Risk Beyond Acquiring: Merchant Risk Across FinTech
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IdentityMind Global's technology creates digital identities and assesses their reputations to combat account origination fraud across the fintech landscape. It discusses merchant risk management strategies and presents three use cases, including collaboration frameworks for high-risk merchants and payment service providers. The document emphasizes the need for proper monitoring and compliance systems to mitigate risks associated with high-risk industries and evolving payment methods.
Risk Beyond Acquiring: Merchant Risk Across FinTech
- 1. 0 IdentityMind Global 息2016 All Rights Reserved Risk Beyond Acquiring The Importance of Merchant Risk Across FinTech
- 2. 1 About IdentityMind IdentityMind Globals core technology, Electronic DNA (eDNA), builds digital identities for both consumers and business and evaluates their reputation. Two fundamental aspects make this technology a superior solution to prevent account origination fraud: 1. It describes and recognizes an identity based on its digital attributes, which are dynamically validated and constantly updated in real-time as more transactions are evaluated, making sure the information is always relevant. 2. It associates the identity's digital attributes with an aggregated reputation value based on financial transactions behavior. 息 IdentityMind Global 2016
- 3. 2 AGENDA Quick Overview of IDMs view on Merchant Risk Merchant Risk in FinTech: 3 Use Cases Use Case #1 Merchant Sentinel: An alternative strategy to De-Risk. Use Case #2 Payment Service Provider managing risk portfolio. Use Case #3 An alternative currency goes into payments. Conclusions 息 IdentityMind Global 2016
- 4. 3 IDM Takes on Merchant Risk Take Control: Underwriting and Monitoring o Lots of effort before opening an account and lots of effort while account is operational Merchant Sentinel: Collaborative o Compliance collaboration framework for high-risk merchants and Processing Banks/Payment Service Providers OnBoard for Businesses o The intersection between BSA compliance and account origination protection for immediate decisioning 息 IdentityMind Global 2016
- 5. 4 Use Case #1: Merchant Sentinel An Alternative Strategy to De-Risk CLICK HERE TO LEARN MORE 息 IdentityMind Global 2016
- 6. 5 High-Risk Industries Regulatory penalties are increasing year over year Increasing enforcement actions $12 Billion BSA/AML penalties since 2011 Operation Choke Point De-risking response Many businesses affected High Risk includes legitimate businesses Significant opportunities for banks the have the right platform for risk mitigation and monitoring High Risk Industries by Market Size Multi-Level Marketing $32 Billion Money Transfer Networks $25 Billion PayDay Loans $46 Billion Online Gaming $37.6 Billion 息 IdentityMind Global 2016
- 7. 6 Use Case #1 Customer: A Top 40 Bank in the United States Support for new Risk Category: Bank servicing digital currencies exchanges with potential serious implications for money laundering and criminal activity What was needed: A monitoring program that offer: 1. KYCC data consumer transactions 2. Transaction Monitoring for suspicious activity 3. Reporting verification 4. Aggregated consumer data across portfolio 息 IdentityMind Global 2016
- 8. 7 Deployment Virtual Currency Firms 3) Transaction info in real time via API 2) KYC, Fraud Prevention, AML & Risk Monitoring Services Bank 息 IdentityMind Global 2016
- 9. 8 Use Case #1 - Results Results: Additional Business by achieving peace of mind through adequate transparency Confident coverage without operational impact based on automated alerts on suspicious activities. Reduction of time for sanctions screening analysis based on detailed user visibility which focus research and minimizes false positives Quickly identify common user activity across merchant portfolio, otherwise too time consuming to even attempt IdentityMind saves us an immense amount of time and effort in identifying end users with activity across our merchant portfolio Banks BSA Compliance Officer 息 IdentityMind Global 2016
- 10. 9 Use Case #2: PSP Managing Risk Portfolio Aggregated and centralized fraud prevention 息 IdentityMind Global 2016
- 11. 10 Payment Fraud Driving Factors EMV rollout in U.S. will shift fraud - Fraud reduction: UK had 70% decline in 8 years - Increase CNP fraud: Already 45% of fraud in U.S. Emerging Technology - Mobile Payments: 1.3x more fraud than computers - Near Field Communication (NFC): Apple Pay, Samsung Pay Cross-border fraud - 25% increase in cross-border fraud from 2013 to 2014 - 47% of fraudulent transactions on U.K. credit cards took place in the US The U.S. has 51% of the worlds card fraud ($7.1B) but only 24% of the worlds card volume Direct Debits 1.3% eWallet 0.8% Merchant Fraud Loss Credit/Debit Cards 0.5% Bank Transfers 0.1%
- 12. 11 Use Case #2 Customer: European Payment Service Provider Take Fraud Prevention Operations PSP operates with clients in Europe but most consumers from the US. Growing fraud rates across portfolio. Clients going international with lack of cross border payments risk expertise Fraud tools cobbled together What was needed: A platform that could offer centralized fraud prevention for diverse set of requirements. Leverage similarities across merchant base 息 IdentityMind Global 2016
- 13. 12 Use Case #2: Deployment Merchants PSPs Payment Processors Transaction Processing Transaction Anti-Fraud Merchant Application Underwriting 息 IdentityMind Global 2016
- 14. 13 Use Case #2 - Results Results: Operational within one month Aggregated chargeback rate drop by 75% Cost savings by consolidating tools into single platform Cost savings by reducing operational cost Growing merchant portfolio 息 IdentityMind Global 2016
- 15. 14 Use Case #3: Alternative Currency goes into Payments Aggregated and centralized fraud prevention 息 IdentityMind Global 2016
- 16. 15 Alternative Currencies To the Moon! Payments are growing rapidly, especially outside the United States. How Bitcoin Activity Stacks Up Against Other Payment Networks Average daily transaction volume (in millions of U.S. Dollars) $400M $200M $300M $100M $397M $397M $289M $216M http://letstalkpayments.com/visa-mastercard-face-increasing-threat-local-networks-crypto-currencies/ Users By Location International US Virtual Currencies Bitcoin Ripple Digital Gold Currency Linden Dollars
- 17. 16 Use Case #3 Customer: Canadian provider of alternative currency backed by Gold Turning Currency into Payment Options at Merchants Starts onboarding merchants to accept their currency as a form of payment Translate acquiring practices however not as strict. Liability is quite different. Heavy scrutiny for Money Laundering Small merchants Fraud prevention What was needed: A platform that can offer business onboarding with heavy focus on money laundering. 息 IdentityMind Global 2016
- 18. 17 Use Case #3: Deployment Merchants Onboarding Payments In Alternative Currency Alternative Currency Processor Alternative Currency Digital Wallet Transaction Monitoring Money Laundering Suspicious Activity Merchant Fraud: Avg ticket deviation Collusion clients/merchants Collusion merchants/merchants Volume Analysis Consumer Fraud Funding wallet Account Fraud Business KYM, KYMA Consumer KYC, KYCC Onboarding Consumers 息 IdentityMind Global 2016
- 19. 18 Use Case #3 - Results Results: Integrated staged onboarding for merchants in real-time Merchants adoption of alternative currency is slow 息 IdentityMind Global 2016
- 20. 19 Conclusions FinTech is moving fast. Merchant Risk practices common on the acquiring world are being selectively adopted. Self inflicted De-Risking is leaving a very profitable opportunity for acquirers with deep monitoring practices. Online onboarding is real time and less concerned about Financial Risk KYCC is being pushed from the banks downstream given AML regulations Financial terrorism will continue to drive extended visibility across portfolio actions. 息 IdentityMind Global 2016
- 21. 20 Learn More For more case studies and in- depth content related to onboarding and acquiring risk, CLICK HERE 息 IdentityMind Global 2016