Transaction Security

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Selected Industry Trends Payment-related Fraud is Growing Rapidly on a Global Scale Substantial rise of fraud in the U.S. is shining a bright spotlight on the importance of transaction security USA Rest of the World ($ in bn) Global Cost of Payment Card Fraud • U.S. loses more money due to credit card fraud than rest of the world combined; U.S. accounts for a significant proportion of global payment card volume, but even higher share of total fraud • Cost of US payment card fraud grew by 29% in 2013 (vs. 11% in rest of the world) $11.7 $13.9 2012 Rate of Unauthorized General Purpose Card Transactions (# of txns) (in basis points) 3.72 General Purpose Card Transactions • CNP 3rd party fraud rates by number of transactions for signature debit and credit cards are estimated to be 3 times as likely to be unauthorized as card-present • CNP fraud can be characterized by relatively frequent, but lower value unauthorized transactions 2.83 0.87 11.82 9.48 $10.2 $6.8 GP Credit Card GP Signature Debit GP Pin & ATM GP Credit Card GP Signature Debit $6.9 $7.6 $5.4 $6.2 Card-Present Card-Not-Present 2012 Rate of Unauthorized General Purpose Card Transactions ($ volume ) $4.0 $3.7 $3.2 $3.6 $4.8 $5.5 $7.1 (in basis points) 9.16 11.32 2.84 11.38 10.91 % Growth 2009 2010 2011 2012 2013 USA na 13% 33% 15% 29% Rest of World na 8% 35% 15% 11% GP Credit Card GP Signature Debit Card-Present GP Pin & ATM GP Credit Card GP Signature Debit Card-Not-Present Source: Federal Reserve Bank of Atlanta, First Annapolis Consulting analysis, finextra.com, Nilson Report, Federal Reserve Payments Study. Note: ‘GP’ denotes General Purpose. Basis points are the number of unauthorized transactions per 10,000 transactions or the volume of unauthorized transactions per $10,000 spent. (1) Business Insider, March 2014. 10
Selected Industry Trends Comparison of Fraud Rates Across Channels 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Fraud as a % of Revenue by Segment 0.80% 1.36% M-Commerce Merchants 0.53% 0.85% Large E-Commerce Merchants 0.51% 2013 2014 0.68% All Merchants* • Mobile commerce transactions account for only 14% of total transaction volume, versus 21% of all fraudulent transactions • Online merchants are paying 10% more per dollar of fraud in 2014 than 2013 – this is driven by the increased volume in mobile payments; mobile channel fraud costs merchants $3.34 per dollar of fraud loss – dramatically higher than the online channel at $2.69 per dollar of fraud (1) • Mobile commerce merchants tend to sell through multiple channels – this complexity creates more opportunity for criminals to compromise security • Also, mobile transactions are newer and do not offer as many data points for fraud algorithms Source: Aite Group, Smart Card Alliance, LexisNexis. *Weighted merchant data. (1) LexisNexis, “True Cost of Fraud 2014.” (2) Aite Group, “EMV: Lessons Learned and the U.S. Outlook.” Counterfeit, 37% Lost & Stolen, 17% CNP Fraud Counterfeit Fraud Lost Lost & Stolen Stolen Card Card Fraud Mail & Non- Receipt Fraud First-Party Fraud U.S. Card Fraud Loss by Type (2) Other, 4% CNP, 45% • CNP fraud is the largest category of fraud loss for merchants • Estimated one-third of card fraud losses are borne by merchants • Data issued by FICO shows that CNP fraud is growing even faster than counterfeit fraud Unauthorized use of payment card number, the security code printed on the card (if required by the merchant), and the cardholder’s address to purchase products in a setting where the customer and merchant are not face-to-face Fake card is created using compromised details obtained from the magnetic stripe or electronic chip in a legitimate card Includes cards that are reported as lost or stolen by the original cardholder Involves intercepting legitimate cards while they are in transit from the issuer to the cardholder Fraudster purports to be legitimate cardholder or a legitimate cardholder intentionally decides not to pay off a credit card balance, leaving the card issuer with the debt 11
Page 1 and 2: Financial Technology Partners Augus
Page 3 and 4: I. Executive Summary
Page 5 and 6: Executive Summary Overview (cont.)
Page 7 and 8: Selected Industry Trends E-Commerce
Page 9: Selected Industry Trends Difficulty
Page 13 and 14: Selected Industry Trends Overview o
Page 15 and 16: Selected Industry Trends EMV Mandat
Page 17 and 18: Selected Industry Trends Consumer P
Page 19 and 20: Overview of Transaction Security Te
Page 21 and 22: Merchant Solutions Issuer Solutions
Page 31 and 32: IV. CEO Interviews
Page 33 and 34: CEO Interviews Michael Keresman, Ca
Page 39 and 40: CEO Interviews Yaron Samid, BillGua
Page 41 and 42: CEO Interviews Nuno Sebastiao, Feed
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Page 45 and 46: CEO Interviews Reed Taussig, Threat
Page 51 and 52: V. Competitive Landscape
Page 53 and 54: Competitive Landscape Transaction S
Page 55 and 56: VI. Selected Company Profiles
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Financing and M&A Transactions Tran
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A. Singtel Acquires Trustwave for $
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Singtel Acquires Trustwave for $810
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Singtel Acquires Trustwave for $810
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Early Warning Acquires Authentify T
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Overview of FT Partners Strong Doma
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Overview of FT Partners Feedzai Rai
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Overview of FT Partners FT Partners
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Overview of FT Partners Selected FT
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Overview of FT Partners Platform of
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Transaction Security

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