How Your Customer Thinks About Payments Fraud

How Your Customers

Think about Payment Fraud

March 12, 2013

Agenda

• About the Speakers

• Research Approach

• Overview of 2012 Research Results

• Key Takeaways

• Recommendations

• Questions & Answers

2

Agenda




• Key Takeaways

• Recommendations


3

Today’s Speakers

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Mike Braatz

SVP & Product Line Manager

Shirley Inscoe

Senior Analyst

Agenda




• Key Takeaways

• Recommendations


5

Research Methodology

• Q3 2012 survey of 5,223 consumers (over 300 per country)

• The study was conducted in a total of 17 countries across the following

regions:

– The Americas (North and South America): Brazil, Canada, Mexico, and the

United States

– EMEA (Europe, the Middle East, and Africa): France, Germany, Italy, the

Netherlands, South Africa, Sweden, the United Arab Emirates, and the United

Kingdom

– Asia-Pacific: Australia, China, India, Indonesia, and Singapore

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Agenda




• Key Takeaways

• Recommendations


7

Global fraud rates by country

12%

12%

13%

18%

20%

24%

25%

25%

26%

31%

33%

34%

36%

36%

37%

42%

44%

Sweden

The Netherlands

Germany

Indonesia

France

Italy

Canada

South Africa

Singapore

Australia

Brazil

United Kingdom

China

The U.A.E.

India

United States

Mexico

Percentage of Respondents Who Have Experienced Card Fraud (N=5,114)

1 in 4 cardholders (27%) experienced fraud in the past five

years.

Source: Aite Group, ACI Worldwide study of 5,223 consumers in 17 countries, Q3 2012

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Credit card fraud rates by country

37%

37%

33%

31%

30%

30%

27%

27%

23%

22%

20%

19%

18%

14%

11%

10%

8%

United States

Mexico

The U.A.E.

United Kingdom

Brazil

Australia

China

India

Singapore

Italy

South Africa

Canada

France

Indonesia

Sweden

Germany

The Netherlands

Q. Have you experienced fraud on your credit card in the past 5 years? (N=5,114)


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Debit card fraud rates by country

25%

24%

21%

20%

17%

17%

13%

12%

12%

11%

11%

11%

10%

9%

9%

8%

6%

Mexico

China

India

United States

United Kingdom

Brazil

Canada

France

South Africa

Singapore

The U.A.E.

Sweden

Italy

Australia

The Netherlands

Indonesia

Germany

Q. Have you experienced fraud on your debit card in the past 5 years? (N=5,114)


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Country (N=5,114) Experienced fraud during past 5 years

India 19%

China 16%

Mexico 10%

Italy 9%

Brazil 7%

Singapore 6%

The U.A.E. 6%

United States 5%

Indonesia 4%

South Africa 4%

Germany 3%

Sweden 3%

France 3%

Australia 2%

Canada 2%

United Kingdom 1%

The Netherlands 1%


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Prepaid card fraud rates by country

Multiple incidents of card fraud

globally

The increase in the percentage of cardholders who experienced

fraud more than one time is statistically significant.


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Agenda




• Key Takeaways

• Recommendations


13

KEY TAKEAWAYS BASED ON

2012 RESEARCH RESULTS

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Research Key Takeaways

1. Financial institutions risk losing customers who

experience fraud

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Satisfaction levels and attrition

15%10%

37%

56%

12%7%

27%

15%

United States Canada Mexico Brazil

Q. How happy were you with the treatment from your card provider after experiencing fraud, and did you change providers?

(n=431)

Unhappy with treatment from card provider

Changed card providers after experiencing fraud

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Satisfaction level factors - the

Americas

Q. What is the main factor that influenced how happy you were with your financial institution? (n=431)

Speed with which FI identified the fraud and brought it to my attention

Speed with which FI replaced my card

Speed with which FI reimbursed my money

How easy it was to notify my FI of the issue and get reimbursed

I was happy with all aspects of treatment from my FI

I was not at all happy with the treatment from my FI

Brazil 23% 7% 29% 19% 8% 14%

Canada 43% 14% 10% 10% 20% 3%

Mexico 17% 6% 12% 24% 17% 24%

United States

37% 9% 14% 12% 26% 2%


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Back of wallet behavior – the

Americas

Q. After you experienced fraud, did you use cash or an alternate payment method rather than your card? (n=431)

Yes, in all situations

Yes, but only in some situations

Used cash instead of my debit card, but not instead of my credit card

No

Brazil 15% 42% 4% 39%

Canada 3% 31% 5% 61%

Mexico 12% 56% 3% 29%

United States 7% 37% 2% 54%


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Replacement cards – the Americas

Q. As a result of the data breach or fraud, did you use the replacement card less than the original card? (n=277)

Yes No

Brazil 56% 44%

Canada 24% 76%

Mexico 63% 37%

United States 33% 67%


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experience fraud

2. Consumers fear of identity theft is increasing

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Global comparisons to prior year…

• Fear from identity theft is increasing – 26% of 2011

respondents stated that their biggest fear related to fraud

was reclaiming their financial identity if they became

victims of identity theft; in 2012, 49% of respondents state

they are “very concerned” about this issue

• Identity fraud was the top worry in 2012 followed by

online banking fraud and card fraud – identity fraud did

not appear in the top 2 in 2011

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Greatest fraud risks in the Americas

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2%

3%

3%

12%

18%

19%

33%

9%

6%

4%

15%

10%

19%

30%

5%

5%

5%

20%

20%

21%

17%

7%

4%

5%

12%

7%

14%

37%

Using credit card traveling on vacation

Shopping in a store

Using phone or tablet to shop, pay bills

Shopping online

Using card for telephone purchases

Paper forms with card or acct numbers

Theft by computer hacker

Q. Which of the following do you believe represents the greatest fraud risk? (n=1,224)

United States

Mexico

Canada

Brazil



experience fraud


3. Some consumers continue to exhibit risky behaviors

which could lead to fraud

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Risky consumer behavior - Americas

Q. Which of these actions have you taken in the past 5 years? (n=1,224)

Brazil Canada Mexico United States

Made a note of PIN and carried it with me or kept it with my card

16% 4% 9% 7%

Thrown bank statements or ATM receipt in the trash 45% 25% 36% 23%

Used online banking or Internet shopping without security software or on a public computer

22% 6% 20% 13%

Responded to emails or calls asking for bank details 8% 3% 7% 6%

Not used the auto lock feature on my mobile phone 21% 11% 17% 18%


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Global comparisons to prior year…

• No improvements in risky behavior:

– 12% indicated making a note of their PIN and carrying it with them

or with their card in 2012 maintaining the same 12% rate who did

so in 2011

– 16% shopped on the Internet or used online banking without

security software or on a public computer in 2012, the same rate

in 2011

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experience fraud


3. Some consumers continue to exhibit risky behaviors

which could lead to fraud

4. Consumers have a strong desire to partner with

financial institutions for fraud prevention

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Consumer preference concerning alerts

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Q. If you were to receive an alert or notification about fraud activity from your financial institution, which action would you prefer (n=1,224)


Bank does not allow any transactions until I respond to alert 85% 75% 89% 63%

Bank continues to allow transactions consistent with my past history

11% 22% 8% 32%

Bank allows all activity unless I notify them otherwise 4% 3% 3% 5%


Preferred contact method - Americas

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Fraud education – the Americas

Q. Has your financial institution provided any guidance or tips for anti-fraud? (n=1,224)


Yes, I've received emails from them with anti-fraud information

15% 15% 14% 19%

Yes, I've received mail from them with anti-fraud information

15% 13% 5% 22%

Yes, I've seen this on my financial institution's website 25% 17% 14% 13%

Don't recall receiving any anti-fraud information from my financial institution

42% 52% 65% 43%

Not applicable 3% 3% 2% 3%


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Agenda




• Key Takeaways

• Recommendations


30

Recommendations for financial

institutions

• Provide fast, easy recovery processes. Simplify and make fraud

resolution process simple and easy - it may curtail fraud-related

attrition.

• Share your fraud policy. Make consumers aware of how you work

with them after a fraud incident - consumers care about fraud

resolution.

• Reassure your customers. Instilling confidence in your process will

minimize risk of non-use of replacement cards or using cash

alternatives.

• Educate consumers about fraud. The messages are still not being

heard. In most countries, a large % of consumers do not recall ever

having their institution providing information related to fraud.

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Recommendations for financial

institutions

• Telephone and text. By a large majority, customers indicate they

prefer to be contacted about a fraud alert via their mobile phone by a

call or text message or via their home phone.

• Regularly update customer data. Institutions should update their

records of consumers’ email addresses and mobile numbers to

facilitate communication. A simple process will encourage customers

to participate.

• Enlist consumers in combating fraud. There is a willingness for

active participation when fraud is detected . Engage them in the fight.

• Proactively prevent fraud. Consumers know fraud schemes are

pervasive. Customer satisfaction rates with FI’s are highest when the

company detects fraud and notifies the consumer of it.

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Agenda




• Key Takeaways

• Recommendations


33

QUESTIONS

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APPENDIX

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Satisfaction levels and attrition -

EMEA

57%

45%

37%

28% 26%21% 20%

13%15%

27% 26%

13%9% 10% 12%

9%

Italy The U.A.E. Germany S. Africa The Netherlands

U.K. France Sweden


(n=519)

Were unhappy with treatment from card provider

Changed fraud providers after experiencing fraud

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Satisfaction level factors - EMEA








France 32% 18% 13% 17% 13% 7%

Germany 24% 13% 29% 10% 16% 8%

Italy 32% 23% 11% 9% 3% 22%

The Netherlands 31%t 26% 9% 11% 14% 9%

South Africa 19% 20% 8% 17% 27% 9%

Sweden 30% 22% 11% 16% 16% 5%

The U.A.E. 27% 21% 17% 11% 8% 16%

United Kingdom 37% 30% 9% 10% 13% 1%


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Back of wallet behavior - EMEA



Yes, in some situations

No Used cash instead of debit card, but not credit card

France 13% 25% 60% 2%

Germany 18% 32% 45% 5%

Italy 15% 35% 44% 6%

The Netherlands 3% 14% 83% 0%

South Africa 15% 36% 45% 4%

Sweden 5% 33% 62%. 0%

The U.A.E. 12% 45% 41% 2%

United Kingdom 9% 30% 58% 3%


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Replacement cards - EMEA


Yes No

France 25% 75%

Germany 36% 64%

Italy 34% 66%

The Netherlands 33% 67%

South Africa 51% 49%

Sweden 26% 74%

The U.A.E. 40% 60%

United Kingdom 38% 62%


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Risky consumer behaviors – EMEA

Q. Which of the following have you done in the past 5 years? (n=2,442)

France Germany Italy The Nether-lands

South Africa

Swe-den

The U.A.E.

U.K.

Made a note of PIN and carried it with you or kept it with your card

3% 10% 17% 2% 12% 9% 14% 12%

Thrown bank statements or ATM receipt in the trash

33% 15% 32% 14% 58% 43% 41% 16%


10% 14% 19% 3% 17% 14% 24% 8%

Responded to emails or calls asking for bank details

4% 5% 4% 3% 5% 4% 12% 3%

Not used the auto lock feature on my mobile phone.

13% 16% 19% 16% 27% 25% 24% 23%


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Preferred contact methods - EMEA

Fraud education - EMEA


France Germany Italy The Nether-lands

South Africa

Swe-den

The U.A.E.

U.K.

Yes, I've received email from them with anti-fraud information

11% 11% 14% 17% 43% 6% 47% 18%

Yes, I've received mail from them with anti-fraud information

12% 20% 13% 14% 7% 6% 10% 20%

Yes, I've seen this on my financial institution's website

19% 19% 16% 30% 30% 40% 19% 21%

Don't recall receiving any anti-fraud information from my financial institution

53% 39% 54% 31% 19% 43% 22% 38%

Not applicable 5% 11% 3% 8% 1% 5% 2% 3%


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Satisfaction levels and attrition -

APAC

63% 60%55%

50%

14%

45%41% 40%

45%

3%

Indonesia India Singapore China Australia


(n=445)

Unhappy with treatment from card provider Changed card providers after experiencing fraud

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Satisfaction level factors - APAC








Australia 29% 19% 9% 15% 25% 3%

China 25% 17% 12% 27% 8% 11%

India 31% 19% 26% 3% 8% 13%

Indonesia 34% 12% 12% 26% 14% 2%

Singapore 29% 35% 8% 9% 9% 10%


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Back of wallet behavior - APAC



Yes, in some situations

No

Used cash instead of debit card, but not credit card

Australia 6% 34% 58% 2%

China 16% 50% 27% 7%

India 25% 52% 17% 6%

Indonesia 12% 68% 14% 6%

Singapore 8% 45% 45% 2%


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Replacement cards - APAC


Yes No

Australia 37% 63%

China 73% 27%

India 73% 27%

Indonesia 78% 22%

Singapore 51% 49%


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Risky consumer behaviors - APAC

Q. Which of the following have you done in the past 5 years? (n=1,557)

Australia China India Indonesia Singapore

Made a note of PIN and carried it with me or kept it with my card

6% 21% 26% 17% 11%

Thrown bank statements or ATM receipt in the trash

28% 51% 45% 39% 50%


10% 30% 32% 20% 22%

Responded to emails or calls asking for bank details

4% 13% 23% 16% 13%

Not used the auto lock feature on my mobile phone

19% 26% 24% 23% 23%


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Preferred contact method - APAC

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Fraud education - APAC


Australia China India Indonesia Singapore

Yes, via email 14% 17% 51% 22% 23%

Yes, via mail 29% 10% 11% 16% 18%

Yes, via their website 17% 26% 13% 19% 16%

Don't recall receiving any anti-fraud information from my financial institution.

39% 39% 18% 36% 38%

Not applicable 1% 8% 7% 7% 5%


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Documents

How Your Customer Thinks About Payments Fraud