This document discusses the growing problem of e-commerce fraud for merchants and outlines solutions from Fraugster. It notes that the fraud rate for merchants is 1.5% of total sales and €47 billion annually in Europe. Current fraud detection methods used by merchants, such as rules-based systems and manual review, are outdated. New European regulations on Strong Customer Authentication (PSD2) aim to increase security but may negatively impact approval rates and revenues. The document then describes Fraugster's artificial intelligence-based fraud detection system, which can approve transactions in 15 milliseconds with explanations, guarantee chargebacks, and increase merchants' revenues. It provides examples of merchants who saw fraud cost reductions of 33% and revenue uplifts of up

2. C O N F I D E N T I A L 2
WELCOME TO A
FRAUD FREE
WORLD
MINIMIZE FRAUD. MAXIMIZE REVENUE.

3. C O N F I D E N T I A L 3
MERCHANTS’ LOSS TO FRAUD
1.5%

4. C O N F I D E N T I A L 4
€47 BILLION

5. FRAUD RATE
is growing
As fast as
E-COMMERCE
X2

6. C O N F I D E N T I A L 6
3D
Secure
Human
Rules
Manual
Review
Machine
Learning
MERCHANTS ARE USING
LEGACY ANTI-FRAUD TECHNOLOGIES

7. C O N F I D E N T I A L 7
FALSE POSITIVES
20%+

8. C O N F I D E N T I A L 8
FRAUD PATTERNS SHIFT IN THE EU
EXPECTED WITH
PSD2

9. C O N F I D E N T I A L 9
Strong Customer Authentication (SCA)
is a new European regulatory requirement
with the goal to reduce fraud and make
online payments more secure.

10. C O N F I D E N T I A L 10
Merchant
Acquirer / PSP
Card issuer
Issuing Bank
Consumer
NON PSD2

11. C O N F I D E N T I A L 11
Merchant
Acquirer / PSP
Card issuer
Issuing Bank
Consumer
NON PSD2

12. C O N F I D E N T I A L 12
Merchant
Acquirer / PSP
Card issuer
Issuing Bank
Consumer
WITH PSD2

13. C O N F I D E N T I A L 13
FRAUDSTERS WILL SWITCH TO NON-EU CARDS
GEOGRAPHICAL APPLICABILITY
EU: European Economic Area, EU-28 and Norway, Iceland & Liechtenstein
PSD2
In scope for
SCA
PSD2
Not in scope for
SCA

14. C O N F I D E N T I A L 14
RISK PROBLEM REMAINS. REVENUE PROBLEM CREATED.
PSD2
Total Fraudulent Transactions SCA required above
0.13% € 100
0.06% € 250
0.01% € 500
No SCA < € 30

15. C O N F I D E N T I A L 15
RISK PROBLEM REMAINS. REVENUE PROBLEM CREATED.
PSD2
Expected higher drop off rate for
Credit Cards and Debit Cards of
10% - 20%

16. C O N F I D E N T I A L 16
SPLIT BY VALUE
E-COMMERCE PAYMENT METHODS GERMANY
8%
13%
13%
20%
20%
26%
Digital wallet Direct debit Open invoice Credit card Other Bank transfer
E-commerce payment method split by value Source: EHI Retail Institute, EHI-Studie Online Payment 2017, 2017.

17. C O N F I D E N T I A L 17
GERMAN E-COMMERCE MARKET
▪ € 73bn market size
▪ 50% cross border
▪ Diverse payment methods with low SCA
▪ Low investment in fraud prevention vs UK and US
▪ 3% fraud rate vs 2% EU average

18. C O N F I D E N T I A LC O N F I D E N T I A L 18
HOW DO YOU PROTECT
YOUR REVENUE?

19. C O N F I D E N T I A L 19
AI IS THE ANSWER
PROTECTION
SCALABLE OPERATIONS
REVENUES

20. ARTIFICIAL
INTELLIGENCE
IN MEMORY
DATABASE
DATA
ENRICHMENT
STRATEGY
TOOLS
HUMAN-LIKE
ACCURACY
WITH MACHINE
SCALABILITY

21. PURCHASE
HOW IT WORKS
DATA COLLECTION FRAUGSTER ENGINEDATA ENRICHMENT

22. TYPICAL RISK BEHAVIOR
DECLINED

23. NATIONALITY
CHECK
THE FRAUGSTER WAY
APPROVED

24. DATA COLLECTION DATA ENRICHMENT FRAUGSTER ENGINE
HOW IT WORKS
PURCHASE DECISION

25. C O N F I D E N T I A L 25
15 msPER DECISION

26. C O N F I D E N T I A L 26
EVERY DECISION BY THE ENGINE EXPLAINED IN CLEAR LANGUAGE
OUR AI IS NOT A BLACK BOX

27. PRODUCTS

28. Entry-level
rule engine
AI risk
management suite
Chargeback
guarantee
+
Guaranteed revenue
+ Chargeback
guarantee
28C O N F I D E N T I A L
OUR PRODUCTS
FOUR PRODUCTS TO IMPROVE YOUR BUSINESS PERFORMANCE

29. C O N F I D E N T I A L 29
FULLY RE-INSURED BY

30. USE CASE: FIRE
A LT E R N AT I V E PAY M E N T M E T H O D S / PAY M E N T U P O N I N V O I C E

31. C O N F I D E N T I A L 31
CLIENT: ONLINE PAYMENT SOLUTION PROVIDER
BUSINESS OBJECTIVES
Better
Performance
Provide stronger fraud
protection for their clients,
thus increasing revenues.
Scalable Client
Growth
Simplified Internal
Operations
Provide the risk
management team with a
powerful tool for real time
testing and deployment
Serve more clients, with
limitless transaction
volume at all times

32. C O N F I D E N T I A L 32
RESULTS WITH FIRE
NICOLAS KIPP
Director Risk Management / Data Science, RatePay
“Thanks to this cooperation, our merchants enjoy greater revenue growth”
’’

33. PAYMENT METHOD: CREDIT CARD
USE CASE: FRAUDFREE+

34. C O N F I D E N T I A L 34
CLIENT: LEADING EUROPEAN FASHION RETAILER
BUSINESS PROBLEMS
Reduce Fraud Rate
High cost of existing
fraud solution provider
High Decline Rate
Legitimate transactions
falsely identified as
fraudulent harm revenue
and profitability

35. C O N F I D E N T I A L 35
CLIENT: LEADING EUROPEAN FASHION RETAILER
BUSINESS OBJECTIVES: FACTS & FIGURES
Annual Revenues: € 102,067,332
Fraud Solution: Retail Decision (ReD)
Cost of Fraud: € 748,645 (0.73%)
Average Approval Rate: 89.7%

36. SWITCH TO
+

37. C O N F I D E N T I A L 37
GUARANTEED CHARGEBACK PROTECTION. GUARANTEED REVENUE UPLIFT.
SWITCH TO FRAUDFREE+
FraudFree
Chargeback guarantee for
0.48% (-33%)
SAVE
€ 247,052

38. C O N F I D E N T I A L 38
AVERAGE APPROVAL RATE 89.7%
SWITCH TO FRAUDFREE+
Approval Rate
80,00%
83,75%
87,50%
91,25%
95,00%
2019-01 2019-02 2019-03 2019-04 2019-05 2019-06 2019-07 2019-08 2019-09 2019-10 2019-11 2019-12
89,06%88,99%89,07%
89,61%89,59%
89,82%89,93%89,93%90,06%90,27%90,40%
89,67%
Previous Solution

39. C O N F I D E N T I A L 39
SWITCH TO FRAUDFREE+
Approval Rate
80,00%
83,75%
87,50%
91,25%
95,00%
2019-01 2019-02 2019-03 2019-04 2019-05 2019-06 2019-07 2019-08 2019-09 2019-10 2019-11 2019-12
Fraugster Previous Solution
89,06%88,99%89,07%
89,61%89,59%
89,82%89,93%89,93%90,06%90,27%90,40%
89,67%
91,81%91,81%91,81%
91,45%91,53%
92,10%92,03%
91,75%91,93%
91,65%
92,52%
91,33%

40. C O N F I D E N T I A L 40
GUARANTEED CHARGEBACK PROTECTION. GUARANTEED REVENUE UPLIFT.
SWITCH TO FRAUDFREE+
FraudFree
Chargeback guarantee for
0.48% (33% saving)
SAVE
€ 247,052
FraudFree+
Revenue uplift guarantee
1.8%
GAIN
€ 2,431,195
Actual uplift delivered
2.4%

41. C O N F I D E N T I A L 41
MERCHANT'S NET GAIN WITH FRAUGSTER
€ 2.6m

42. BOOST YOUR
PERFORMANCE

43. C O N F I D E N T I A L 43
DEDICATED ACCOUNT MANAGER ASSIGNED TO YOU
HOW TO START
Free Analysis of your
Business: 5 days
Contract with Fraugster
2-page amendment to
PSP contract
Direct
integration
Via your
Payment Service Provider
Review with
our fraud
experts
3 – 4 WEEKS
1 click // 24H

44. WORLD CLASS CLIENTS
A N D M A N Y M O R E . . .

45. QUESTIONS ?

46. Max Laemmle
max@fraugster.com
+49 160 9779 4312