travel Merchants 14616 £1,169,808 £80.03
Latin American Merchants 2906 £170,684 £58.73
Other Merchants 3458 £37,607 £10.88
EU Payment Service Providers 34483 £1,890,889 £54.83
Telecommunication Merchants 13399 £200,167 £14.94
US Retail Merchants 91562 £5,795,978 £63.30
Hits against ReD’s Global Negative Database in a 6 week period
Never under-estimate the value of data
Cross-industry information sharing - everyone benefits
• Issuers and Acquirers get early warning of compromised or fraudulent merchants
• Issuers can proactively alert Cardholders, improving customer experience
• Merchants benefit from faster fraud detection and reduced chargebacks
• Acquirers and PSPs can provide added value to merchants
• Together, we achieve a safer payments ecosystem
Selecting the best fraud detection model
• Example
• US online accessories retailer uses Manual Review model for domestic transactions; secondary Pass/Fail model for transactions from Canada and Europe
Language barriers Limited verification tools Time zone differences
January
Febru
aryMarc
hApril
MayJune
July
August
Septem
ber
October
November
December
Jan-13
0.00%20.00%40.00%60.00%80.00%
100.00%
024681012
Processing Results
Total Volume ACCEPT CHALLENGE DENY
Protection with and without 3D Secure
Implementation varies by country - mandated in some countries, with fines for non-compliance
Consumer attitudes also vary - 3DS generates cart abandonment in US and Germany; sales uplift in UK and Russia
Post-verification fraud screening can provide additional authentication support - and enable genuine sales declined by 3DS
Tailoring fraud strategies and rules - by country
Online transactions with cards issued in France
IP City Attempted Fraud Rate % Volume % Attempted FraudParis 1.7% 18.0% 17.3%
Marseille 3.1% 2.9% 5.1%Lyon 2.4% 3.4% 4.7%Caen 3.8% 1.9% 4.0%
Rennes 2.1% 3.1% 3.8%Orleans 2.7% 2.0% 3.2%
Lille 1.8% 3.0% 3.1%Toulouse 1.9% 2.8% 3.0%Nantes 1.7% 2.6% 2.5%Bezons 1.8% 2.2% 2.3%
Bordeaux 1.7% 2.3% 2.1%Others 1.6% 55.7% 48.9%Total 1.8% 100.0% 100.0%
IP City Attempted Fraud Rate % Volume % Attempted FraudParis 1.7% 18.0% 17.3%
Marseille 3.1% 2.9% 5.1%Lyon 2.4% 3.4% 4.7%Caen 3.8% 1.9% 4.0%
Rennes 2.1% 3.1% 3.8%Orleans 2.7% 2.0% 3.2%
Lille 1.8% 3.0% 3.1%Toulouse 1.9% 2.8% 3.0%Nantes 1.7% 2.6% 2.5%Bezons 1.8% 2.2% 2.3%
Bordeaux 1.7% 2.3% 2.1%Others 1.6% 55.7% 48.9%Total 1.8% 100.0% 100.0%
Online transactions with cards issued in BelgiumBilling Country Attempted Fraud Rate % Volume % Attempted Fraud
Belgium 0.3% 95.0% 57.6%France 3.0% 1.2% 8.8%
Netherlands 2.5% 0.9% 5.6%South Africa 33.3% 0.0% 3.2%
Spain 32.4% 0.0% 3.2%Australia 75.0% 0.0% 3.2%Norway 43.5% 0.0% 2.7%
New Zealand 50.0% 0.0% 2.7%Switzerland 10.9% 0.1% 1.9%
Ecuador 75.0% 0.0% 1.6%Denmark 9.5% 0.0% 1.1%
United Kingdom 0.4% 1.1% 1.1%Other 2.1% 1.5% 7.5%Total 0.4% 100.0% 100.0%
Tailoring fraud strategies by channel and payment types
Web• Domestic markets are maturing - customer experience is the priority• Higher risks in less mature International markets
Mobile• Shift of fraud to mobile channel
- volumes small but demands greater scrutiny
Call Center• Migration to this channel of fraudsters avoiding 3D Secure elsewhere• Internal fraud/collusion
You can monetize cross-border opportunities safely
by
Obtaining Local Knowledge
Gaining access to global fraud Intelligence
Achieving the Flexibility to trade effectively across cross-borders
Tailoring rules, by country, channel and payment type
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Don’t block cross-border revenue opportunities – make it safe to accept these transactions, and grow your business
