It Runs In The Family Fraud Your source for payments education It Runs In The Family Fraud Host: Lisa Tennant – SVP, Client Relations, Verifi Brian Cullen – Sr Payments Risk Analyst, Sony Robert Moran – Manager, Global Fraud Monitoring and Operations, Sony Jennifer Pedersen – VP, Manager of Deposit Operations, Webster Bank

A Brief History of Family Fraud Family fraud has evolved as consumers move toward shared family accounts, and young people gain access to payment methods through their own devices. Buying music streaming In-app purchases One-click purchases Image source: https://www.aarp.org/money/scams-fraud/info-2018/family-fraud.html

The rise of Friendly and Family Fraud 8 out of 11 issuing banks allow in-app chargebacks 53% of issuers and 72% of merchants believe that it is too easy to dispute transactions. Digital purchases - games & music. * www.creditcards.com * Javelin Strategy & Research * www.creditcards.com Trends Driving Payment Ease Consumer Demand Social Media Influencers Technology Improvements Regulation 8 out of 11 issuing banks allow in-app chargebacks Source: https://www.creditcards.com/credit-card- news/banks-make-chargebacks-easier-to-initiate.php More than half (53%) of issuers and 72% of merchants believe that it is too easy for customers to dispute transactions. Source: Javelin Strategy & Research. The Chargeback Triangle Friendly fraud is especially prevalent with digital purchases, such as games and music, accounting for as much as 75 percent of chargebacks with these items, according to Aite Group. Assessing friendly fraud risk can be a challenge for issuers. While issuers claim to experience only half the rate of friendly fraud that merchants see (17% compared to 34%), this disagreement might arise from lack of visibility, rather than actual differences in friendly fraud rates. Studies have found that 83% of convicted criminals are repeat offenders, averaging five additional offenses each. Friendly fraudsters will likely follow this same path, requesting one illegitimate chargeback after another. Source: https://www.bjs.gov/index.cfm?ty=pbdetail&iid=6266 Issuers claim to experience only half the rate of friendly fraud that merchants see – 17% compared to 34% Friendly fraudsters will likely become repeat offenders, requesting one illegitimate chargeback after another. * Javelin Strategy & Research * www.bjs.com

What are we seeing today? How do merchants identify family fraud? Do merchants have practices in place to mitigate and prevent this type of fraud? Do Issuers see the same obstacles in mitigating and preventing these disputes? How do merchants and issuers see consumer trends driving the levels of family fraud? Are cardholders more likely to chargeback? What provisions do merchants and issuers think that the card brands should take to help reduce family fraud?

The Trade-off One-click payments In-app purchases Social Media Customer experience versus reduced fraud – what is the optimal solution? Customer experience versus reduced fraud – what is the optimal solution? One-click payments In-App purchases as part of gaming experience Social media apps (buying through Instagram) One-click payments In-app purchases Social Media

The Future Driving towards a regulated market increases the need for industry collaboration to succeed As we move to a more regulated global market for payments, how will SCA affect in-app purchases, or what should be in place to meet the exception criteria? What mitigation strategies should merchants and issuers put in place? Eg, collaborative technologies, fraud filters, two factor auth, etc. Regulated Markets – PSD2 & SCA Industry Collaboration

Thank you Don’t forget to submit your session evaluation! Host: Lisa Tennant – SVP, Client Relations, Verifi Brian Cullen – Global Fraud Management, Sony Jennifer Pedersen – VP, Manager of Deposit Operations, Webster Bank Robert Moran – Manager, Global Fraud Monitoring and Operations, Sony