Risk Management views at Authentiction level: How banks and payment networks can leverage their KYC knowledge to become leaders at real time authentication.

1. Merchant Payments Ecosystem
February 18-20, Berlin
RISK MANAGEMENT
VIEWS AT
AUTHENTICATION LEVEL
How banks and payment networks can leverage their KYC
knowledge to become leaders at real time authentication.

2. Merchant Payments Ecosystem
February 18-20, Berlin
UNLOCKING
THE KEY
POINTS
• A Broader Definition of Fraud from a
Risk Analysis Perspective
• Innovation at KYC Level
• Compliance “Headaches”
• Multi-Industry Collaboration
• Biometrics Barriers and Future
Developments

3. Merchant Payments Ecosystem
February 18-20, Berlin
A BROADER DEFINITION OF
FRAUD FROM A RISK ANALYSIS
PERSPECTIVE
We cannot solve our problems with
the same thinking we used when we
created them.
“ “

4. Merchant Payments Ecosystem
February 18-20, Berlin
STANDARD DATA AND ASPECTS WE CONSIDER IN
RISK MANAGEMENT
BSINESS + PAYMENTS DATA
AS A CONVERSION TOOL
CONTROL
• Merchant Category Code (MCC)
• Customer Behavior
• Authorisation Rates
• Static Geo-Location
• Fraud and Scoring Rules (bin velocity?)
• Declined Code (type) — Separate Analysis/Dashboard
• Device Fingerprinting
• Biometric Data
• Multi-Factor Authentication
• Third-Party Identity Providers
• Real Time Location Data (Mobile/Geo-Fencing)
LAYERS WE MUST ADD OR CONSIDER

5. Merchant Payments Ecosystem
February 18-20, Berlin
WHAT IS DATA
CONVERGENCE?
TRANSACTION + CHANNEL + DEVICE DATA
CUSTOMER PROFILING
CONVERSIONS AND
PROCESS OPTIMIZATION
Merge all transactions with
device + channel DATA
• Reduce Manual Reviews
• Increase Authorization Rates
• Reducing Processing Costs
(Balancing Gateways/RMTs)
• Automating Internal Processes
Segment customer database upon different
behavior as well as their preferences in terms of
payments method used and the ongoing scoring
results (Black /White Listing)

6. Merchant Payments Ecosystem
February 18-20, Berlin
INNOVATION AT
KYC LEVEL

7. Merchant Payments Ecosystem
February 18-20, Berlin
Source: www.litle.com

8. Merchant Payments Ecosystem
February 18-20, Berlin
SOME INITIATIVES AND/OR PROVIDERS
Some of them can serve as authentication tools
but not all will meet your compliance needs…

9. Merchant Payments Ecosystem
February 18-20, Berlin
COMPLIANCE
“HEADACHES”
Some Issues:
• Data Protection
• Money Laundering
• Multi-Jurisdiction Approach
Who is the owner and responsible
for enforcing them at product
and operational level?

10. Merchant Payments Ecosystem
February 18-20, Berlin
MULTI-INDUSTRY
COLLABORATION
WHY?
82% of fraud attempts are from
customers with no account history with
the merchant
8% of fraud attempts result from
consumers with more than 241 days
of account history with a merchant -
classic account take-over fraud
So what…?

11. Merchant Payments Ecosystem
February 18-20, Berlin
CASE STUDY OF RED AND DISCOVER:
C10s TO BE REDEVELOPED?
Information added to
positive / negative
databases
Suspicious or High Risk
Transactions
Authentication
ISSUER RESPONSE TO MERCHANTS’ REQUEST FOR VERIFICATION
MATCH Merchant input field and Issuer Data match exactly.
NOT MATCHED Merchant input field and Issuer Data do not match exactly.
UNKNOWN Merchant input data but Issuer has no data on file with which
to present a match response.
NO RESPONSE Merchant input field is blank (Issuer Data is not considered).
Merchants alerted to all
associated orders
Merchants’ ability to
verify Cardholder with
Issuing Bank through
ReD’s Customer Service
Interface (CSI)
MERCHANT
CARDHOLDER
Source: Merchant Risk Council

12. Merchant Payments Ecosystem
February 18-20, Berlin
• Increase revenue
• Adapt risk strategies faster
• Lower fraud and reduce chargebacks
• Simplify authentication of Cardholder’s
information directly with Issuer
• Stop shipment of goods or disable services on
confirmed fraud
FOR MERCHANTS FOR ISSUERS
• Reduces the resources and costs associated
with managing chargebacks and handling
account validation requests from Merchants
• Delivers a direct return on investment through
the identification of fraudulent transactions
• Enables the Issuer to write rules on data and,
so, further refine fraud strategies
• Enables the Issuer to be proactive in alerting
Cardholders and protecting them against
fraud
• Increases Cardholder confidence and
improves Cardholder relationships
Source: Merchant Risk Council

13. Merchant Payments Ecosystem
February 18-20, Berlin
BIOMETRICS BARRIERS
AND FUTURE
DEVELOPMENTS
69% of the Europeans would be willing
to use biometry.
- Synovate Censydiam Research
“
“
AND TO CONCLUDE…

14. Merchant Payments Ecosystem
February 18-20, Berlin
CONCLUSIONS
ON BIOMETRICS
• Biometrics at KYC and transactional level will be a must soon, as it is not longer a promise, but a trend
• Most providers still use old fashion OCR technology instead of biometric authentication systems
A HOLISITC VIEW
• See big data as “chopping onions” - too many layers can make you blind (cry)
• Keep in mind that in most cases, payments and fraud go together, look at data from both angles,
and an “apples to apples” perspective
• Multi-factor authentication is the way to follow as biometrics won’t be enough on their own. Apply
this at different risk levels (withdrawals, etc.)
Are banks or payments networks going to take the lead in
fraud prevention systems and processes?
REMEMBER…
• “The more secure you make something, the less secure it becomes”
• “Fraud never sleeps”…so, never stop studying/learning!

15. Merchant Payments Ecosystem
February 18-20, Berlin
THANK
YOU!
@jerusomix
es.linkedin.com/in/jesusperezbatlles
www.jesusperezbatlles.com