View this slideshow to better understand the risks for merchants selling goods online. The purchase of digital goods is on the rise putting retailers and merchants at a greater risk for fraud. There is limited time to assess the risk of virtual purchases which requires a complex fraud management system. The three fraud management options include: In-house, Third Party Services, or Complete Outsourcing. Developing a fraud management strategy begins with an assessment of your current program, the development of a plan, and the evaluation of your institution’s ability to execute the plan. Download “A Merchant’s Guide to Successfully Selling Digital Goods” to learn more about the operational risks of fast fraud: http://info.trustvesta.com/digitalgoods

1. What’s
your
strategy?
Gift Card Fraud

2. Gift Card Fraud Solutions
Chris Uriarte
Chief Payments Officer
Mike Fletcher
General Manager

3. Gift cards & the cost of fraud
Growth
Vulnerability
How business
processes & practices
influence gift card fraud
Solutions
Three that every retailer
should consider

4. Growth 2013
$118B
Gift cards
delivered via
mobile &
digital
channels
Source: CEB TowerGroup
• Key component of an
overall customer
acquisition strategy
• Convenient gift
alternative
• eGift increases
convenience
• Increases average
spend
8x more
2012

5. Growth
by 2015
Gift cards
will account for18%
of holiday spending
Source: CEB TowerGroup, Gift Cards State of the Union 2013

6. Growth
Gift card spend & eGifting spend ($Billions)
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$-
2012 2013 2014 2015 2016
Source: CEB TowerGroup, Gift Cards State of the Union 2013

7. Growth of
eGift purchases
Growth of
CNP Purchases
and Fraud

8. Vulnerability
600+Data breaches reported
in 2013
+30% over 2012
Cards affected by data
breaches in past year 40+
Million
Source: Bloomberg Business Week, Michael Riley, Ben Elgin, Dune Lawrence and Carol Matlack, March 13, 2014,
Identify Theft Resource Center, ITRC 2013 Breach List Tops 600, Feb. 20, 2014

9. Vulnerability
$1
The fraudster’s price
for a stolen card’s data

10. How fraudsters turn data into dollars
1
Obtain Stolen
Card Data
2
Purchase
Gift Cards/eGift
3
Turn into
Cash or Use Funds
Buys Goods
or Services
Sells Card
or Code

11. Increased Complexity
Financial Risk
Physical Gift Cards
Time to Assess Risk
High Risk $$
Low Risk $$
Laptops
Dog Supplies
Children’s Clothes
eBooks
Watches
Virtual Gift Cards
10 mins1 hr 4 hr 24 hrs 48 hrs

12. Fraud control lifecycle
Solutions implemented
Time lag for solutions
to take effect
Value of fraud
to reduce fraud
Familiarity with
weaknesses and
technology
increases fraud
New solution is
implemented to
reduce fraud
Fraud rises as
new technologies are
cracked and new
weaknesses found
2006 Time 2013
Implies
innovation

13. Fraud management
What’s Your
Strategy?

14. Fraud management
Complete
Outsourcing
In-House
• Increase resources
• Difficult to review
• Adds more third party
tools
Third Party
Services
• Create new
segmentation
• Develop fraud strategies
• Increase out sort rate for
reviews
• Segment all stored value
products to a third party
• Use service with option for
indemnifying transactions
• Form partner relationship
with vendor

15. Criteria for Success
Complete
Outsourcing
In-House
• Use existing resources
and systems
• Achieve similar KPI
levels
• Same customer
experience
Third Party
Services
• Equal or better than
current in-house
• Achieve same KPI
levels or better
• Same customer
experience
• Equal or better than
current in-house
• Achieve same KPI
levels or better
• Same customer
experience

16. Your Strategy: Assess, Plan & Execute
• Assess the current state of your program
• Will it provide the level of loss prevention for new digital products?
• Will it provide the highest level of customer experience? Equal to other
products?
• Plan
• Can you segment your payment and risk processing by SKU or other
segmentation?
• Do you have segmented KPIs in place today?
• Standard ROI matrix or process? Decision threshold?
• If implementing an in-house solution do you have the resources?
• Execute
• Will you be able to implement and reach success milestones?
• How will implementation impact current processes?
• Do you have the systems, training and people resources to reach your
goals?

17. e-Gift Card: Challenges and Opportunities
Mike Fletcher
General Manager
InComm Digital Solutions

18. Value proposition
InComm transforms the
shopping experience in stores,
online and through mobile and
social commerce.
IDS provides an innovative
technology platform that allows
brands and distributors to sell,
promote and deliver prepaid
products in digital and physical
formats. Transactions are initiated
in a digital environment.

19. What is the digital gift card experience?
1
Order from web site
2
Receive notice
via email
Taking your physical gift card
and offering it in a digital format
eGift card
displays
based on web
or mobile
browser
3

20. How stored value products fit into the
overall customer/sales strategy
• Prepaid sales via online and mobile
• Incremental sales and last-minute
shopping
• Promotional opportunities
• Ability to retain customers via loyalty

21. Current state of
online stored value products
• Stored value continues
to increase, along with
digital
• Mobile sales on the rise
• Online sales extend your
in-store offerings

22. Current state
of online stored value products
In 2014,
retail purchases
made with prepaid
cards will top
U.S. $200B
Source: Forbes, April 2014
The purchase volume numbers include prepaid
debit, payroll cards, open (from a major card
company like Visa or MasterCard and which can
be used anywhere) and closed-loop gift cards
(like Starbucks for example), and open and
closed-loop consumer incentive cards.
(5% of all U.S. retail spending)

23. 55% of U.S. adults
own smartphones as of 2013
Growth
17%
21%
28%
32%
42%
55%
24%
33%
50%
2009 2010 2011 2012 2013
Smartphone ownership in U.S., 2009–2013
Source: Mercator Advisory Group, CustomerMonitor Survey Series, Payments, 2011, 2012, 2013

24. But, issuers say
mobile card loads are small
Source: Mercator Advisory Group
Form factor
2013 average
reported % of loads
Physical 93%
Virtual 6%
Mobile 1%

25. Customers want options
87%
Agree they prefer to
have the option to
purchase either a digital
or a physical card
74%
Agree they are likely
to purchase a digital gift
card in 2014
Source: November 2013 consumer survey commissioned by InComm.

26. Instant delivery drives eGift sales
The most
commonly cited
reasons for
selecting eGift
Cards are their
immediate
delivery and
ease to send,
buy and redeem
32%
28%
26%
21%
21%
18%
42%
Instant delivery
Easier to send
Easier to purchase
Cool gift to give
Easier to redeem
Environmentally friendly
Hard to lose
Source: November 2013 consumer survey commissioned by InComm. Consumers were asked to check all that apply.
62%
Recipient preference

27. Digital captures last-minute sales
eCommerce sales for physical and digital gift cards in December 2013
43%
Physical
cards
57%
Digital
cards
Physical gift card sales taper off as Christmas approaches
because shipping means gifts may not arrive for Christmas
Digital gift card sales rise as Christmas approaches because
instant delivery means gifts arrive in time for Christmas
Christmas
Source: Aggregated data of digital and physical gift cards fulfilled through the InComm Digital Solutions platform when our
clients offer both delivery options through their eCommerce sites.

28. Mobile on the rise
46%
are interested in
storing digital gift
cards on their phones
40%
prefer to have a digital
gift card scanned from
their phone rather than
carry an email printout
Source: November 2013 consumer survey commissioned by InComm

29. eGift card views from mobile
8% 7% 7%
11%
Source: InComm Digital Back Office
19% 16%
27% 25%
Mobile Desktop
30% 29% 29%
92% 93% 93%
89%
81% 84%
73% 75%
70% 71% 71%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013 Q2 2013Q3
Mobile viewing of eGift cards is on the rise—almost 30% of eGift cards
are now viewed first on a mobile device rather than a desktop.

30. Challenges of digital stored
value sales for online retailers
• Card not present transaction
• No physical address required
for delivery
• Instant delivery of product,
that is easy to monetize in a
secondary market

31. Previous experiences and challenges
Goal Challenges
• Guard retailer from high risk
of digital goods fraud without
being at the cost of lost sales
or a good customer
experience
• High risk due to immediacy of
product fulfillment
• Merchants payment gateway controls
• High rate of payment denial of good
customers

32. Previous experiences and challenges
Solution
• Implemented easy to use, secure payment solution
• Real-time payment processing
• Eliminated the InComm merchant’s fraud liability
• Improvement of inline/pend process for better approval rates

33. Previous experiences and challenges
Results
• Peace of mind for InComm’s merchants offering digital gift cards
• Instant approval and delivery of digital gift cards
• Fraud related liability for InComm’s merchants is Zero
• Able to turn the cart on and LEAVE it on!

34. Measuring success
• Driving the highest throughput of sales
• Indemnifying against fraud
• Customer service experience – how many calls?
Need to keep this in check

35. Future road map of
enhancements and changes
• Mobile experience is gaining
traction – both interaction and
sales from mobile devices
• Better experience because
customers are familiar with
the device, having an account
• Ability to identify location via
IP address to reduce fraud
• Fingerprinting

36. Summary Points
Your strategy is critical to your business.
• Eliminate fraud related expenses with chargeback indemnification
• Ensure that you select an easy-to-use and implement yet secure
solution
• Maximize the customer experience with real-time payment
processing and the reduction of false positives

37. Questions?