Early Warning Services Brian Dearle âWells Fargo Bank
Early Warning Services Brian Dearle âWells Fargo Bank
Early Warning Services Brian Dearle âWells Fargo Bank
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
Preventing Fraud with<br />
Identity to Account Matching<br />
Russ Chacon –<strong>Early</strong> <strong>Warning</strong> <strong>Services</strong><br />
<strong>Brian</strong> <strong>Dearle</strong> –Wells <strong>Fargo</strong> <strong>Bank</strong><br />
© 2008 <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>, LLC. All Rights Reserved. All information contained herein is confidential and proprietary to <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>. It shall not be disclosed, duplicated, or used in part or in whole for any<br />
purpose without prior written consent from <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>. All trademarks, service marks and trade names referenced herein are the property of their respective owners.
Today’s Challenges<br />
Credit Account Payments<br />
Online and Telephone<br />
<strong>Bank</strong>ing<br />
DDA Funding<br />
Online and Telephone<br />
<strong>Bank</strong>ing<br />
ACH payments in this environment<br />
are great tools but carry a risk<br />
2
ACH “Unauthorized”Returns<br />
The Hard Part<br />
Returns for “unauthorized”often take far longer than returns<br />
for NSF. Normal holds & floats don’t cover most R10 returns.<br />
NACHA rules: up to 60 days from DDA statement date<br />
State UCC: can be up to 7 years<br />
Many/most R10s are not malicious, just innocent errors<br />
R07 and R10<br />
Fraudsters have identified this as a big, easy opportunity.<br />
Many FIs do not have reporting to track their losses, nor manage the risk.<br />
3
Credit Account Payments<br />
•Online, telephone, VRU<br />
•Customer provides RTN and account from paying<br />
FI, ODFI has no way of directly verifying ownership<br />
•“Unauthorized”returns often take 24 weeks or<br />
more beyond normal hold periods<br />
•Adequate holds can make for bad customer<br />
experience. Low $ limit = low risk but low customer<br />
satisfaction<br />
•High $ limit means loss exposure can be very high<br />
4
Magnitude of the Problem<br />
Subset –Online/TEL Credit Card Payments<br />
SOURCES:<br />
Primary Research<br />
Secondary Research*<br />
Primary<br />
} 12 <strong>Bank</strong> Card<br />
Issuers<br />
} 43% of bank<br />
cards<br />
} Two Key Industry<br />
Associations<br />
} Two Bill Payment<br />
Providers<br />
Secondary<br />
NACHA, Nilsen. Tower<br />
Group, AITA Group,<br />
Federal Reserve, Celent,<br />
Glenbrooke Partners,<br />
OCC, Two Sparrows<br />
Consulting, IBM,<br />
Cybersource, Mastercard<br />
$800M confirmed, but<br />
likely to be higher<br />
Primary<br />
Research<br />
Loss Spectrum<br />
$800M $2B<br />
$1.7 –$2.1 B in losses<br />
Secondary<br />
Research<br />
5
DDA Funding<br />
•ACH used to fund new deposits may be from<br />
unauthorized account<br />
•Same inability to verify, same long return period<br />
•Low $ limit = low risk, but low customer satisfaction<br />
and low deposits<br />
6
Opportunity Outweighs Problem<br />
Online/TEL DDA Funding<br />
Primary<br />
} 13 <strong>Bank</strong>s<br />
} 33% of DDAs<br />
} Four Leading Online<br />
Payment Processors<br />
Secondary<br />
SOURCES:<br />
FDIC, NACHA, ABA,<br />
Unisys, Financial<br />
Insights, STAR<br />
Systems<br />
RESULTS:<br />
Primarily an opportunity for FIs to grow<br />
revenue<br />
¤ Expand services to customers<br />
¤ Eliminate doublestandard in security practices for<br />
consumers<br />
¤ Reduce enrollment abandonment<br />
60% of the top 25 banks open accounts online today;<br />
they currently experience a 50% attrition rate<br />
7
Solving the Problem<br />
© 2008 <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>, LLC. All Rights Reserved. All information contained herein is confidential and proprietary to <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>. It shall not be disclosed, duplicated, or used in part or in whole for any<br />
purpose without prior written consent from <strong>Early</strong> <strong>Warning</strong> <strong>Services</strong>. All trademarks, service marks and trade names referenced herein are the property of their respective owners.
1. Voided Original Check<br />
•OldFashioned Way –a voided original check<br />
•Not realtime unless it’s in person<br />
•These days it takes an expert to tell it’s original!<br />
9
2. History Data<br />
•Your own history data<br />
•Store the MICR of past payments. Past good<br />
transactions mean probable account ownership.<br />
•IF you can find the data, do the matches, place the long<br />
holds needed!<br />
10
3. Restrict the Transaction<br />
•Restricting the transaction<br />
•No ACH from other FIs<br />
•Low $ limits<br />
•Low risk, low customer satisfaction & low deposits<br />
11
4. Online <strong>Bank</strong>ing Screen Scrape<br />
•Online <strong>Bank</strong>ing Screen Scrape<br />
•Online only<br />
•Real time<br />
•Customers enter their online banking credential from<br />
your FI into another FI’s system<br />
•Defeated by compromised online credential<br />
12
5. Trial Deposit<br />
•Trial Deposit<br />
•Small deposits that the customer verifies back to you<br />
•Not real time<br />
•Defeated by compromised online credential,<br />
authentication by call center<br />
13
6. Account Owner Authentication<br />
eFunds eXpress Verification<br />
<strong>Early</strong> <strong>Warning</strong> <strong>Services</strong><br />
• Available for some time<br />
• New service, just entering beta<br />
• Includes retailer and check<br />
printing data<br />
• Coverage issues<br />
• Uses banksourced data<br />
• Initial Coverage –68M accounts<br />
• Cost effective for targeted,<br />
high risk items<br />
• Pricing not yet announced<br />
14
15<br />
Discussion
Change language