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Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 1 Setting the scene for our Panel to share tactical and strategic guidance on Card Fraud and First Party Fraud 16 th November, 2010 Foiling Fraudsters! Lee Gordon Senior Vice President Citi Mark Tingey Senior Fraud Manager RBSG Richard Hurley Comms Manager CIFAS Brian Kinch Senior Partner FICO Martin Warwick Principal Consultant FICO
© 2010 Fair Isaac Corporation. Confidential. 2 2 Agenda »Introduction to our Panel Discussion on: »Getting to Grips with Card Fraud »Identity Theft & First Party Fraud »Thoughts on Advanced Analytics to Repel Attacks
© 2010 Fair Isaac Corporation. Confidential. 3 3 »Current trends are looking good, so do we need to do anything else? »How can we break the cycle of fraud? Getting to Grips with Card Fraud
© 2010 Fair Isaac Corporation. Confidential. 4 Current Plastic Card Trends in the UK »Lowest card fraud levels for a decade in the UK »Lost & Stolen is 11% of the total fraud problem and down 15% on last year. »Mail Not Received is running at 2% »Counterfeit is 15% of the problem and down 39% »ID Theft comes in at 8% and down 37% on last year »Card Not Present is the big one at 63% but still 12% down on last year »UK ‘face to face’ transactions represents just 18% of the total fraud Fraud Losses UK Fraud strategies on Chip & PIN and ‘Real-time’ fraud detection using Falcon has made a difference Source: UK Payments
© 2010 Fair Isaac Corporation. Confidential. 5 X- Border and X-Border ATM Fraud is Down »Cross-border fraud down £118m since 2008 (230 to 112) could be nearer the £100 by end of year. »Cross-border ATM fraud down £71m since 2007 (86 to 15) – hard cash! »Strong ‘real-time’ fraud detection strategies made this possible
© 2010 Fair Isaac Corporation. Confidential. 6 Panel - How do we break that fraud cycle? »Why do we only get investment on the upward slopes? »How do we get a fraud prevention vision adopted within our banks? »Can we smooth out the effects of the fraud cycle? »How do we provide excellent customer experience whilst maintaining a grip on fraud?
© 2010 Fair Isaac Corporation. Confidential. 7 Panel - How do we break that fraud cycle? »Can we sit back and wait for the new attacks? »Do you have secured investments to break the cycle? »Any tips on securing investment without hard losses taking place first? »Is it easy to predict what is going to be the next target for fraudsters? »Any suggestions on what might help you in your current roles?
© 2010 Fair Isaac Corporation. Confidential. 8 8 »Let’s set the scene for our Panel discussion on what we can do to detect and prevent this type of attack »But lets relate First Party Fraud to the UK ID Theft situation First Party Fraud
© 2010 Fair Isaac Corporation. Confidential. 9 ID Theft is Under Control, Isn't it? »As an Industry we see 3 rd Party Application Fraud and Account Take Over reported as ID Theft »ID Theft represents 8% of total Plastic Card Fraud Problem (H1 2010) »Is it a low priority based on that fact?? »Down 37% on pervious year so surely we don’t need to worry about it? »The fact that there are around 15 million more National Insurance numbers out there than the current population. Is that a worry? »If ID Theft is under control, what about First Party Fraud?
© 2010 Fair Isaac Corporation. Confidential. 10 What are the types of First Party Fraud? »Hit & Run – take the money in the shortest time and disappear »Sleeper – willing to play the longer game using the banks own money to make small payments. »Organised – because its easy money then criminals want to up the stakes. »Opportunist – if others have got away with it why don’t I try it. »Organised »Opportunist »Sleeper Hit & Run
© 2010 Fair Isaac Corporation. Confidential. 11 What to look out for in your Bad Debt? »Key areas to look out for these fraudsters are »Credit Cards »First Payment Defaults »Massive over credit limit cases »At least 130% of credit limit. »Ends up as a skip or no trace »Debit Card payments ‘chargebacks’ doubles their money »Loans »Pays less than 5% of loan amount »Skip or no trace at time of write off »Compare to typical ‘credit loss’ reasons, e.g. paid more than 30% of loan.
© 2010 Fair Isaac Corporation. Confidential. 12 FICO First Party Fraud Benchmark for Loans USUKEuropeGermany Accountability»Fraud Team in Place4512 Identification »Definition agreed and understood 4512 Size of Problem »As a % of Bad Debt Write Off5-15% 20-40%25-50% Communication »Steering Group or Group Wide awareness 3422 Treatment »Fraud Policy »Fraud Rules »Fraud Model Re-evaluation »Continuous evaluation of FPF framework 4412 Benchmark against FICO FPF Framework Scale of 0 to 5 where 5 is ‘best in class’
© 2010 Fair Isaac Corporation. Confidential. 13 ID Theft – Don’t Worry about it! »What is the CIFAS view on the current situation? »Do the industry figures tell the whole story? »Are we doing enough in terms of investment and strategies?
© 2010 Fair Isaac Corporation. Confidential. 14 ID Theft – CIFAS Trends »Prior to 2007 we had steep increases in identity fraud (21% growth in 2006 over 2005) »2007 became the year of Application Fraud »2008 the push back to Account Take Over fraud as the recession takes hold ( a 207% increase from 2007) »2009 Identity Fraud makes a comeback
© 2010 Fair Isaac Corporation. Confidential. 15 Identity Fraud makes a comeback in CIFAS »Fraud increased by 9.85% »Identity Fraud up 31.79% »Victims of Impersonation up 36% »Facility Takeover Fraud up 16.15% »Misuse of Facility up 28.05% »Application Fraud down 24% »Internet driven fraud becomes noticeable: over 74% of identity frauds and 76% of facility takeovers on bank accounts perpetrated online
© 2010 Fair Isaac Corporation. Confidential. 16 How its Trending in CIFAS »Fraud decreased by 4.52% »Identity fraud increased by 9.68% »Victims of impersonation up by 18.38% (over 10,000 more people) »Takeovers have remained relatively constant »Plastic card and mobile phone accounts are the products of choice for Takeover
© 2010 Fair Isaac Corporation. Confidential. 17 Let’s get some advice from the Panel »Do you have a First Party Fraud Problem? »Does CIFAS recognise First Party Fraud? »What’s the CIFAS view on the problem? »Is it covered off in bank fraud strategies? »What tips can you share with us to keep it under control?
© 2010 Fair Isaac Corporation. Confidential. 18 © 2010 Fair Isaac Corporation. Confidential. 18 »Fraudsters will always change their Modus Operandi and FICO has focused on advanced analytics to detect and prevent these attacks as they take place. »Do you connect decisions in fraud with Customer Management? Advanced Analytics Repels Attacks
© 2010 Fair Isaac Corporation. Confidential. 19 Consortium Data Supervised Model Profile Variables Related to Fraud Score Based on Historical Profiles of Fraud/Nonfraud Business Rules Model Profiles Detect Global Fraud Patterns Case Dispositions Global Profiles Analysts Analyses Online Variable Scaling Calibration Profiles Outlier Model Score Based on Outlier Variables Correlated With Fraud Adaptive Model Case Dispositions Data Consortium Data Score Based on Historical Profiles of Fraud/Nonfraud Business Rules Case Dispositions Data Profile Variables Related to Fraud Model Profiles Supervised Model Detect Global Fraud Patterns Global Profiles Case Dispositions Analysts Global Profiles Analyses Online Variable Scaling Calibration Profiles Outlier Model Score Based on Outlier Variables Correlated With Fraud Calibration Profiles Outlier Model Adaptive Model Case Dispositions Adaptive Model Advanced Analytics Repel Attacks Consortium Data Supervised Model Profile Variables Related to Fraud Score Based on Historical Profiles of Fraud/Nonfraud Business Rules Model Profiles Data Analysts Non-FIC Models
© 2010 Fair Isaac Corporation. Confidential. 20 What about connecting decisions with Customer Management ? »Fraud Risk Influences Decisions on »Credit Risk »Customer Experience »Appropriate Fees PROFILEPROFILE
Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 21 THANK YOU 16 th November, 2010 Lee Gordon Senior Vice President Citi Mark Tingey Senior Fraud Manager RBSG Richard Hurley Comms Manager CIFAS Brian Kinch Senior Partner FICO Martin Warwick Principal Consultant FICO
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