Increasing Revenue
Reducing Costs
Fighting Fraud

Some Key Facts
There are 140 billion card transactions p.a. worldwide
processes over 14 billion card transactions per year
for blue chip clients around the globe
processes for many travel & hospitality companies globally
is the largest pre-paid gift card issuer in Australia
is one of the world’s largest players in transactional
card fraud prevention
has 19+ years experience in card fraud prevention

Typical Hotel Fraud Patterns
Fraudulent bookings are often:
Third party purchases
E-tickets = increased risk
Booked last minute / the e-ticket risk
One night stays
Cross Border Transactions
tickets
Use free email domains
Multiple bookings on many sites

Hotel Fraudster Characteristics
• A majority of the online bookings originate in Florida and
California
• Fraudsters like to go to holiday destinations
– 4 of the top 5 holiday destinations are seaside resorts
• Outside of the US, fraudsters are most likely to come from UK,
France, Germany, Ghana, India, Italy, Nigeria, South Africa,
Spain, Vietnam
• When leaving the US, fraudsters like to travel to Australia,
Austria, Belgium, France, Germany, Italy, Netherlands, South
Africa, Spain and Switzerland

Fraud – Latest Trends - Customer Salutations
“Miss” salutations typically 3
times more prone to fraud than
“Mr”
Typical percentage of transactions that are fraud by passenger
salutation
Mrs
11%
Ms
4%
Mr
21%
Miss
64%

Hotel Fraud – Latest Trends
www.Fraudsters_posing_as_Travel_Agents.con
CANADA
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– Fraudulent travel agency set up online
– Genuine customer purchases rooms from fraudulent site
– Fraudsters purchase rooms from legitimate companies
using card details
– Customer is forwarded legitimate booking confirmation
– Consumer loses money; brand impact for legitimate
travel company; loss of sale of ticket.
– Fraudster has card details

Merchants Under Attack - The Real Cost of CNP Fraud
Lost sales to fraud
Sales blocked to good customers by
fraudsters testing cards
Rejecting third party sales as risk prone
Turning away cross-border
transactions from high-risk destinations
Rejecting, insulting & losing genuine
customers. Lost repeat sales
Revenue

Merchants Under Attack - The Real Cost of CNP Fraud
Chargebacks, surcharges and fines
High manual review costs to minimize
fraud
Credit card rejection
and call centre costs
Cost of alternative sales channels
Costs

Manual Reviews
A Costly Process
Online
revenue
Fraud
prevention
costs
Cost of
sale

Draconian Fraud Prevention Solutions
Online merchants reject: Fraud accounts for:
8% Domestic transactions 1% - 2%
13% International transactions of all transactions
We can improve your revenue by using
risk strategies based on our 19+ years of
CNP experience

I.P.I.D - Geo Location
Real-world
location
Pre-emptively block web site
access to certain locales or IP
origination points known to
be frequent sources of fraud
Instantly compare an online
customer's registered
address with his real-world
location to flag potential fraud

Location details
Unusual combinations of location details
Billing and/or
Delivery address
in London
I.P. address
in California Card issued
in Poland

Fraud Patterns: Free Email Accounts
john8@hotmail.com john1@hotmail.com john10@hotmail.com
john3@hotmail.com john5@hotmail.com
john6@hotmail.com john7@hotmail.com
john2@hotmail.com john4@hotmail.com john9@hotmail.com
John8
John10@hotmail.com
John9
John7
John6
John5
John4
John3
John2
John1
John10@hotmail.com
10% fraud rate on free email domains

Fraud Patterns: Tumbling & Swapping

VbV and MC SecureCode
• Generically called 3D Secure
• Adds a new layer of authentication to an
online purchase transaction
• Relies on
– The merchant implementing new software
provided by the acquiring bank
– The cardholder signing up for the service
with his card issuing bank

Card Scheme Initiatives
Latest initiative from Visa and MasterCard
• User signs up with their card issuer
• At point of purchase, a prompt appears for
supported card issuers
– Pop-up box or ‘in-line’
• Each time a purchase is made the user enters
their password or code
• This is checked directly with the issuer, prior to
the transaction being sent on line
Promises Chargeback Liability Shift

3D Secure is not a silver bullet
Understanding the chargeback liability shift
• 3D Secure Doesn’t actually stop the fraud, just shifts the liability
– Fraudsters will simply opt not to use 3D secure
• Liability moves back to the merchant if fraud levels become excessive
– Which they will if there are no other fraud prevention measures
• Only protects against a handful of the chargeback reason codes
• Only protects web channel – other CNP channels are unprotected
Other Considerations
• Issuers can deploy more stringent fraud prevention policies, impacting
genuine customers
• High fraud rates will have a significant negative brand impact
• Increase in transaction times – increased consumer drop-out

A Multi-Dimensional Approach to Fraud Prevention
Feedback for Rules specific to a
on-going development of customer’s business
rules and models processes and/or industry
Real time ReD PROPRIETARY
PROFESSIONAL
identification of Industry and customer-
consumers’ location EXPERTISE
specific databases
(Risk Analysts)
ReD PROPRIETARY
Advanced artificially ReD PROPRIETARY ENGINES
intelligent models to detect that detect very specific
behaviour and patterns fraud patterns

ReD’s Core Competence
Hotels core business = Room bookings
ReD’s core business
= Fraud prevention
With ReD Hotels will:
• reduce fraud
• increase ticket sales/revenue
• reduce costs
• Improve the customer’s online experience

Thank you
For additional questions email
Kami Boyer
kboyer@red-usa.com