REALTIME DECISIONING

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REAL-TIME DECISIONING
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The Fraud Landscape

• Visa estimates 70 of card fraud is either a
  single transaction fraud or the first transaction
  of a fraud run
• Blocking the first transaction, rather than
  reacting after the first transaction is the key
  to reducing fraud losses
• Balancing customer convenience while maintaining
  a protected portfolio can be achieved
• Taking a conservative approach up front is vital
  to achieve this balance
• Criminals will continue to refresh their approach
  to fraud and new fraud strategies to combat them
  need to be deployed
• Educating members of your approach will provide
  additional security and assist them in how they
  respond in the event of false declines

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Current Neural Network Processing

• Review authorizations AFTER the response is sent
  back to merchant
• processes the authorizations and assigns it
  a Score from 000-999
• Authorizations are run against any production
  rules engaged
• Members associated with each case are attempted
  to be contacted to confirm legitimacy of the
  transaction
• Cases are reviewed either by an automated
  response dialer or by a fraud analyst
• Members not reached are attempted to be reached
  again
• Members with bad phone numbers or with another
  authorization incoming above the previous score
  are sent to the credit union for credit union
  action
• Temporary blocks are placed on high risk accounts
  based on Processor analyst judgment
• Blocks prevent future approvals (declines at the
  point of sale) until the cardholder confirms
  legitimacy of activity

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Real-Time Decisioning

• can prevent fraud DURING the authorization
  process
• Real-Time Parameters New parameters built on the
  Authorization system to target highly risky
  transactions
• Authorizations Come in for Approval
• Standard Pre-edit Checks occur First in the
  Authorization System
• Declined Transactions are not sent for
  Real-Time Decisioning
• Key Parameters are Used as Criteria to Cast Net
  over High Risk Transactions
• Targeted High-Risk Authorizations are passed to
  Real-Time Rules
• Non High-Risk Authorizations are handled same as
  today

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Real-Time Decisioning

• Real-Time Rules Engaged to prevent fraudulent
  transactions at point of authorization
• How it Works
• Targeted High-Risk Authorizations are Delivered
  to run against Real-Time rule(s)
• If Authorization Matches a Rule Criteria, an Auth
  Response of Decline is Returned to the Merchant
• Authorizations not Matching Rule Criteria Return
  an Approval
• Host Clients Receive Authorizations After the
  Real-Time review unless Declined

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Real-Time DecisioningRULES

• RULES
• Administers Rules Auth Settings at Global
  Level
• Initial Baseline Real-Time Rule Driven off of
  Score and Dollar Amount
• Initial Beta results extremely successful with
  High Score and Dollar Amount over Average
  Transaction Range
• Processor will monitor success and effectiveness
  of rules and adapt accordingly
• Respond to Flash Fraud Trends
• Allows for Processor to Create Dynamic Real-Time
  Rules to Respond Quickly
• Processor is Able to see Trends Across All
  Clients

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Real-Time DecisioningProcessor Fraud Operations

• PROCESSOR FRAUD OPERATIONS
• Creates a CASE for All Authorizations Receiving
  a Real-Time Decline
• Processor Contacts Cardholder for Validation
  (same as today)
• Send Client Alerts for all Real-Time Declines
  (new)
• Upon Validation of NO-FRAUD from Cardholder,
  Processor Immediately updates the card record,
  which allows Cardholder to Continue Spending
• Processor will Communicate Updates and Trends to
  Client Base

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Real-Time DecisioningClient Impact

• Clients Role
• Educate Customer Service Staff to handle
  Real-Time declined cardholder calls and screen
  changes
• Update Fraud Staff for Alert Processing
• Real-Time Cases will be faxed to client as ALERTS
  for early notification of potential legitimate
  cardholder declines
• Update Cardholder Phone Numbers to allow for
  better contact rates ADD CELL PHONES TO
  CARDHOLDER RECORDS
• Review Reports- New and Changes to Existing
  Reports
• Consider Promoting Security Features to Members
• Cardholders need to carry phone numbers for CU
  and Falcon/FRIS Service Centers

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Fraudster at Point of Sale
Processor Fraud Analystcontacts Cardholder
Fraud Stopped
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5
1
Declineat POS
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Transaction Declinedbecause rule is broken
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3

• High-Risk Transactions passedto Real-Time Rules
  to be Analyzed
• Non High-Risk Transactions
• processed as Normal

• Card is blocked toprevent further activity
• Card reissued

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Cardholder at Point of Sale with High-Risk
Transaction
Cardholder may call Customer Service
Fraud Analystcalls Cardholder
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TransactionDeclined
1
3
Declineat POS
2
Transaction Declinedbecause rule is broken
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• High-Risk Transactions passedto Real-Time Rules
  to be Analyzed
• Non High-Risk Transactions
• processed as Normal

• Card is flagged temporarily
• to prevent further declines

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Cardholder at Point of Sale after Confirming
Non-Fraud
Merchant
Cardholder attempts new transaction
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1
Cardholder can nowcomplete transaction
Auth Response to POS
2

• New Transaction bypasses Real-Time Rules
• Normal Authorization Rules Apply

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Real-Time DecisioningPromoting Security To
Members

• OPPORTUNITIES TO BROADCAST YOUR MEMBER PROTECTION
  SECURITY FEATURES
• Statement Inserts
• Statement Messages
• IVR Messages
• In House Branch Displays
• Client Websites
• Newsletters
• Others

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Real-Time DecisioningPromoting Security To
Members

• Sample- Previous Processor insert to introduce
• To help protect you against debit card fraud, we
  have enhanced our fraud system to include , a
  sophisticated neural network. Now, when a
  transaction on your card appears to fall outside
  of your usual spending pattern, an alert is
  created. A fraud analyst or automated voice
  system will then contact you at home or your
  office to verify whether you authorized this
  transaction which does not fit your historical
  card spending behavior. Part of the verification
  will be to ask your members to validate they are
  the cardholder.
• If we are not successful contacting you, a
  decision will be made on your behalf to block
  future transactions until you can be reached for
  confirmation. Therefore it is important that you
  provide us your most up to date phone numbers.
  This is part of our continuing effort to provide
  you with the best protection available when using
  your debit card. We hope you enjoy the peace of
  mind that comes with knowing your card carries
  the state of the art security features.
• Sample 2- Potential Verbiage to Promote
  Additional Fraud Protection
• To help protect you from additional fraud, we
  have enhanced our existing security protection.
  We already protect your account by reviewing
  activity after transactions are approved today.
  We attempt to contact you today if a transaction
  falls outside of your normal spending pattern.As
  criminals become more sophisticated, the need to
  protect your account during the transaction could
  prevent additional fraud immediately at the
  merchant. In some instances you may be declined
  at the merchant if the activity is considered
  extremely suspicious. With a simple call to
  Customer Service, well validate the transaction
  and allow you to continue shopping immediately.
  We hope your enjoy the peach of mind that comes
  with knowing your card carries the latest state
  of the art security features.

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Customer Service Real-Time Script

• Suggested Client Call-Center Script
• For Real-Time Decline Validation
• Thank you for calling the (Client Name) Customer
  Service Center. This is (representatives first
  name). May I ask whom I am speaking with?
  (Cardholder gives name) For security purposes,
  may I please have the last 4 digits of your
  Social Security number? (Cardholder gives SSN)
  Your card was declined due to suspicious
  activity. We would like to verify this
  information with you now. Thank you for
  validating the transaction(s). We apologize for
  any inconvenience this may have caused. You can
  now continue spending using your (Client Name)
  card immediately. Thank you for your time.
  Goodbye.