1. SMARTER. TOGETHER. The Mobility of Fraud Michael Loox, CFI Director of Loss Prevention & Safety Coffee Bean and Tea Leaf mloox@coffeebean.com David Johnston Sr. Director, Loss Prevention Dunkin’ Brands david.johnston@dunkinbrands.com Understanding the Challenges of Mobile, Loyalty and Virtual Initiatives

2. SMARTER. TOGETHER. Objectives Today’s changing payment landscape The challenges that may lie ahead Identifying fraud in the mobile environment Getting ahead of the curve

3. SMARTER. TOGETHER. The Coffee Bean & Tea Leaf ® in the World Today 52 Years 27 Countries 1010 Stores 14,000 Passionate Team Members

4. SMARTER. TOGETHER. 11,300 Dunkin’ Donuts restaurants in 36 countries 7,500 Baskin-Robbins restaurants in nearly 50 countries 1,200 Franchise owners and 50 international partners Franchisee-reported sales of approximately $9.8 billion (2014). Dunkin’ Brands is home to two of the world’s most recognized and loved brands: Coffee Fact: Did you know that a single coffee tree produces only an average of 1-1.5 lbs. of roasted beans annually? Ice Cream Fact: Baskin-Robbins is part of 2 Guinness World Records – Most cones scooped in a minute (19 - Mitch Cohen, Franchisee) and Largest Scoop of Ice Cream (8,865 lbs. in 2005)

5. SMARTER. TOGETHER. Changing Payment Landscape

6. SMARTER. TOGETHER.

7. EMV: Friend or Foe? Europay, Mastercard and Visa standards to protect consumers against fraud Inclusion of a Chip & Pin Technology to make counterfeiting cards difficult Expectations is for retail industry to be compliant by October 2015 Merchant absorbs more liability

8. SMARTER. TOGETHER. EMV: Friend of Foe? 10 Million devices require change in U.S. Issuers pushing for chip-enabled card distribution – hit 10/1 Liability Shift Card variations to exist until ?2017? Online fraud expected to increase – UK had upwards of 150% increase – Increase in Mobile Fraud

9. SMARTER. TOGETHER. How would you like to pay? Mobile Wallets Google Wallet / Apple Pay / Visa Checkout 200+ variations across the globe* Contactless Payments NFC / QR Codes / SMS Payments Mobile Applications (Loyalty and Private Label) Online Payments Mobile / Advanced Ordering Applications Gift Cards and Merchandise (CNP environment)

10. SMARTER. TOGETHER. The Mobility of Fraud Mobile Fraud – Virtual Activations, Value reloads, Ordering “Account Take Overs” – Mobile Accounts with Stored Value – Loyalty Accounts Digital Fraud Schemes – Coupons – 3 rd Party Gift Card Sales

11. SMARTER. TOGETHER. Mobile Fraud Using stolen credit card numbers to put value on a gift card or make a purchase in an above store transaction. (Card not present environment) Expansion into virtual card activations, online reloading can increase the potential for fraud.

12. SMARTER. TOGETHER. Mobile Applications Fraud Schemes involving private mobile applications involving Ordering, Payment, Loyalty Programs. “Account Takeovers” – when an outsider gains access into a customer’s account and either “leeches” or “takes over” their account. – Pretends to be the consumer and uses value on the app for purchases – Changes access to the account and controls value – Removes value (de-registering) and re-registers the value on another account Consumers think…Data Breach

13. SMARTER. TOGETHER. Loyalty Fraud Benefits of Loyalty Programs- Economics

14. SMARTER. TOGETHER. Loyalty Fraud: Then & Now Costs of Loyalty Programs Customer abuse- multiple accounts, exploit rewards Credit card / Gift Card fraud through app Employee theft- more avenues and opportunities: point shaving, gifting points, misuse of loyalty redemption codes Value Transfers: e-gift and loyalty points Real Time Redemptions No App Needed! Link to phone #

15. SMARTER. TOGETHER. Digital Schemes Digital marketing can cause greater concern with fraud Opens 3 rd party fraud channels and affects brand and consumer loyalty

16. SMARTER. TOGETHER. Staying Ahead of the Curve Be a continued learner and partner Learn your digital environment Understand industry trends and future applications Partnerships with IT and Marketing Get involved in Strategic discussions

17. SMARTER. TOGETHER. Staying Ahead of the Curve Understand Proactive Prevention IT Capabilities to thwart attempts – Forced account log-ins – “Bot” applications to automate attempts or uncover account credentials

18. SMARTER. TOGETHER. Example of a Credential “Bot” Courtesy of Krebs on Security

19. SMARTER. TOGETHER. Staying Ahead of the Curve Understand Proactive Prevention Proper controls and restrictions – Expiration of coupons or loyalty points – Account thresholds – Strong customer password/multiple authentication process

20. SMARTER. TOGETHER. Staying Ahead of the Curve Stay current in the payment landscape Work with cross-functional teams Think Sales first, but understand exposure Changes in investigative process Be ready for constant change

21. SMARTER. TOGETHER. Thank you for your time and enjoy the conference