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Cybersource ecommerce summit
 

Cybersource ecommerce summit

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Doug Schwegman é diretor da CyberSource Corporation, uma das maiores empresas de soluções de pagamento e anti fraude do mundo. Doug é specialista em fraude e gestão de risco e fará a ...

Doug Schwegman é diretor da CyberSource Corporation, uma das maiores empresas de soluções de pagamento e anti fraude do mundo. Doug é specialista em fraude e gestão de risco e fará a apresentação do relatório Online Fraud Report 2010 que é considerado a referência do mercado mundial de fraude.

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    Cybersource ecommerce summit Cybersource ecommerce summit Presentation Transcript

    • Managing Fraud Doug Schwegman Director Market Intelligence Managing Fraud Management: Work the Process
    • Agenda • Origins of Online Fraud & Merchant Risk • Fraud Management Process • Operating Trends & • Merchant Challenges • Best Practices • Questions © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 2
    • Online Fraud & Merchant Risk Profiles © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 3
    • • Credit card number: $1 • Credit card with 3-digit code: $3-$5 • Credit cardWork the Process Managing Fraud Management: with code and PIN: $10-$100 4 © 2010 CyberSource Corporation. All rights reserved.
    • How Is Information Obtained? – Javelin Research Primarily Business Controlled Online purchases Online Access or transactions Some other way 2% Phishing 2% 4% Computer viruses, spyware, Data breaches 7% or hackers on PC 8% In-store, mail, telephone purchases or transactions 23% From a lost or stolen wallet, checkbook, or credit card 33% From stolen paper mail 6% By friends, acquaintences, relatives, or in-home employees 17% Primarily Consumer Controlled October 2007, n = 144 (Based on the 35% of Victims Who Know How Their Information Was Obtained) Q26: How was your information obtained? Keep in mind 'other' is an Base: Victims Who Know How Their Information Was Accessed option. Was it obtained ... © 2008 Javelin Strategy & Research © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 5
    • Determinants of Merchant Fraud Risk s rd t Ca f / Gi y elr ew Fungibility / Fencibility / J Fraudster’s ct. El e Radar er l su m Appare Con Paper Clips Visibility on the web © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 6
    • Fraud Trends & Management Process © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 7
    • Fraud Loss Estimates – U.S. and Canada % Revenue Lost to Online Fraud Online Revenue Loss Due to Fraud Estimated $3.3B in 2009 N=132 N=220 N=341 N=333 N=348 N=404 N= 351 N= 294 N= 399 N= 317 The rate of revenue loss due to online payment fraud declined in 2009 and total dollars lost to fraud declined by an estimated $700 million – the first drop since 2003. Source: CyberSource Annual Fraud Survey © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 8
    • 11th Annual Fraud Survey Methodology • Independent survey commissioned by CyberSource • Fielded September 10 – October 7, 2009 • Industry-wide sample: companies involved in e-business activities – 59% of 2009 respondents are CyberSource customers • Email invitation to online survey hosted by Mindwave Research • 352 qualified completed interviews • Screening criteria: – Current online sellers with online operations primarily based in the U.S. or Canada – Must be “ultimately responsible” or “influence policy and fraud management decisions” for online payment risk management RESPONDENT PROFILE: 2009 48% of merchants are experienced online sellers (> 7 years) Respondent median annual online revenues in 2009: $2.0M A total of over $60 billion in annual online revenues was reported by participating merchants 39% have annual online revenues of $10M or more 31% have annual online revenues of $25M or more © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 9 9
    • Automated Screening Mobile Web Call Center Kiosk Orders Detectors Rules Reject POS Chargeback Management Manual Review Tuning & Analytics © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 10
    • Top Priority Strategy / Area of Focus 2010 16% Manual Review (tasks / workflow) 20% 60% Process Analytics Automated Detection 2% Outsourcing 2% Other Source: 2010 CyberSource Fraud Report Q: Which of these best characterizes your top priority strategy/area of focus for process improvement over the next 12 months? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 11
    • Automated Screening Orders Detectors Rules Reject Fraud Chargeback Rate Management 18-25% Manual Review Tuning & Analytics © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 12
    • Total % of Orders Resulting in Fraud Loss Average % Accepted Orders Resulting in Fraud Losses (A fraud chargeback was received on the orders OR a credit was issued directly to a customer who claims not to have placed an order) (U.S. & Canada) 2009 vs. 2008 2009 2008 2.0% 1.5% 1.3% 1.3% 1.2% 1.1% 1.1% 1.1% 1.1% 1.0% 0.9% 0.8% 0.6% 0.5% n=326 n=280 n=95* n=98* n=60* n=46* n=57* n=41* n=87* n=76* 0.0% O verall <$500K $500K - <$5M $5M - <$25M $25M + Annual Online Revenues Base: Merchants accepting orders from U.S./Canada (excludes DK/No Answer) *Caution: small base Q6.Thinking more specifically about the impact of online fraud on order acceptance and payment collection, please estimate the following factors: 6b.) the percent of orders accepted that later result in fraud losses © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 13
    • Chargebacks Only Portion of Fraud Loss % of Fraud Claims: Chargebacks vs. Credit Issued by Merchant 2009 Credits Issued Chargebacks 100% 90% 80% 51% 44% 70% 48% 72% 70% 60% 50% 40% 30% 56% 52% 20% 49% 28% 30% 10% 0% Overall <$500K $500K - <$5M $5M - <$25M $25M+ Annual Online Revenues Base: Merchants expecting any online payment fraud during 2009 (excludes DK/No Answer) Q6d. Of your TOTAL fraudulent orders, what portion are fraud-coded chargebacks from a bank or other payment provider (vs. credits/reversals issued by your staff)? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 14
    • Fraud Rates in U.S./Canada (Overall and by Online Segment) International Fraud Rate 2% Overall Digital Goods/ Media & Apparel/ Health Consumer Household & Education/ Svcs Entertainment Jewelry Electronics General Government Merchandise Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 15
    • % of Merchants who have Stopped Accepting Orders from one or More Countries in the Past Year due to High Fraud Levels 20% of merchants stopped accepting orders from at least one country outside 20% of merchants stopped accepting orders from at least one country outside the U.S./Canada in the past year due to high fraud levels the U.S./Canada in the past year due to high fraud levels 2009 Non-U.S./Canada Orders Those who stopped accepting orders Accepted vs. Rejected from one or more countries outside the (and when rejection started) U.S./Canada in the past year due to high fraud levels 54% Yes Accept international 20% orders Don’t know 11% Never 80% accepted Stopped accepting No international 3%ALL orders in the orders last year 30% 2% Stopped accepting ALL n=200 orders more than a year ago Base: Respondents who accept non U.S./Canada orders or who n=352 stopped accepting ALL non U.S./Canada orders in past year (excludes DK) Q9a1. You previously indicated that you stopped accepting orders from ALL countries outside of the U.S. and/or Canada in the past year. Were any of these countries selected due to high fraud levels? Q9a2. Have you stopped accepting orders from any country outside of the U.S. and/or Canada in the © 2010 CyberSource Corporation. All rights reserved. past year due to high fraud levels? Managing Fraud Management: Work the Process 16
    • Countries / Regions where Merchants have Stopped Shipping Riskiest Highest Risk Areas for Online Fraud Countries Outside U.S. & Canada 2009 2009 <10% mentions not shown 50% Nigeria #1 (all of west Africa 53%) #2 30% 30% 45% Ghana Europe 53% 53% Europe Asia 30% Indonesia, Asia #Tie 3 Malaysia Pacific Pacific 23% Iran, Pakistan, 73% #4 Tie Romania, Russia Africa 45% &Middle #5 20% China, Vietnam 15% Ghana 50% Nigeria East 30% Tie Latin & Central 53% 30% Malaysia #Tie 18% Hong Kong, India, 6 Singapore America All of West Indonesia Africa 15% Brazil, South #7 Korea, Turkey Tie 13% Philippines, #8 Taiwan Tie #9 10% Mexico n=40* Base: Those who stopped accepting orders outside the U.S./Canada in the past year Q: Which countries did you stop accepting orders from in the past year due to high levels of fraud? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 17
    • Fraudsters continue to improve % of merchants that claim current fraudulent orders are cleaner than those from 12 Yes months ago No 48% 52% Q: Are the fraudulent orders you experience now “cleaner” than those you experienced 12 months ago? By “cleaner” we mean they have fewer anomalies and/or they look more like valid orders than ever before. © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 18 1
    • Automated Screening # Detection Tools = 7 Orders Detectors Rules Reject Chargeback Management Manual Review 50% say Tuning & “Fraud is cleaner” Analytics © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 19
    • Automated Fraud Detection Tool Use Fraud Detection Tool Usage % Currently Using 2009 % Planning to Implemen All Merchants Merchants $25M+ Online Revenue Validation Services Validation Services CVN (Card Verification Number) 77% 14% CVN (Card Verification Number) 80% 9% Address Verification Service 76% 10% Address Verification Service 86% 3% Postal address validation services 34% 12% Postal address validation services 35% 14% Verified by Visa/MasterCard SecureCode 29% 20% Verified by Visa/MasterCard SecureCode 16% 12% Telephone # verification/reverse lookup 24% 12% Telephone # verification/reverse lookup 33% 12% Paid for public records services 13% 8% Paid for public records services 24% 17% Credit history check 5% 5% Credit history check 4% 5% Out-of-wallet or in-wallet challenge/response 5% 7% Out-of-wallet or in-wallet challenge/response 10% 5% Your Proprietary Data/Customer History Your Proprietary Data/Customer History Customer order history 44% 16% Customer order history 61% 10% Negative lists (in-house lists) 40% 8% Negative lists (in-house lists) 75% 5% Order velocity monitoring 35% 14% Order velocity monitoring 66% 12% Fraud scoring model-company specific 28% 13% Fraud scoring model-company specific 53% 17% Positive lists 21% 10% Positive lists 41% 14% Customer website behavior analysis 19% 16% Customer website behavior analysis 19% 19% Purchase Device Tracing Purchase Device Tracing IP geolocation information 27% 22% IP geolocation information 52% 26% Device "fingerprinting" 9% 27% Device "fingerprinting" 18% 45% Multi-Merchant Data/Purchase History Multi-Merchant Data/Purchase History Shared negative lists-shared hotlists 16% 13% Shared negative lists-shared hotlists 23% 19% Almost half of larger Almost half of larger Multi-merchant purchase velocity 12% 0.11 merchants plan to merchants plan to Multi-merchant purchase velocity 19% 12% implement implement device “fingerprinting” device “fingerprinting” Other 4%7% Other 6%9% in the next 12 months in the next 12 months Current n=308; Future n=166 (excludes None/No answer) Current n=99*; Future n=58* (excludes None/No answer) Q10a1. Which of these fraud detection services/technologies does your company use to AUTOMATICALLY *Caution: small base Mean # of Tools Used Mean # of Tools Used assess the risk of online payment fraud BEFORE any manual review or human intervention? All Merchants: 5 All Merchants: 5 Merchants $25M+: 7 Merchants $25M+: 7 Q10b1. Which of these fraud detection services/technologies does your company plan to add in the next 12 © 2010 CyberSource Corporation. All rights reserved. months to AUTOMATICALLY assess the risk of online payment fraud BEFORE manual review? Managing Fraud Management: Work the Process 20
    • Most Effective Fraud Tools % Merchants Using Tool that Selected it as One Of Their “Top Three” Most Effective 2009 Validation Services Paid for public records services 32% Contact customer to verify order 26% Credit history check 20% Verified by Visa/MasterCard SecureCode 19% Address Verification Service 16% CVN (Card Verification Number) 16% Telephone # verification/reverse lookup 15% Out-of-wallet or in-wallet challenge/response 10% Postal address validation services 9% Contact card issuer/Amex CVP 2% Your Proprietary Data/Customer History Fraud scoring model-company specific 37% Negative lists (in-house lists) 31% Customer website behavior analysis 22% Customer order history 16% Order velocity monitoring 14% Positive lists 7% Purchase Device Tracing IP geolocation information 36% Device "fingerprinting" 22% Multi-Merchant Data/Purchase History Multi-merchant purchase velocity 21% Shared negative lists-shared hotlists 11% Base: Merchants with annual online sales ≥$25M who use tool : automated or manual (excludes None) *Caution: small base Q10c. Of the tools your company currently uses to help detect online payment fraud or assess fraud risk for online orders, please select the most effective. Please select up to three. © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 21
    • Automated Decision Management Systems Usage Of Automated Decision Management Systems Two thirds of all merchants use a decision Two thirds of all merchants use a decision Have a decision management system and business management // rules system to sort orders -- a management rules system to sort orders -- a managers can create and modify rules using this system significant increase vs. 2008 (67% vs 56%) Have a decision management system but internal IT significant increase vs. 2008 (67% vs 56%) group/department must program the rules Have a decision management system but external resource must program the rules Do not have a decision management system All Merchants Merchants $25M+ 24% 8% 36% 6% 67% 87% 56% 80% 34% 13% 35% 45% n =272 n =98* Base: Merchants using automated services/technologies (excludes DK/No Answer) *Caution: small base Q10d. Do you use a decision management/rules system to control the sorting of orders based on the results of detection tests? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 22
    • Results of Automatic Screening Are Inbound Orders Rejected Based Solely On Automated Screening? Yes, but generally ONLY if customer is on our negative list Yes, if automated tests indicate too much risk OR customer is on our negative list Just under half of all merchants reject orders Just under half of all merchants reject orders No, generally all suspicious orders are in the initial automated screening stage in the initial automated screening stage outsorted for manual review All Merchants Merchants $25M+ 34% 47% 36% 54% 46% 53% 13% 18% n =269 n =96* Base: Merchants using automated services/technologies (excludes DK/No Answer) *Caution: small base Q10e. Do you reject ANY inbound orders due to suspicion of fraud ONLY as a result of your AUTOMATED screening process? © 2010 CyberSource Corporation. All rights reserved. Denotes significantly higher/lower than “all merchants” (95% CL) Managing Fraud Management: Work the Process 23
    • Automated Screening Orders Detectors Rules Reject Chargeback Managemen t # Systems/Data Input Interfaces 4 - 12 Review Rate 15-46% Tuning & Analytics Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 24
    • Manual Review Trends Over the past 5 years, on average, 1 out of 4 online orders has been manually reviewed. Over the past 5 years, on average, 1 out of 4 online orders has been manually reviewed. Merchants performing manual review have on average reviewed 1 out of every 3 orders received. Merchants performing manual review have on average reviewed 1 out of every 3 orders received. Q11: Approximately what percent of the total orders you receive require manual review © 2010 CyberSource Corporation. All rights reserved. to screen for online payment fraud? Managing Fraud Management: Work the Process 25
    • Reviewer Productivity Median # Orders Reviewed Per Day/Reviewer (By Merchant Size) n =174 Annual Online Revenues © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 26
    • Use of Reviewer Case Management System Use or Plan to Implement Case Management System to Support Manual Order Review Process Currently use Plan to implement in 2010 Do not use or plan to implement All Merchants Merchants $25M+ 49% 30% 81%* 66%* 34% 54% 58%* 44% 16% 17% n=211 n =76 Base: Those conducting manual review (excludes DK) Q10c2. Do you use, or plan to implement, a case management system to support your manual order % who track fraud rate of orders review process? undergoing manual review Q11c. Do you track the fraud rate associated with orders that are reviewed and accepted through your MANUAL review process? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 27
    • Automated Screening 2% to 6% Detectors Rules Orders Rejected Reject Chargeback Management Tuning & Analytics Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 28
    • Post Review Acceptance Rates Average % of Manually Reviewed Orders % Acceptance Rate that are Accepted/Rejected (of Manually Reviewed Orders as Reported by Merchants) 2009 As was the As was the 0% 1% case in 2008, case in 2008, Accepted about 2/3 of about 2/3 of Rejected 1 - 9% 3% merchants merchants 100% ultimately ultimately 10 - 19% 3% accept 80%+ accept 80%+ 90% of the orders of the orders 83% 77% 77% 20 - 29% 3% they manually they manually 80% 75% review review 69% % Acceptance Rate 70% 30 - 39% 1% 60% 40 - 49% 1% 50% 50 - 59% 11% 40% 60 - 69% 3% 31% 30% 23% 25% 23% 70 - 79% 6% 20% 17% 80 - 89% 10% 10% 90 - 99% 46% 0% O verall <$500K $500K - <$5M $5M - <$25M $25M + 100% 11% Annual Online Revenues Base: Merchants practicing manual review (excludes None/No answer) *Caution: small base Q11a. Of all the orders you manually review, what % of these do you ultimately accept? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 29
    • Order Reject Rate Average % Orders Rejected Due to Suspicion of Fraud (Order is automatically or manually rejected for processing/cancelled prior to shipment or service fulfillment) Within U.S./Canada 2009 Base: Merchants accepting orders from U.S./Canada (excludes DK/No Answer) Outside U.S./Canada Base: Merchants 20% accepting international orders (excludes DK/No Answer) 15% 11.1% 10% 7.7% 7.8% 7.2% 5.5% 5% 4.1% 3.2% 2.4% 2.0% 1.0% 0% Overall <$500K $500K - <$5M $5M - <$25M $25M+ Annual Online Revenues Q6.Thinking more specifically about the impact of online fraud on order acceptance and payment *Caution: small base collection, please estimate the following factors: 6a.) the percent of incoming orders received that you decline to accept due to suspicion of fraud © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 30
    • Order Reject Rates from U.S./Canada Overall Digital Goods/ Media & Apparel/ Jewelry Health Consumer Household & Education/ Svcs Entertainment Electronics General Government Merchandise Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 31
    • Automated Screening Orders Detectors Rules Reject Chargeback Management Win Rate 42% 1 out of 4 recovered Tuning & Analytics Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 32
    • Chargeback Re-presentment Rate Average % Total Fraud-Coded Chargebacks 0% 9% % of Merchants Re-presented 1 - 9% 12% Reporting this 10 - 19% 3% Re-presentment % Chargebacks Re-presented Rate 2009 20 - 29% 12% 30 - 39% 5% 40 - 49% 3% 65% 50 - 59% 12% 60 - 69% 1% 53% 53% 70 - 79% 5% 48% 49% 80 - 89% 5% 90 - 99% 12% 100% 22% n=86* Base: Merchants expecting any online payment fraud during 2009 (excludes DK/No Answer) % of Merchants Using Automated Chargeback Management Tool 49% 51% O verall <$500K $500K - <$5M $5M - <$25M $25M + Annual Online Revenues n=80* Base: Merchants who re-present chargebacks (excludes DK/ Base: Merchants expecting any online payment fraud during 2009 (excludes DK/No Answer) No Answer) Q6e.With regard to your FRAUD-coded chargebacks, what portion do you re-present (fight)? Q6h. Do you use automated/electronic chargeback management tools/systems for re-presentment? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 33
    • Fraud Management Budgets How Much Merchants Spend on Fraud Management (Percent of Merchants Operating at Defined Expense Level) 2009 vs. 2008 vs. 2007 Median % of Online Median % of Online Revenues 2009 Revenues 2009 – 0.3% 2008 2009 – 0.3% 2008 – 0.2% 2007 2008 – 0.2% 50% 2007 – 0.3% 2007 – 0.3% 44% 41% In 2009, In 2009, 40% 37% 29% of Merchants spend 29% of Merchants spend % of Merchants 1% or more of online 1% or more of online revenues to manage fraud revenues to manage fraud 30% 24% 22% 20% 15% 16% 16% 16% 14% 13% 12% 8% 10% 6% 6% 4% 4% 0% 0% 0% >0% - <.2% .2% - <.5% .5% - <1% 1% - <4% 4% + % of Annual Online Revenues Spent to Manage Fraud 2009 n=104 (Staff, Systems, Tools, etc., excluding Fraud Loss) 2008 n=108 2007 n=97* Base: Merchants who answered both questions and budget < total projected online revenues for 2009 *Caution: small base Q17. Approximately how much will your organization spend in total on online payment fraud prevention and management in 2009? (Please include all relevant costs including staff, etc., but exclude fraud losses.) © 2010 CyberSource Corporation. All rights reserved. Denotes “2009” significantly higher/lower than “2008” (95% CL) Managing Fraud Management: Work the Process 34
    • Budget Allocation - 2009 Average % Spending Allocation for Review Staffing - 2009 Fraud Management 2009 # Full-Time Median** Annual Review Annual Online Revenue Staff Revenue per Staff 1 $400K $400K n=81* 2 $7M $3.5M n=46* Internal Tools & 3-4 $47.5M $12M - $16M n=33* Systems Order 5-9 $35M $4M - $7M n=34* 26% Review 10+ $717M up to $72M n=23* Staff **Median used to minimize impact of outliers 51% 3rdParty Base: Those with 1 or more full-time manual review staff (excludes DK/No Answer) Tools 24% Planned Staffing Increase Same Decrease Levels for 2010 13% 77% 9% n=194 n =352 Base: Those with 1 or more full-time manual review staff (excludes DK/No Answer) Q18. Approximately what % of your total 2009 spending on online payment fraud prevention and management infrastructure is allocated to each *Caution: small bases of the following areas: Q13. How many staff are involved with manual order review for your online sales (including both full-time and full-time equivalent)? Q14. How do you expect your manual order review staffing to change (if at all) during 2010? (Please do not include seasonal peaks.) © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 35
    • ~80% Same or Lower Increase Budget De cre ase No Change Expected Budget Change for Fraud Management 2010 Source: 2010 CyberSource Fraud Report © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 36
    • 3 Questions to Ask… 1. How will I detect increasingly cleaner fraud? 2. How will I scale operations? [facing static budget, increasing order volume and demand for higher levels of service] – Expertise – Capacity – Service Delivery (24x7, global) 3. Do I have systems/process to manage and optimize? © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 37
    • Questions ? Actions to Consider: • Benchmark your operations with your peers: www.cybersource.com/fraudreport • Contact us for more information: 1-888-330-2300 info@cybersource.com dschwegman@cybersource.com © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 38
    • International Order Acceptance in 2009 % of Merchants Accepting International Orders From… Over half of merchants accept online orders from Over half of merchants accept online orders from outside the U.S. and/or Canada** outside the U.S. and/or Canada** In 2009 these orders represented on average In 2009 these orders represented on average 100% 21% of total orders up from 17% in 2008 21% of total orders up from 17% in 2008 90% 81% 80% Average # of Average # of 72% 71% Countries per Merchant 68% Countries per Merchant 70% 64% 64% 63% 9 9 62% % of Merchants 60% 53% 52% 51% 51% 48% 48% 47% 50% 40% 30% 20% 10% 0% United Australia Germany France Italy Mexico Spain Japan Hong Singapore Brazil China South Taiwan India Kingdom Kong Korea n=191 Base: Merchants accepting international orders Note: A list of countries was provided, but merchants were also allowed to add any country Results < 25% not shown that was missing from the list. (The list of countries provided changed in 2008.) Q4b. From which of the following countries, outside the U.S. and Canada, do you accept online orders? Please select all that apply. © 2010 CyberSource Corporation. All rights reserved.2007 **Note: 54% in 2009; 52% in 2008, 59% in Managing Fraud Management: Work the Process 39 3
    • Average % Orders Manually Reviewed Year-to-Year Trend for Manual Review by Merchants Practicing Review In general, merchants with higher revenues continue In general, merchants with higher revenues continue 2009 to be more likely to conduct a smaller % of manual to be more likely to conduct a smaller % of manual 2008 reviews than their lower revenue counterparts reviews than their lower revenue counterparts 2007 60% 51% 50% 46% 45% 43% 40% 40% 35% 34%33% 33%32% 30% 28% 19% 20% 14%15%15% 10% 0% Overall <$500K $500K - <$5M $5M - <$25M $25M+ Annual Online Revenues Base: Merchants practicing manual review (Mean excluding 0) Q11. Approximately what percent of the total orders you receive require manual review © 2010 CyberSource Corporation. All rights reserved. to screen for online payment fraud? Managing Fraud Management: Work the Process 40
    • Online Fraud Management: A Full Process Approach Doug Schwegman CyberSource Director, Research May 11, 2009
    • Indicators of Fraudulent Airline Bookings Type of Booking (net) 87% Cardholder not travelling 69% Single passenger 44% Bookings include children 3% Frequent flyer bookings 1% Group booking 1% Time between Booking & Departure (net) 80% < 12 hours 37% 12 - 23 hours 37% 24 - 47 hours 21% 48 hours to 1 week 8% More than 1 week 4% Type of Flight (net) 77% Trans-continental 30% Regional 25% Continental 20% National 10% Type of Itinerary / Journey (net) 76% One way 45% Round trip 25% Multi-leg 7% Class of Service Booked (net) 59% Economy 40% Business 20% Premium Economy 7% n= 71 First 6% Total mentions = 334 Q: Which of the following items do you consider to be the most common indicators of a fraudulent transaction for bookings made on your airline's own website(s)? [you may select up to six items] © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 42
    • Airline % of Online Revenue Lost to Fraud Exp Region Type 3.8% 2.6% 1.9% 1.6% 1.3% 1.4% 1.1% 1.1% 1.2% 1.2% 1.1% 0.6% 0.6% * * * pe a* a re * C * e* ll e * ib AC ss st ic ra lin 5) LC ic Fa lin ro ar Ea er ne ve =5 on r AP /C on Eu Af Am ll O (n si e Fu m s dl Bu s yr e tA N. yr id in 9 La M irl 2 >= <= A n- n=61 .No *Caution: small base er Am ** Online Revenues $100 + Million N. Q: What percent of your revenue do you expect to lose due to payment fraud during 2008? - Based on revenue from your airline's own website(s) Q: % of bookings accepted that later result in fraud losses (A fraud chargeback was received on the booking OR A credit was issued directly to a customer who claims not to have made the booking © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 43
    • 190+ Countries On Demand • Transact in 140 currencies, fund in 22 currencies • Manage connections 24/7/365 to over 33 payment processors /Corporation. All rights reserved. © 2010 CyberSource systems worldwide Managing Fraud Management: Work the Process 44
    • CyberSource Asia • CyberSource K.K. established 2000 • JV with Trans-Cosmos, Inc. • Sales, Marketing, Support, Operations • Data Center: Tokyo Europe • UK presence since 1997 • Sales, Marketing, Support, Operations • Data Center: London USA • R&D Center N. Ireland • HQ: Mountain View, CA • Engineering, Operations, Sales, Marketing, • Offices throughout US • Data Centers: California, Colorado, Washington © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 45
    • E-Retail Entertainment/Telecom Travel $1:4 Transacted by U.S. Consumers* $120B ePayments Managed WW 2009 300,000+ Merchants 2.5 Billion Transactions © 2010 CyberSource Corporation. All rights reserved. Managing Fraud Management: Work the Process 46 * Forrester, US Gov. Data