eCommerce Summit Atlanta Moneybookers Presentation

International Risk and Fraud Management by Moneybookers

AGENDA 1 2 3 Quick introduction of Moneybookers Risk and fraud in global online payments 4 Most common fraud types Moneybookers’ fraud protection system ? Q & A

Moneybookers Ltd. was f ounded in July 2001 and is based in London, United Kingdom

Moneybookers USA, Inc. founded in October 2008 as part of the Moneybookers group, based in New York

Moneybookers Ltd. as first regulated e-money issuer, regulated by the UK financial authorities (FSA)

Owned by Investcorp, Chairman of Moneybookers’ Board: Dr. Thomas Middelhoff

250 employees, supporting 12 languages

Most comprehensive Payment network for borderless money transfers worldwide and in real-time

Over 7.5 Million account holders and 12,000 new account openings per day

More than 35,000 Merchants already use the Moneybookers solution

Moneybookers is an independent payment provider

*Moneybookers USA, Inc. is a payment service provider that enables US merchants to accept major credit and debit card payments from domestic and international customers. Moneybookers USA, Inc. is affiliated with Moneybookers Limited, a UK-based money services business regulated by the FSA. Moneybookers Limited provides a service whereby US merchants can accept alternative payment options from non-US residents. The proceeds of those alternative payments are settled into the merchant’s Moneybookers Limited account, from which they can be withdrawn into the merchant’s bank account. In order to obtain the services offered by each entity, the merchant must enter into a separate agreement with the appropriate entity.

Key facts about the Moneybookers Group*

Laser

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Solo

Cheque

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

directebanking

e-Wallet

Carte Bleue

Cheque

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

E-Wallet

Euro6000

4B

Bank transfer

Amex

Visa

Visa Electron

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

directebanking

e-Wallet

iDeal

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

directebanking

e-Wallet

Sofort ü berweisung

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Poste Pay

Carta C

Bank transfer

Amex

Visa

Visa Electron

Mastercard

JCB

Diners Club

e-Wallet

ELV

Giropay

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

EPS

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

P24

BPH

Inteligo

Mbank

Multitransfer

Nordea

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Nordea

Solo

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

eBG

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

Epay

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Nordea

Solo

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Visa

Amex

Mastercard

JCB

Diners Club

E-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Poli

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Poli

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Allpay

Local Instant Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank Wire

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

eNets

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Moneybookers : Widest support of local payment options

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Visa

Mastercard

Amex

Poli

Bank transfer

Amex

Visa

Mastercard

JCB

Diners Club

e-Wallet

Worldwide eCommerce spending (US$bn) Global e-commerce revenues are still growing Source: JP Morgan, Forrester, US Dept of commerce

Online fraud losses however grow as well Source: Cybersource 2009 Loss due to online fraud (US$ billion)

Organized international internet crime organizations are on the rise

Underground international hackers organize in community & marketplaces

Prosecutors are chasing moving targets – pinning them down becomes more difficult

Medium Internet allows for great economies of scale – also in the criminal world!

2008 top IC3 complaint categories Auction fraud is the second most common complaint reason at the Internet Crime Complaint Center (IC3) Source: IC3

Order rejection trends International orders are riskier and get rejected more often Source: Cybersource 2009

Merchants report 3.5 times higher order rejection rate for international orders than for domestic ones

Domestic and international fraud rate

Fraud risk on international orders is over 3.5 times that of domestic orders

Domestic Orders International Orders

Perpetrators come mainly from the USA, United Kingdom and Nigeria Origin of perpetrators: Worldwide 66.1% 10.5% 7.5% Source : 2008 Internet Crime Report – IC3

Global risk and fraud: Threats by state Origin of perpetrators: United States Source : 2008 Internet Crime Report – IC3 15.8% 9.5% 9.4% 6.4%

We differentiate between criminal fraud and friendly fraud

Phishing pharming, vishing

SPAM - Fraudulent notification or requests for information

Malicious software – spyware, virus infection, key stroke capture, turn off protections, crimeware

Website impersonations (spoofing) & redirection – collection of account & authentication information

Man in the middle & session hijacking

Breach of credit card & merchant sites for theft of customer and account information – followed by fraudulent transactions & card counterfeiting

Identity theft/customer impersonation – establishment of new account & remote authentication challenges

“ Friendly” Fraud (1 st or 2 nd party) Criminal Fraud (3 rd party)

Order was valid, but buyers trigger chargeback

Disappointment with about actual product (-quality)

Financial hardship due to job loss

Unrelated anger/protest

Chargeback's

Refunds

Viable orders that got rejected in error

Risk and fraud personnel

Risk and fraud related tools (34% of merchants spend 0.5% or more of their online revenues to manage online payment fraud)

Collection cost

Reputational risk

LOSS OF REVENUE AND INCOME

Risk and fraud related cost can be substantial

The pre-transaction fraud prevention process features three different steps Automated Screening Manual Screening Accept payment Refuse payment 1 2 3 3

A localized automated screening process is crucial

Automated Screening

Validation Measures

Address verification services

Name and DOB verification (MB uses local premium agencies -> maximum relevancy and accuracy)

Credit history check etc.

Company specific records

Customer order history

Negative lists (Cards, known fraud etc.)

Fraud scoring (Moneybookers uses a risk models with more than 400 configurable rules)

Industry specific records

Shared blacklists (e.g. OFAC, Match, PEP etc.)

Multi-merchant fraud models

Tracking methods

IP geo-location tracking

Device fingerprinting (PC, MAC, Linux, iPhone etc)

2 3 3 1

Manual screening requires highly trained personnel and a close relationship with local and international law enforcement agencies

Manual Screening

Personal investigation

Contact card issuer and customers for verification

Co-operation with national and international law enforcement agencies e.g. FBI, FTC, Interpol, SOCA etc.

Constant identification and update of new fraud patterns

Accept payment

Refuse payment

2 3 3 1

Moneybookers’ chargeback team works hard on behalf of our partners to avoid the execution of chargebacks

Our transparent and scalable re-presentment process is the result of 8 years experience

Contesting and re-presenting chargebacks is part of the process Buyer initiates chargeback via bank Bank requests CHB from Moneybookers Moneybookers informs merchant Merchant provides “proof of delivery” Moneybookers informs processor Chargeback is not executed Negotiation with bank Successful: Merchant keeps Money Not successful: CHB is executed

Markus Kroeger Managing Director Moneybookers USA, Inc. Mobile: +1 (347) 967 9222 [email_address] www.moneybookers.com .