Risk Management from an issuer perspective June 6 , 2008 Alli - - PowerPoint PPT Presentation

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Risk Management from an issuer perspective June 6 , 2008 Alli Allison Edwards Ed d Director of Product Development Fiserv, Inc. Fortune 500 company providing information technology for i fi i l t ti f th 30 processing financial

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Risk Management from an issuer perspective

June 6, 2008 Alli Ed d Allison Edwards Director of Product Development

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Fiserv, Inc.

Fortune 500 company providing information technology for i fi i l t ti f th 30 processing financial transactions for more than 30 years Publicly traded for more than 20 years (NASDAQ: FISV) 23,000 employees and 18,000 clients worldwide Fiserv EFT Fiserv EFT 30 years’ experience 5.4 billion debit and ATM transactions processed in 2007 2,700 financial institution clients

1,100+ banks , 1,400+ credit unions

18,000 ATMs

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Cards Dominate Transaction Volumes…

Total Payment Transactions by Type, 1999-2009

60 70 40 50

Checks C d 20 30

billio

Cards ACH

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Financial Insights, 2005

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Land of Opportunity

Growing payment segment Fraudsters becoming more creative & sophisticated Inviting target Professionalism of criminal organizations Professionalism of criminal organizations

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Fraud Loss By Payment Type

U.S. Payments Fraud Loss by Type

$77 4.5%

Debit cards – from

2005

$836 49.2% $532 31.3% $190 11.2% $65 3.8% $122 6.8%

15% to 22% of total losses

$0 $500 $1,000 $1,500 $2,000

2009

$912 50.9% $285 15.9% $276 15.4% $197 11.0%

Credit Card Check Signature Debit PIN debit ACH Millions

Sources: ABA/Dove Consulting “2005/2006 Study of Consumer Payment Preferences,” Financial Insights

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The Risk Climate

What We Know We Know

Consumers love their debit card Debit card fraud is here to stay Card compromise impact, regulations and debate Fact vs. fiction and reality vs. perception Issuers bearing the burden C ti i t f th “f d Consumer perception - impact of the “fraud factor”

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Risk Management - An Issuer Perspective We bear the liability for fraud losses & associated t costs

Cardholder zero liability Limited Charge back rights

We have increasing expenses to invest in risk We have increasing expenses to invest in risk management solutions Interchange does not provide a revenue stream that

ffsets our costs/losses

It is our reputation at risk

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The Realities of Fraud

Detection is key Response time essential A balanced defense is the best defense An understanding of controls is critical One solution will not fit all Dynamic environment

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How Do Issuers Prepare?

Develop comprehensive risk management strategies and programs Increase investment in the “right” risk management and security solutions Rethink the role of the cardholder

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What Issuers Want, Need and Expect

Effective Risk Management solutions

Protect – prevent fraud from happening Detect – identify potential fraud y p Respond – minimize impact of known fraud

S l ti th t id Solutions that provide:

Real-time control for action Flexibility to NOT treat every transaction or cardholder the same

Reduced losses H dh ld ☺

Happy cardholders ☺

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The Right Solutions

Utilization of Cardholder awareness Securing data and information

Protect

Utilization of authorization and authentication controls Increasingly business rule driven

Stop fraud before it happens

Deployment of predictive solutions Engage your customer

Identify fraud when it occurs Reduce the impact of loss

Identify points of compromise Timely, efficient notification

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Risk Mitigation Spectrum

Premier Advanced Basic

Mitigation Strategy

Minimal Predictive & Proactive Authorization Card Management

Types of Controls

Internal

Solutions

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What Do Cardholders Want, Expect and Demand? Demand?

To use their card when they want, where they want for what they want Their card to be secure Th d t t t b i i d They do not want to be inconvenienced They do not want their card program to be y p g intrusive

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The Evolving Role of the Cardholder

Cardholders know their activity best Most effective crime fighters against fraud Educated cardholder = satisfied customer

Allow to define options & activities (e.g. limits) Opt out of paper statements p p p Provide tools for self monitoring (online banking, notification alerts) )

Cardholder awareness is essential

Will they receive calls to inquire about transaction Will they receive calls to inquire about transaction activity? Are they able to use their cards internationally?

Are they able to use their cards internationally?

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