MERCURY PROCESSING OUR WAY OF FIGHTING SERVICES INTERNATIONAL FRAUD OUR WAY … · 2017-06-12 · Mercury Processing Services International is a provider of payment solutions, dedicated

MERCURY PROCESSING

SERVICES INTERNATIONAL

OUR WAY OF FIGHTING FRAUD

Grozdana Marić, Fraud Product Manager

Ljubljana, 31st May 2017

OUR WAY OF FIGHTING

FRAUD

Mercury Processing Services International is a provider of payment solutions, dedicated to developing and

managing its payment business on an international level. Company was established in 2009.

Located in Croatia and Slovenia, we serve clients from the financial and banking sectors across Central & Eastern

Europe and North Africa. Our portfolio is tailored to meet regional, local market or individual client requirements and

business strategy.

Technological expertise is the main driver of enhancing and enriching our existing business relations, as well as the

main source for innovations we provide in the payment industry.

The foundations of Mercury Processing Services International rely on complementary strengths of the two strongest

cards businesses, Banka Koper and Privredna banka Zagreb, and their transition from local companies into a fully

international organization.

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OUR DNA KEY PILLARS

EXPERTISE

• Deep business and industry insights with technology know-how

• Employees focused on the core mission of the company

• High fluidity of communication and people interactions

• More than 70% employees with university degree and 100% English fluent

• Elaborated trainings programs and corporate culture based on constant self

and collective improvement

• Early and quick adopters, with tailored approach to meet local needs

• Strong expertise based on innovation hub with deep business and industry insights

• Service minded employees with rigorous understanding of client’s needs and their

specific institutional context

• Lean and responsive organizational structure built around value streams and powered

by agile software development

• Truly international (teams, mindset, approach, …)

• Diverse (nationalities, cultures, languages…)

• Adaptive and flexible (learning from customers requirements…)

• Creative (solution oriented, cutting corners, …)

• Agile (methodology, spirit, …)

PEOPLE

VERSATILITY

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OUR SERVICES

Issuing solutions Value added solutionsAcquiring solutions

• Cardholder and Card

Management

• Issuer Authorization Service

• Transaction Processing

• Proximity Payments

• POS Solutions

• ATM Solutions

• E-Commerce

• Reporting

• Call Center

• Dispute and Chargeback

Management

• Strong Authentication

• Fraud Detection

• Advanced Risk Modelling

• Loyalty Programs

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FRAUD IN THE PAYMENT

CARD INDUSTRY

FRAUD IN THE PAYMENT CARD INDUSTRY

• Payment card fraud is among the fastest-growing and best-known means of generating

criminal profit.

• It has evolved from being committed by casual fraudsters to being committed by organized

crime and fraud rings that use sophisticated methods.

• The sophistication of their tactics makes detecting fraud difficult, especially as the volume of

bank transactions grows by about 10% every year.

• Besides the huge financial loses, fraud hurts institutions’ reputation, customer loyalty, and

shareholder confidence.

Damage is far greater than just the financials around the actual fraud loss.

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1980 1990 2000 TODAY

Fraudster Individuals Teams Local crime rings International crime rings

Target Consumers Small retailers Larger retailersBanks

Processors

Leading Fraud

typesLost/Stolen

Domestic

counterfeiting /

skimming

Identity theft

Phishing

Rudimentary data

compromise

CNP fraud

ATM fraud

Cross-border data

compromise

Type of cards

targeted

Travel&

Entertainment

cards

Premium credit

cards

Mass market credit

cards

All type of credit card

Debit cards

Prepaid cards

Necessary

resourcesOpportunism

Rudimentary

knowledgeTechnical knowhow

Technical expertise

Insider information

Global connections

EVOLUTION OF THE PAYMENT CARD FRAUD IN EUROPE

TRUE COST OF FRAUD – COUNTING THE UN-COUNTABLES

TRUE COST

OF

FRAUD

CEO’s Apologies

Regulatory Fines

Impact on share price

Tighten Regulations

Costs of Investigation

Revenues Loss

Re-acquiring

Reputational Damage

Source: VISA

Attrition & re-acquisition

Actual losses due to fraud, measured by the accumulated fraud transaction amounts, are often just

the tip of the iceberg.

But consider what’s below the surface: fraud hurts institutions’ reputation, customer loyalty,

shareholder confidence.

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Increased OpRisk exposure and

capital charge

FRAUD IN THE PAYMENT CARD INDUSTRY

FRAUD DRIVES CUSTOMER ATTRITION

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63% 43% 25%

of consumers who

have experienced

fraud are more likely to

use their cards less.

of consumers who

received replacement

cards as a result of

fraudulent activity use

their new card less than

they used their original.

of consumers changed

financial institutions

due to dissatisfaction

after experiencing

fraud.

Source: ACI Worldwide Global Consumer Fraud Report

Statistics show poor handling of fraud is a key reason you will loose the trust

of that customer and why they are likely to close an account.

FRAUD IN THE PAYMENT CARD INDUSTRY

FRAUD SHAPES THE CUSTOMER’S EXPERIENCE

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How you handle a fraud event is a defining moment in customer satisfaction and

loyalty to your brand.

You FAIL

when ..

You SUCCEED

when ..

• Genuine transactions are NOT declined

• Contact is established within second

• Interactions are personalized and convenient

• Customers are informed and empowered

• Legitimate activity is stopped

• Your customers are not informed

• A process takes too long

SO, HOW TO MITIGATE

THE FRAUD RISK ?

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Set up the

organization

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Antifraud

operating model

• Strategies and thresholds - need to be determined based on:

• Fraud risk appetite, fraud tolerance, policies and procedures, KPIs;

• Customer experience / The impact on the cardholders;

• How much you refer or decline depend on your preferences for customer

satisfaction and aggressiveness towards fraud prevention;

• Available resources (Fraud Operations, Call Centre etc.).

• The balance is a critical: to set a fair balance between fraud mitigation purposes

and Business sales objectives.

• Dedicated antifraud teams with fraud skill set and know-how;

• Fraud monitoring 24/7 - adequate capacity to table fraud needed during

non-working hours;

• Alert management, cardholder/merchant contact, countermeasures;

• Fraud diagnostics – drill-down, data discovery and correlations;

• Incident management – CPP identification, Black listing, Card reissuance,

Reporting to payment schemes;

• Collaboration with Law enforcement, National Bank, Local and Global

Fraud associations.

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OUR FRAUD APPROACH AND FRAMEWORK

KPIs monitoring

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Fraud Detection

Platform

Lynx Fraud Management System – an in-house Fraud detection and prevention

solution for detecting payment card fraud and addressing it along multiple risk

dimensions.

• The system combines artificial intelligence and user-specified rules to give the bank

agile fraud detection and prevention solution.

• Protects all cardholders regardless of their chosen payment types (debit, credit,

mobile, contactless payments) and of brands.

• Supports multi-currency, multi-organization and multi-channels fraud prevention

and detection.

• By using our system, banks are enabled to perform highly automated and

sophisticated screenings of incoming transactions and to flag suspicious

transactions.

Main fraud risk metrics to shift operations strategy;

• No of False positives;

• No of alerting scenarios; alerts / cases;

• Operational costs – Average time-to-case;

• Overall fraud losses, unrecovered fraud losses, fraud loss per case, CHB expenses

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OUR FRAUD APPROACH AND FRAMEWORK (II)

LYNX FRAUD MANAGEMENT SYSTEM HIGHLIGHTS

Lynx Fraud

Management

System

Online plus module for

automatic card blocking

Covering all channels, brands,

payment options from a single

platform

High level of modularity & flexibility

Possibility to implement

limitless rules

Extensive reporting suite

Multi-institution solution

Fraud notification services

Extensive data retention

Multiple brands / card schemes

supported

Audit records on who did what

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Comply with regulatory standards

LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 1

This application empowers fraud experts to create, maintain and control fraud strategies quickly, easily and cost

effectively, in order to drive smarter fraud strategies and make faster and more consistent decisions.

It enables a quick response to attack flash fraud threats and implements different risk parameters based on corporate

policies and guidelines, external regulations and the analysis of historical data.

COMPONENT 1: LYNX RULE ENGINE SYSTEM

HIGHLIGHTS

• Rules are changed without IT intervention and are immediately propagated in the production environment.

• Possibility to implement „limitless” number of rules and hotlists

• Various types of rules, single, count, sum, hotlist, comparing two transactions, monitoring 1st pattern

appearance…and all combinations + Scoring

• Enables the setting of rules as Online plus rules, which upon alert creation perform automatic card blocking

directly from FCM

• Enables rule based notifications

• Enables the implementing of different fraud operations strategies using Low/Med/HR rules classification

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• Fraud detection is supported with data mining

techniques.

• The fraud score is easily combined with other

business rules in the fraud detection process.

• Enables detection and score the probability of

fraud in cardholders’ transactions and in addition

to custom business rules define the appropriate

action to be performed.

• Leverage Big Data & Analytics to gain a holistic

view of fraud.

• The scorecard module changes in parameters,

variables, and other can be very easily and

quickly done, changes can be made by issuer,

market, transaction type.

FIGHTING FRAUD WITH ARTIFICIAL INTELLIGENCE

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Are data consistent?

Do duplicate records exist?

Are relations within tables

consistent? Between

entities and attributes?

Are data available at

needed time?

Are data from verifiable

sources?

Are all data within

specified domains?

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Data

quality

Timelines

Are all necessary

data present?Accuracy Completeness

IntegrityValidity

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Consistency

ANALYTICS STRATEGY – DATA MANAGEMENT

• Data quality challenges

• Better data enables better detection

• Introduce new data assets (session data, device data, location based information)

• Multiple source systems challenges

• Transform information into decisions

LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 2

Case manager is a web-based application which provides comprehensive information to enable fraud

analysts to prioritize all alerts in multiple queues according to specified user-defined rules and for analysts

to review and decide on alerts. It is tailored to help meet the most complex operational requirements.

COMPONENT 2: LYNX CASE MANAGER – MONITORING AND INVESTIGATION TOOL

HIGHLIGHTS

• Various levels of fraud monitoring both on issuing and acquiring level

• Integrated transaction viewer, extensive Reporting suite

• Card Service functionality for card blocking and unblocking directly from FCM to B/O

• SMS functionality for quicker cardholder contacting

• Hotlists - whitelists and blacklists

• Case suppression lists (full and grey)

• Extensive transactions and cardholder information and card alert history

• Card transactional history (6 months access via application; 13 months in database)

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LYNX FRAUD MANAGEMENT SYSTEM - COMPONENT 3

COMPONENT 3: VALUE ADDED FEATURES

Lynx Fraud Management System is built to boost analyst efficiency and efficacy by leveraging the added

functionality embedded within the system which will keep focus and save time wasted logging in to satellite

applications.

Major features integrated within the Lynx fraud management system are:

• Online plus mode - allows automatic card blocking

• Integrated Transaction Viewer

• Customizable Reporting Suite

• Fraud notification services (SMS, email)

SUPPORTED SERVICES

• Advanced Fraud Management service

• Fraud analytics and fraud diagnostics support

• Consultancy and training

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LYNX FRAUD MANAGEMENT SYSTEM BENEFITS

FOR THE BANKS:

• Reduces fraud losses by detecting fraud earlier with fewer false positives

• Improves operational efficiency through added value functionalities

• Minimizes cardholder impact on operational costs

• Decreases chargeback expenses

• Reduces charge-offs

FOR THE CARDHOLDERS:

• Cardholder satisfaction

• Cardholder convenience

• Feeling of security

• First line of defense from fraudsters

• Enhanced customer experience at the point of detection

FOR THE MERCHANTS:

• Merchant satisfaction and convenience

• Feeling of security

• First line of defense from fraudsters

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A TYPICAL DAY … TRUSTED WITH SCALE

Average processing and monitoring of 1.5 million transactions a day

In peak moments Fraud Management System is processing around 30

transactions per second

Over 600 active fraud rules are monitoring in Rule Engine System

Fraud monitoring of 6.7 million cards, 75.000 POS

terminals and 2.600 ATM

Fraud analysts of 20 Banks in 11 countries are

constantly taking appropriate measures using FMS

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www.mercury-processing.com

+385 98 29 10 10

[email protected]

Grozdana Marić

Fraud Product Manager

Business Management Division

CONTACT

THANK YOU!

Any questions?