Tackling card fraud: embracing technological and strategic solutionsDerek WyldeHead of Group Fraud RiskHSBC

UK Card Losses £m

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007

UK CNP Losses 1995-2007 £m

73

96 110

122 15

0 183 21

3

290

0

50

100

150

200

250

300£

Mill

ion

s

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

• P.C. Vey, Published by the New Yorker, January 16th, 2006

Start with a laugh…

Anti-fraud strategy

• Render the card number useless if compromised• EMV for face to face• Remote card authentication (CAP) for CNP• DDA not SDA• Unique CVC value on chip

EMV - The silver bullet?

• Fraud at its highest level in UK for years• Expensive• Is PIN the right CVM?• Effectiveness limited until total migration

3D Secure - MasterCard SecureCode and Verified by Visa• Scheme-driven authentication technology, providing merchant liability protection from fraud

• Merchants now get global protection• But merchant adoption slow • Cardholder registration even slower• Activation During Shopping add-on• Maestro mandate

Remote Card Authentication

• Alleviates static data vulnerabilities• Limits opportunity for compromise and collusion• Multi-channel opportunities• Provides an enhancement to 3D Secure, possibly remove ADS

• But… requires chip card technology

Giving the customer control

• Allow the customer to parameterise his spend• Straight through processing• Prevents not just CNP fraud• For example block card for overseas ATM spend, CNP transactions or overseas POS

Fraud detection systems

• Optimised• Up to date models• Models for high net worth customers• Up to date contact details• Work 24x7

Authorisation strategies

• Analysis - there is no substitute• Get the priorities right• Exclude low value referrals• Restaurant referrals• ‘Sticky referrals’

And finally……...

• Customer education• SMS• Contact centre• Customer complaint handling

Tackling card fraud: embracing technological and strategic solutions

Derek WyldeHead of Group Fraud RiskHSBC