Tactics, plans and the whole meaning of fraud is evolving from day to day. Controlling and improving the processes is one of the steps in the fight against fraud. But what is the key to be effective against fraud in the payment industry?

1. MERCURY PROCESSING
SERVICES INTERNATIONAL
OUR WAY OF FIGHTING FRAUD
Grozdana Marić, Fraud Product Manager
Ljubljana, 31st May 2017
OUR WAY OF FIGHTING
FRAUD

2. Mercury Processing Services International is a provider of payment solutions, dedicated to developing and
managing its payment business on an international level. Company was established in 2009.
Located in Croatia and Slovenia, we serve clients from the financial and banking sectors across Central & Eastern
Europe and North Africa. Our portfolio is tailored to meet regional, local market or individual client requirements and
business strategy.
Technological expertise is the main driver of enhancing and enriching our existing business relations, as well as the
main source for innovations we provide in the payment industry.
The foundations of Mercury Processing Services International rely on complementary strengths of the two strongest
cards businesses, Banka Koper and Privredna banka Zagreb, and their transition from local companies into a fully
international organization.
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3. OUR DNA KEY PILLARS
EXPERTISE
• Deep business and industry insights with technology know-how
• Employees focused on the core mission of the company
• High fluidity of communication and people interactions
• More than 70% employees with university degree and 100% English fluent
• Elaborated trainings programs and corporate culture based on constant self
and collective improvement
• Early and quick adopters, with tailored approach to meet local needs
• Strong expertise based on innovation hub with deep business and industry insights
• Service minded employees with rigorous understanding of client’s needs and their
specific institutional context
• Lean and responsive organizational structure built around value streams and powered
by agile software development
• Truly international (teams, mindset, approach, …)
• Diverse (nationalities, cultures, languages…)
• Adaptive and flexible (learning from customers requirements…)
• Creative (solution oriented, cutting corners, …)
• Agile (methodology, spirit, …)
PEOPLE
VERSATILITY
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4. OUR SERVICES
Issuing solutions Value added solutionsAcquiring solutions
• Cardholder and Card
Management
• Issuer Authorization Service
• Transaction Processing
• Proximity Payments
• POS Solutions
• ATM Solutions
• E-Commerce
• Reporting
• Call Center
• Dispute and Chargeback
Management
• Strong Authentication
• Fraud Detection
• Advanced Risk Modelling
• Loyalty Programs
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5. FRAUD IN THE PAYMENT
CARD INDUSTRY

6. FRAUD IN THE PAYMENT CARD INDUSTRY
• Payment card fraud is among the fastest-growing and best-known means of generating
criminal profit.
• It has evolved from being committed by casual fraudsters to being committed by organized
crime and fraud rings that use sophisticated methods.
• The sophistication of their tactics makes detecting fraud difficult, especially as the volume of
bank transactions grows by about 10% every year.
• Besides the huge financial loses, fraud hurts institutions’ reputation, customer loyalty, and
shareholder confidence.
Damage is far greater than just the financials around the actual fraud loss.
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7. NORMAL 7
1980 1990 2000 TODAY
Fraudster Individuals Teams Local crime rings International crime rings
Target Consumers Small retailers Larger retailers
Banks
Processors
Leading Fraud
types
Lost/Stolen
Domestic
counterfeiting /
skimming
Identity theft
Phishing
Rudimentary data
compromise
CNP fraud
ATM fraud
Cross-border data
compromise
Type of cards
targeted
Travel&
Entertainment
cards
Premium credit
cards
Mass market credit
cards
All type of credit card
Debit cards
Prepaid cards
Necessary
resources
Opportunism
Rudimentary
knowledge
Technical knowhow
Technical expertise
Insider information
Global connections
EVOLUTION OF THE PAYMENT CARD FRAUD IN EUROPE

8. TRUE COST OF FRAUD – COUNTING THE UN-COUNTABLES
TRUE COST
OF
FRAUD
CEO’s Apologies
Regulatory Fines
Impact on share price
Tighten Regulations
Costs of Investigation
Revenues Loss
Re-acquiring
Reputational Damage
Source: VISA
Attrition & re-acquisition
Actual losses due to fraud, measured by the accumulated fraud transaction amounts, are often just
the tip of the iceberg.
But consider what’s below the surface: fraud hurts institutions’ reputation, customer loyalty,
shareholder confidence.
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Increased OpRisk exposure and
capital charge

9. FRAUD IN THE PAYMENT CARD INDUSTRY
FRAUD DRIVES CUSTOMER ATTRITION
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63% 43% 25%
of consumers who
have experienced
fraud are more likely to
use their cards less.
of consumers who
received replacement
cards as a result of
fraudulent activity use
their new card less than
they used their original.
of consumers changed
financial institutions
due to dissatisfaction
after experiencing
fraud.
Source: ACI Worldwide Global Consumer Fraud Report
Statistics show poor handling of fraud is a key reason you will loose the trust
of that customer and why they are likely to close an account.

10. FRAUD IN THE PAYMENT CARD INDUSTRY
FRAUD SHAPES THE CUSTOMER’S EXPERIENCE
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How you handle a fraud event is a defining moment in customer satisfaction and
loyalty to your brand.
You FAIL
when ..
You SUCCEED
when ..
• Genuine transactions are NOT declined
• Contact is established within second
• Interactions are personalized and convenient
• Customers are informed and empowered
• Legitimate activity is stopped
• Your customers are not informed
• A process takes too long

11. SO, HOW TO MITIGATE
THE FRAUD RISK ?
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12. Set up the
organization
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Antifraud
operating model
• Strategies and thresholds - need to be determined based on:
• Fraud risk appetite, fraud tolerance, policies and procedures, KPIs;
• Customer experience / The impact on the cardholders;
• How much you refer or decline depend on your preferences for customer
satisfaction and aggressiveness towards fraud prevention;
• Available resources (Fraud Operations, Call Centre etc.).
• The balance is a critical: to set a fair balance between fraud mitigation purposes
and Business sales objectives.
• Dedicated antifraud teams with fraud skill set and know-how;
• Fraud monitoring 24/7 - adequate capacity to table fraud needed during
non-working hours;
• Alert management, cardholder/merchant contact, countermeasures;
• Fraud diagnostics – drill-down, data discovery and correlations;
• Incident management – CPP identification, Black listing, Card reissuance,
Reporting to payment schemes;
• Collaboration with Law enforcement, National Bank, Local and Global
Fraud associations.
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OUR FRAUD APPROACH AND FRAMEWORK

13. KPIs monitoring
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Fraud Detection
Platform
Lynx Fraud Management System – an in-house Fraud detection and prevention
solution for detecting payment card fraud and addressing it along multiple risk
dimensions.
• The system combines artificial intelligence and user-specified rules to give the bank
agile fraud detection and prevention solution.
• Protects all cardholders regardless of their chosen payment types (debit, credit,
mobile, contactless payments) and of brands.
• Supports multi-currency, multi-organization and multi-channels fraud prevention
and detection.
• By using our system, banks are enabled to perform highly automated and
sophisticated screenings of incoming transactions and to flag suspicious
transactions.
Main fraud risk metrics to shift operations strategy;
• No of False positives;
• No of alerting scenarios; alerts / cases;
• Operational costs – Average time-to-case;
• Overall fraud losses, unrecovered fraud losses, fraud loss per case, CHB expenses
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OUR FRAUD APPROACH AND FRAMEWORK (II)

14. LYNX FRAUD MANAGEMENT SYSTEM HIGHLIGHTS
Lynx Fraud
Management
System
Online plus module for
automatic card blocking
Covering all channels, brands,
payment options from a single
platform
High level of modularity & flexibility
Possibility to implement
limitless rules
Extensive reporting suite
Multi-institution solution
Fraud notification services
Extensive data retention
Multiple brands / card schemes
supported
Audit records on who did what
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Comply with regulatory standards

15. LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 1
This application empowers fraud experts to create, maintain and control fraud strategies quickly, easily and cost
effectively, in order to drive smarter fraud strategies and make faster and more consistent decisions.
It enables a quick response to attack flash fraud threats and implements different risk parameters based on corporate
policies and guidelines, external regulations and the analysis of historical data.
COMPONENT 1: LYNX RULE ENGINE SYSTEM
HIGHLIGHTS
• Rules are changed without IT intervention and are immediately propagated in the production environment.
• Possibility to implement „limitless” number of rules and hotlists
• Various types of rules, single, count, sum, hotlist, comparing two transactions, monitoring 1st pattern
appearance…and all combinations + Scoring
• Enables the setting of rules as Online plus rules, which upon alert creation perform automatic card blocking
directly from FCM
• Enables rule based notifications
• Enables the implementing of different fraud operations strategies using Low/Med/HR rules classification
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16. • Fraud detection is supported with data mining
techniques.
• The fraud score is easily combined with other
business rules in the fraud detection process.
• Enables detection and score the probability of
fraud in cardholders’ transactions and in addition
to custom business rules define the appropriate
action to be performed.
• Leverage Big Data & Analytics to gain a holistic
view of fraud.
• The scorecard module changes in parameters,
variables, and other can be very easily and
quickly done, changes can be made by issuer,
market, transaction type.
FIGHTING FRAUD WITH ARTIFICIAL INTELLIGENCE
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17. Are data consistent?
Do duplicate records exist?
Are relations within tables
consistent? Between
entities and attributes?
Are data available at
needed time?
Are data from verifiable
sources?
Are all data within
specified domains?
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Data
quality
Timelines
Are all necessary
data present?
Accuracy Completeness
IntegrityValidity
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Consistency
ANALYTICS STRATEGY – DATA MANAGEMENT
• Data quality challenges
• Better data enables better detection
• Introduce new data assets (session data, device data, location based information)
• Multiple source systems challenges
• Transform information into decisions

18. LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 2
Case manager is a web-based application which provides comprehensive information to enable fraud
analysts to prioritize all alerts in multiple queues according to specified user-defined rules and for analysts
to review and decide on alerts. It is tailored to help meet the most complex operational requirements.
COMPONENT 2: LYNX CASE MANAGER – MONITORING AND INVESTIGATION TOOL
HIGHLIGHTS
• Various levels of fraud monitoring both on issuing and acquiring level
• Integrated transaction viewer, extensive Reporting suite
• Card Service functionality for card blocking and unblocking directly from FCM to B/O
• SMS functionality for quicker cardholder contacting
• Hotlists - whitelists and blacklists
• Case suppression lists (full and grey)
• Extensive transactions and cardholder information and card alert history
• Card transactional history (6 months access via application; 13 months in database)
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19. LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 3
COMPONENT 3: VALUE ADDED FEATURES
Lynx Fraud Management System is built to boost analyst efficiency and efficacy by leveraging the added
functionality embedded within the system which will keep focus and save time wasted logging in to satellite
applications.
Major features integrated within the Lynx fraud management system are:
• Online plus mode - allows automatic card blocking
• Integrated Transaction Viewer
• Customizable Reporting Suite
• Fraud notification services (SMS, email)
SUPPORTED SERVICES
• Advanced Fraud Management service
• Fraud analytics and fraud diagnostics support
• Consultancy and training
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20. LYNX FRAUD MANAGEMENT SYSTEM BENEFITS
FOR THE BANKS:
• Reduces fraud losses
by detecting fraud
earlier with fewer
false positives
• Improves operational
efficiency through
added value
functionalities
• Minimizes cardholder
impact on operational
costs
• Decreases
chargeback expenses
• Reduces charge-offs
FOR THE
CARDHOLDERS:
• Cardholder
satisfaction
• Cardholder
convenience
• Feeling of security
• First line of defense
from fraudsters
• Enhanced customer
experience at the
point of detection
FOR THE MERCHANTS:
• Merchant satisfaction
and convenience
• Feeling of security
• First line of defense
from fraudsters
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21. A TYPICAL DAY … TRUSTED WITH SCALE
Average processing and monitoring of 1.5 million transactions a day
In peak moments Fraud Management System is processing around 30
transactions per second
Over 600 active fraud rules are monitoring in Rule Engine System
Fraud monitoring of 6.7 million cards, 75.000 POS
terminals and 2.600 ATM
Fraud analysts of 20 Banks in 11 countries are
constantly taking appropriate measures using FMS
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22. www.mercury-processing.com
+385 98 29 10 10
grozdana.maric@mercury-processing.com
Grozdana Marić
Fraud Product Manager
Business Management Division
CONTACT

23. THANK YOU!
Any questions?