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 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 2
Cards Dominate Transaction Volumes… Total Payment Transactions by Type, 1999-2009 70 60 50 Checks 40 ons billio C Cards d 30 ACH 20 10 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Financial Insights, 2005 3
Land of Opportunity Growing payment segment Fraudsters becoming more creative & sophisticated Inviting target Professionalism of criminal organizations Professionalism of criminal organizations 4
Fraud Loss By Payment Type U.S. Payments Fraud Loss by Type $77 Debit cards – from 4.5% 15% to 22% of total $190 $65 $836 $532 2005 losses 11.2% 3.8% 49.2% 31.3% $122 6.8% $912 $285 $276 $197 2009 50.9% 15.9% 15.4% 11.0% $0 $500 $1,000 $1,500 $2,000 Millions Credit Card Check Signature Debit PIN debit ACH Sources: ABA/Dove Consulting “2005/2006 Study of Consumer Payment Preferences,” Financial Insights 5
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 Consumer perception - impact of the “fraud C ti i t f th “f d factor” 6
Risk Management - An Issuer Perspective We bear the liability for fraud losses & associated costs t 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 offsets our costs/losses It is our reputation at risk 7
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 8
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 9
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 Solutions that provide: S l ti th t id Real-time control for action Flexibility to NOT treat every transaction or cardholder the same Reduced losses Happy cardholders ☺ ☺ H dh ld 10
The Right Solutions Cardholder awareness Securing data and information Utilization of Utilization of Protect authorization and Increasingly business authentication rule driven Stop fraud controls before it happens Deployment of Reduce the Engage your Identify predictive impact of customer fraud when solutions loss it occurs Identify points of Timely, compromise efficient notification 11
Risk Mitigation Spectrum Basic Advanced Mitigation Minimal Premier Strategy Internal Predictive & Card Authorization Types of Management Proactive Controls Solutions 12
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 They do not want to be inconvenienced Th d t t t b i i d They do not want their card program to be y p g intrusive 13
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? 14
Questions? Allison.Edwards@Fiserv.com 973 682 5521 973-682-5521
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