WEBINAR

EIGHT MONTHS OF EMVEARLY FRAUD SHIFTS AND TRAJECTORY

JUNE 2016

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The transition to EMV card types will drive major changes in consumer behavior, in infrastructure and liablility, and in fraud patterns.

How do experiences in other countries help us prepare for these shifts?

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JULIE CONROYR E S E A R C H D I R E C T O R

Head of Aite Group’s Retail Banking & Payments practice, covering fraud, data security, anti-money laundering, and compliance.

VP-level product management roles in financial services, risk management and payment processing.

MI C H A E L TH E L A N D E RP R O D U C T M A R K E T I N G M A N A G E R , A U T H E N T I C A T I O N

Manages go-to-market, launch and customer education activities for iovation’s authentication products.

20 years in VP- and director-level product management and product marketing roles for information security companies.

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AGENDA1234

WHY & WHAT Understanding EMV transitionGoals and desired outcomes

LESSONS LEARNED Experiences in other countriesFraud trends and directions

EXPECT THE EXPECTED What will we see in the U.S.?

HOW TO PREPAREWhat tools are at your disposalWhat’s next for card-not-present fraud?

WHY & WHATWHAT PROBLEM IS EMV SUPPOSED TO SOLVE?

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W H Y E MV ?P R O B L E M S S O LV E D B Y E M V C A R D S A N D T E R M I N A L S

EMV cards (EMV stands for “Europay”, “MasterCard” and “Visa”) add a chip that makes it virtually impossible to use a counterfeit card

Business who use EMV cards throughout their payment process will not be liable for purchases on lost, stolen or counterfeit cards

The verification data embedded on the chip includes a continually changing algorithm that makes it easier to detect or deny stolen cards

Like around one-third of the EMV deployments in the world, the U.S. is primarily chip-and-signature, since lost/stolen fraud is relatively minor in the U.S. market

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P R O G R E SS I N TR A N S I T I ON8 1 % O F C R E D I T C A R D S , 5 7 % O F D E B I T

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P R O G R E SS I N TR A N S I T I ON9 4 % O F C R E D I T C A R D D O L L A R S , 7 2 % O F D E B I T D O L L A R S

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LESSONS LEARNED“THOSE WHO DON’T REMEMBER THE PAST … REPEAT IT.”

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C N P L E SS ON S F R O M TH E U .K .“ S Q U E E Z I N G T H E B A L L O O N ”

From 2012 to 2015 counterfeit fraud increased marginally, by less than 7%

But at the same time Card-Not-Present fraud increased by over 60%

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C N P L E SS ON S , C A N AD A & AU S TR AL I A“ S Q U E E Z I N G T H E B A L L O O N ”

From 2012 to 2014, Canada saw a $91 million increase in CNP fraud – more than 33%

Australia’s transition was similar, with 60% more CNP fraud and a $117M increase in losses

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TWO TYP E S O F C A R D - L E SS F R AU DA C C O U N T T A K E O V E R

Criminals fish for info, pretend to be the cardholder, and then request a replacement card

CARD-BASED ATO

Access a legitimate account through hacking or fraud, and transfer funds to another account

ONLINE BANKING ATO

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AC C O U N T TA K E OV E R I N TH E U .K .“ S Q U E E Z I N G T H E B A L L O O N ”

From 2012 to 2015, the U.K. saw a £1M decrease in card-based ATO

While online-based account takeover increased £61M, or 250%

EXPECT THE EXPECTEDPROJECTING THE IMPACT OF EMV ROLLOUT IN THE U.S.

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P R O J E C TE D I M PAC TS I N TH E U . S .E S T I M A T I N G U . S . C O U N T E R F E I T C A R D L O S S E S

Stem the sharp increase that was seen from 2012 through 2015

Begin a precipitous decline in counterfeit fraud activity

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P R O J E C TE D I M PAC TS I N TH E U . S .A C C O U N T T A K E O V E R L O S S E S T H R O U G H 2 0 2 0

Expect a $330 million increase in U.S. account takeover losses

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P R O J E C TE D I M PAC TS I N TH E U . S .“ S Q U E E Z I N G T H E B A L L O O N ”

But worse a potentially disastrous increase in CNP fraud

CNP fraud is projected to see a 80% increase over the next 4+ years

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A word about cyber criminals

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Fraud Inc.

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OR G A N I Z E D C R I M E R I N G S A R E QU I C K T O F I N D G A P SN I M B L E A N D E A G E R T O A D A P T

HOW TO PREPAREWHAT TO DO, AND THE FUTURE OF CNP FRAUD

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F I G H T I N G C N P F R AU D8 T O O L S A T Y O U R D I S P O S A L

Device fingerprinting and digital identity

Behavioral analytics & behavioral biometrics

Malware detection

Mobile operator data

Knowledge Based Authentication (KBA)

Out-of-Band Authentication

Transaction Signing

Biometrics

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Device fingerprinting and digital identity

F I G H T I N G C N P F R AU D8 T O O L S A T Y O U R D I S P O S A L

Behavioral analytics & behavioral biometrics

Malware detection

Mobile operator data

Knowledge Based Authentication (KBA)

Out-of-Band Authentication

Transaction Signing

Biometrics

LOW FRICTION

LOW FRICTION

LOW FRICTION

LOW FRICTION

HIGH FRICTION

HIGH FRICTION

HIGH FRICTION

HIGH FRICTION

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HISTORICALREPUTATION

ANOMALOUS BEHAVIOR SECURITY RISK

INDICATORS

AUTHORIZEDFOR ACCOUNT

LINKS AND ASSOCIATIONS

CUSTOMER AUTHENTICATION

THE GOOD NEWS: YOU ALREADY HAVE THE TOOLS

FRAUD PREVENTION

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ACCOUNTLOGIN

CHANGEACCOUNT DETAILS

CHECKBALANCE

WITHDRAWAL, FUND TRANSFER

THE GOOD NEWS: YOU ALREADY HAVE THE TOOLS

LOAN ORIGINATIONOR

ACCOUNT CREATION

CHECK BALANCE, DEPOSIT

MAKE PAYMENTS

CUSTOMER AUTHENTICATION

FRAUD PREVENTION

FRAUD PREVENTION

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RECOMMENDATIONS

FOR ISSUERS FOR MERCHANTS

INVEST IN SOLUTIONSACCELERATE BOLSTER CNP

CONTROLS

BEWARE OF ATM ATTACKS EDUCATE

PRIORITIZE RETERMINALIZATION

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THE EVOLUTION OF FRAUD, INC?8400 miles, 1600 forged cards, 1400 transactions, $13 million …..

… in less than three hours.

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THE EVOLUTION OF FRAUD, INC?8400 miles, 1600 forged cards, 1400 transactions, $13 million …..

… in less than three hours.

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G O T O W W W. I O V A T I O N . C O M / R E S O U R C E S

R E S O U R C E S

“AUTHENTITHINGS” WEBINAR

A review of the overall state of authentication in consumer-oriented, “Internet-of-Things” technologies.

AITE REPORT ON EMV TRANSITION

The full report on EMV migration and the impact of shrinking counterfeit card opportunity on other forms of fraud.

Q&A