Fraud & Identity
The availability and opportunities for customers to conduct business through mobile devices continues to multiply, challenging organizations to protect customers without impacting their experience. Our infographic highlights five challenges of customer authentication that businesses face and what customers feel in an increasingly mobile world. Personally Identifiable Information (PII) is more available, but less reliable, than ever before. 35% performance improvement using models built with attributes beyond simple identity element validation. More transactions are taking place in an omnichannel environment. 36% of organizations interact with their customer in five or more channels. Diversity of devices and technology complicates customer authentication. 85% of consumers use online or mobile to conduct business. 17% of consumers reported having an online transaction declined when device information was not available. Increased online transactions have multiplied fraud opportunities, resulting in more false positives. Of those surveyed who have had Card Not Present (CNP) transactions declined: 31% blame the merchant 38% blame the credit card network 83% felt embarassed or angry Stringent requirements change the way organizations interact with customers. 80% expect the focus on managing regulatory risk to be more than it is today Download our fraud prevention perspective paper to gain more insight on how you can prepare your business.
Have a look ‘Inside Experian’ through this documentary on our global business explaining who we are, what we do and how we’re helping people and businesses around the world protect, manage and make the most of their data. This ‘Inside Experian’ video focuses on 41st Parameter, a leading provider of dedicated fraud prevention solutions. Their methodology and patented technologies are responsible for reductions in fraud losses and subsequent declining attack rates at some of the largest institutions in e-commerce, financial services, and travel services. Here are some highlights of 41st Parameter’s solutions: $25 trillion in e-commerce orders and financial services transactions scored for risk 500 million transactions processed each month with daily volumes exceeding 8 million transactions a day PCI Certified as a Level 1 Service Provider and ISO-27000, SAS-70 and Safe Harbour Compliant 600 million devices detected by their patented tagless device identification technology captures no PII 41st Parameter works to make the process of preventing and detecting fraud easier and more effective, reducing potential losses while protecting operating costs and the customer experience. Download our fraud prevention whitepaper to gain more insight on how you can prepare your business.
“Building a better mousetrap merely results in smarter mice” – Charles Darwin Credit card issuers in general have a good handle on fraud. They manage it under 10bps (i.e. losses of $0.10 or less per $100 of transactions) on transactions made with a "dumb" plastic card lacking any additional context. So Issuers wishing for Apple Pay fraud to fall between 2-3bps was not totally out of character, considering the protections in place by Apple and Networks to keep fraud away – including issuer support during provisioning, NFC, Tokenization, a tamper proof Secure Element and TouchID. But fraud seems to have followed a different trajectory here. About a month post-launch, it seems like fraud has come to Apple Pay. (in one case – as high as 600bps for an issuer that I cannot name). Though what follows was written in the context of Apple Pay, much of it translates to any other competitor – irrespective of origin, scale, intent, or patron saint. Apple Pay and the Yellow Path: All Apple Pay participating card issuers are required to build a “Yellow Path” for when card provisioning in to Apple Pay requires additional bank verification. Implementation of the “Yellow Path” and corresponding customer experience has varied per Card Issuer. Today, depending on your card issuer – you could expect much variance – such as being directed to their call center, being asked to authenticate via the bank’s mobile app, or an entirely other 2FA verification. As one can expect – each has varying levels of success and friction – with just a couple of banks opting to authenticate via their mobile apps, that would have provided a far easier and customer friendly provisioning experience. Where as, those that opted for call center verification traded efficiency for friction and by most reports – the corresponding experience has been subpar. In fact initially “Yellow Path” was marked optional for card issuers by Apple – which meant that only a couple of Issuers directed much focus at it. Apple reversed its decision and made it mandatory less than a month before launch – which led to issuers scrambling to build and provide this support. Why any bank would consider this optional is beyond me. Either way, Card issuer implementations of the Apple Pay Yellow Path have proved to be inadequate – as I am willing to bet that most of the fraud in Apple Pay came by stolen identities. For all the paranoia around elevating your phone to be the container for all your credit cards – fraud in Apple Pay has assumed more traditional and unsophisticated ways. No, iPhones weren’t stolen and then used for unauthorized purchases, TouchID was not compromised, Credentials weren’t ripped out of Apple’s tamper proof secure element – nor the much feared but rarely attempted MITM attacks(capture and relay an NFC transmission at a different terminal). Instead fraudsters bought stolen consumer identities complete with credit card information, and convinced both software and manual checks that they were indeed a legitimate customer. Fraud on Apple Pay is somewhat unique – as the Pay setup is one of the first things one would do upon getting their iPhone 6. At which point – the device will have little to no background or context with the bank. Further, the customer most likely haven’t had the time to install the bank app or login. It is no wonder then that a number of banks defaulted to “Call our call center” as the default Yellow path. In an earlier post on ISIS (Softcard) I did write how the vast retail network coupled with visibility in to customer identity positioned Carriers as a trusted partner for banks to do secure provisioning. But ISIS had other (yet unrealized) aspirations. For all the focus in protecting transactions and plastic – for e.g. via EMV and Tokenization – issuance and provisioning remains the soft underbelly – under protected and easily compromised. And this should concern all – because the strongest chain is only as good as its weakest link – and those with malice are almost always the first to find it. Fraud in Apple Pay will in time, come to be managed – but the fact that easily available PII can waylay best in class protection should give us all pause. Make sure to download our fraud prevention whitepaper to gain more insight on how you can prepare your business. This post originally appeared here.
41st Parameter, a part of Experian, surveyed 250 marketers to understand the relationship between omnichannel retailing, fraud prevention and the holiday shopping season. The findings show that few marketers understand the full benefit of fraud-prevention systems on their activities as 60% of marketers were unsure of the cost of fraud to their organization. The survey also indicated that 40% of marketers said their organization had been targeted by hackers or cybercriminals. Download the Holiday Marketing Fraud Survey: http://snip.ly/JoyF With holiday shopping in full stride, 35% of businesses said they planned to increase their digital spend for the 2014 holiday season. Furthermore, Experian Marketing Services reported that during 2014, 80%t of marketers planned on running cross-channel marketing campaigns. As marketers integrate more channels into their campaigns, new challenges emerge for fraud-risk managers who face continuous pressure to adopt new approaches. Here are three steps to help marketers and risk managers maintain a frictionless experience for customers: Marketers should communicate their plans early to the fraud-risk team, especially if they are planning to target a new or unexpected audience. Making this part of the process will reduce the chances that risk management will stop or inhibit customers. Ensure that marketers understand what the risk-management department is doing with respect to fraud detection. Chances are risk managers are waiting to tell you. Marketers shouldn’t assume that fraud won’t affect their business and talk to their risk-management division to learn how much fraud truly costs their company. Then they can understand what they need to do to make sure that their marketing efforts are not thwarted. “Marketers spend a great deal of time and money bringing in new customers and increasing sales, especially this time of year, and in too many cases, those efforts are negated in the name of fraud prevention,” said David Britton, vice president of industry solutions, 41st Parameter. “Marketers can help an organization’s bottom line by working with their fraud-risk department to prevent bad transactions from occurring while maintaining a seamless customer experience. Reducing fraud is important and protecting the customer experience is a necessity.” Few marketers understand the resulting impact of declined transactions because of suspected fraud and this is even more pronounced among small businesses, with 70% saying they were unsure of fraud’s impact. Fifty percent of mid-sized business marketers and 67% of large-enterprise marketers were unsure of the impact of fraud as well An uncoordinated approach to new customer acquisition can result in lost revenue affecting the entire organization. For example, the industry average for card-not-present declines is 15%. However, one to three percent of those declined transactions turn out to be valid transactions, equating to $1.2 billion in lost revenue annually. Wrongfully declined transactions can be costly as the growth of cross-channel marketing increases and a push towards omnichannel retailing pressures marketers to find new customers. “Many businesses loosen their fraud detection measures during high peak time because they don’t have the tools to review potentially risky orders manually during the higher-volume holiday shopping period,” said Britton. “Criminals look to capitalize on this and exploit these gaps in any way possible, taking an omnifraud approach to maximizing their chances of success. Striking the right balance between sales enablement and fraud prevention is the key to maximizing growth for any business at all times of the year.” Download Experian’s fraud prevention report to learn more about how businesses can address these new marketing challenges.
By: Ori Eisen This article originally appeared on WIRED. When I started 41st Parameter more than a decade ago, I had a sense of what fraud was all about. I’d spent several years dealing with fraud while at VeriSign and American Express. As I considered the problem, I realized that fraud was something that could never be fully prevented. It’s a dispiriting thing to accept that committed criminals will always find some way to get through even the toughest defenses. Dispiriting, but not defeating. The reason I chose to dedicate my life to stopping online fraud is because I saw where the money was going. Once you follow the money and you see how it is used, you can’t “un-know.” The money ends up supporting criminal activities around the globe – not used to buy grandma a gift. Over the past 10 years the nature of fraud has become more sophisticated and systematized. Gone are the days of the lone wolf hacker seeing what they could get away with. Today, those days seem almost simple. Not that I should be saying it, but fraud and the people who perpetrated it had a cavalier air about them, a bravado. It was as if they were saying, in the words of my good friend Frank Abagnale, “catch me if you can.” They learned to mimic the behaviors and clone the devices of legitimate users. This allowed them to have a field day, attacking all sorts of businesses and syphoning away their ill-gotten gains. We learned too. We learned to look hard and close at the devices that attempted to access an account. We looked at things that no one knew could be seen. We learned to recognize all of the little parameters that together represented a device. We learned to notice when even one of them was off. The days of those early fraudsters has faded. New forces are at work to perpetrate fraud on an industrial scale. Criminal enterprises have arisen. Specializations have emerged. Brute force attacks, social engineering, sophisticated malware – all these tools, and so many more – are being applied every day to cracking various security systems. The criminal underworld is awash in credentials, which are being used to create accounts, take over accounts and commit fraudulent transactions. The impact is massive. Every year, billions of dollars are lost due to cyber crime. Aside from the direct monetary losses, customer lose faith in brand and businesses, resources need to be allocated to reviewing suspect transactions and creativity and energy are squandered trying to chase down new risks and threats. To make life just a little simpler, I operate from the assumption that every account, every user name and every password has been compromised. As I said at the start, fraud isn’t something that can be prevented. By hook or by crook (and mainly by crook), fraudsters are finding cracks they can slip through; it’s bound to happen. By watching carefully, we can see when they slip up and stop them from getting away with their intended crimes. If the earliest days of fraud saw impacts on individuals, and fraud today is impacting enterprises, the future of fraud is far more sinister. We’re already seeing hints of fraud’s dark future. Stories are swirling around the recent Wall Street hack. The President and his security team were watching warily, wondering if this was the result of a state-sponsored activity. Rather than just hurting businesses or their customers, we’re on the brink (if we haven’t crossed it already) of fraud being used to destabilize economies. If that doesn’t keep you up at night I don’t know what will. Think about it: in less than a decade we have gone from fraud being an isolated irritant (not that it wasn’t a problem) to being viewed as a potential, if clandestine, weapon. The stakes are no longer the funds in an account or even the well being of a business. Today – and certainly tomorrow – the stakes will be higher. Fraudsters, terrorists really, will look for ways to nudge economies toward the abyss. Sadly, the ability of fraudsters to infiltrate legitimate accounts and networks will never be fully stifled. The options available to them are just too broad for every hole to be plugged. What we can do is recognize when they’ve made it through our defenses and prevent them from taking action. It’s the same approach we’ve always had: they may get in while we do everything possible to prevent them from doing harm. In an ideal world bad guys would never get through in the first place; but we don’t live in an ideal world. In the real world they’re going to get in. Knowing this isn’t easy. It isn’t comforting or comfortable. But in the real world there are real actions we can take to protect the things that matter – your money, your data and your sense of security. We learned how to fight fraud in the past, we are fighting it with new technologies today and we will continue to apply insights and new approaches to protect our future. Download our Perspective Paper to learn about a number of factors that are contributing to the evolving fraud landscape.
Experian hosted the Future of Fraud event this week in New York City where Ori Eisen and Frank Abagnale hosted clients and prospects highlighting the need for innovative fraud solutions to stay ahead the consistent threat of online fraud. After, Ori and Frank appeared on Bloomberg TV, interviewed by Trish Regan discussing how retailers can handle fraud prevention. Ori and Frank highlighted how using data is good, especially when combined with analytics as a requirement for businesses working to try and prevent fraud now and in the future. "Data is good. The only way that you deal with a lot of this cyber(crime) is through data analytics. You have to know who I am dealing with. I have to know it is you and authenticate that it is you that wants to make this transaction." Frank Abagnale on BloombergTV Charles Chung recently detailed how utilizing the data for good can protect the customer experience while providing businesses a panoramic view to ensure data security and compliance to mitigate fraud risk. Ultimately, this view helps businesses build greater consumer confidence and create a more positive customer experience which is the first, and most important, prong in the fraud balance. Learn more on how Experian is using big data.
More than 10 years ago I spoke about a trend at the time towards an underutilization of the information being managed by companies. I referred to this trend as “data skepticism.” Companies weren’t investing the time and resources needed to harvest the most valuable asset they had – data. Today the volume and variety of data is only increasing as is the necessity to successfully analyze any relevant information to unlock its significant value. Big data can mean big opportunities for businesses and consumers. Businesses get a deeper understanding of their customers’ attitudes and preferences to make every interaction with them more relevant, secure and profitable. Consumers receive greater value through more personalized services from retailers, banks and other businesses. Recently Experian North American CEO Craig Boundy wrote about that value stating, “Data is Good… Analytics Make it Great.” The good we do with big data today in handling threats posed by fraudsters is the result of a risk-based approach that prevents fraud by combining data and analytics. Within Experian Decision Analytics our data decisioning capabilities unlock that value to ultimately provide better products and services for consumers. The same expertise, accurate and broad-reaching data assets, targeted analytics, knowledge-based authentication, and predictive decisioning policies used by our clients for risk-based decisioning has been used by Experian to become a global leader in fraud and identity solutions. The industrialization of fraud continues to grow with an estimated 10,000 fraud rings in the U.S. alone and more than 2 billion unique records exposed as a result of data breaches in 2014. Experian continues to bring together new fraud platforms to help the industry better manage fraud risk. Our 41st Parameter technology has been able to detect over 90% of all fraud attacks against our clients and reduce their operational costs to fight fraud. Combining data and analytics assets can detect fraud, but more importantly, it can also detect the good customers so legitimate transactions are not blocked. Gartner reported that by 2020, 40% of enterprises will be storing information from security events to analyze and uncover unusual patterns. Big data uncovers remarkable insights to take action for the future of our fraud prevention efforts but also can mitigate the financial losses associated with a breach. In the end we need more data, not less, to keep up with fraudsters. Experian is hosting Future of Fraud and Identity events in New York and San Francisco discussing current fraud trends and how to prevent cyber-attacks aimed at helping the industry. The past skepticism no longer holds true as companies are realizing that data combined with advanced analytics can give them the insight they need to prevent fraud in the future. Learn more on how Experian is conquering the world of big data.
Allocating resources toward mobile device access and improved customer service is inevitable, and, arguably, investment and shifts in one of these areas ultimately will affect the other.
According to a recent 41st Parameter® study, 85 percent of consumers use online or mobile channels to conduct business.
In a recent webinar, we addressed how both the growing diversity of technology used for online transactions and the many different types of access can make authentication complicated. Technology is ever-changing and is continually reshaping the way we live. This leaves our industry to question how device intelligence factors into both the problem and solution surrounding diverse technologies in the online transaction space. Industry experts Cherian Abraham from the Experian Decision Analytics team and David Britton from 41st Parameter, a part of Experian, weighed in on the discussion. Putting It All Into Context Britton harkened back to a simpler time of authentication practices. In the early days of the web, user names and passwords were the only tools people had to authenticate online identities. Eventually, this led organizations to begin streamlining the process. “They did things like using cookies or placing files onto a computer so that the computer would be “known” to the business,” said Britton. However, those original methods are now struggling to fit into the modern-day authentication puzzle. “The challenge has been that for both privacy reasons and for the advancements of technology we have actually moved to a more privacy-centric environment where those types of things have fallen away in terms of their efficacy. For example, cookies are often easily deleted by simply browsing incognito. So as a result there’s been a counter move approach to how to authenticate online,” said Britton. New Technology – A Quick Fix? Don’t be fooled. Newer technologies cannot necessarily provide an easy alternative and incorporate older authentication methods. Britton referenced how the advent of mobile has actually made recognizing the consumer behind the device, the behavior of the machine and the data that the consumer is presenting even more complex. Additionally, rudimentary methods of authentication don’t actually exist well in the mobile environment. On the other hand, newer technologies and the mobile environment force a more layered approach to authentication methods. “There is a better way and the better way is to look at a variety of other inspirations beyond user names and passwords before vindicating the customer. This is all the more evident when you get to newer channels such as mobile where consumer expectations are so different and you cannot rely on the customer having to answer a long stream of characters and letters such as a user name or a password,” said Abraham. Britton weighed in as well on device intelligence and the layered approach. “Our whole philosophy around this has been that if you can recognize aspects of the device in the form of device intelligence – we’re able to actually leverage that information without crossing the boundaries of good privacy management. Furthermore, we are then able to say we recognize the attributes of the device and can recognize the device as that person is attempting to come back into an environment,” said Britton. He emphasized how being able to help companies understand who might be on the other end of the device has made a world of difference. This increasingly points to how authentication will continue to evolve in a in a multi-device, multi-screen and multi-channel environment. For more information and access to the full webinar – Stay tuned for additional #fraudlifecycle posts.
Our second annual data breach preparedness study reveals good news and bad news for businesses concerned with data security.
Fraud is not a point-in-time problem and data breaches should not be considered isolated attacks, which break through network defenses to abscond with credentials. In fact, data breaches are just the first stage of a rather complex lifecycle that begins with a vulnerability, advances through several stages of validation and surveillance, and culminates with a fraudulent transaction or monetary theft. Cyber criminals are sophisticated and have a growing arsenal of weapons at their disposal to infect individual and corporate systems and capture account information: phishing, SMSishing and Vishing attacks, malware, and the like are all attempts to thwart security and access-protected information. Criminal tactics have even evolved to include physical-world approaches like infiltrating physical call centers via social engineering attacks aimed at unsuspecting representatives. This, and similar efforts, are all part of the constant quest to identify and exploit weaknesses in order to stage and commit financial crimes. There are some companies that claim malware detection is the silver bullet to preventing fraud. This is simply not the case. The issue is that malware is only one method by which fraudsters may obtain credentials. The seemingly endless supply of pristine identity and account data in the criminal underground means that detecting a user’s system has been compromised is akin to closing the barn door after the hose has bolted. That is, malware can be an indicator that an account has been compromised, but it does not help identify the subsequent usage of the stolen credentials by the criminals, regardless of how the credentials were compromised. Compromised data is first validated by the seller as one of their “value adds” to the criminal underground and typically again by the buyer. Validation usually involves logging into an account to ensure that the credentials work as expected, and allows for a much higher “validated” price point. Once the credentials and/or account have been validated, cyber criminals can turn their attention to surveillance. Remember, by the time one realizes that credential information has been exposed, cyber criminal rings have captured the information they need – such as usernames, passwords, challenge responses and even token or session IDs – and have aded it to their underground data repositories. with traditional online authentication controls, it is nearly impossible to detect the initial fraudulent login that uses ill-gotten credentials. That is why it is critical to operate from the assumption that all account credentials have been compromised when designing an online authentication control scheme.
By: Maria Moynihan At a time when people are accessing information when, where and how they want to, why aren’t voter rolls more up to date? Too often, voter lists aren’t scrubbed for use in mailing, and information included is inaccurate at the time of outreach. Though addresses and other contact information becomes outdated, new address identification and verification has not typically been a resource focus. Costs associated with mandated election-related communications between government and citizens can add up, especially if messages never get to their intended recipients and, in turn, Registrar Offices never get a response. To date, the most common pitfalls with poorly maintained lists have been: Deceased records — where contact information for deceased voters has not been removed or flagged for mailing Email and address errors — where those who have moved or recently changed information failed to update their records, or where errors in the information on file make it unlikely for the United States Postal Service® to reach individuals effectively Duplicate records — where repeat records exist due to update errors or lack of information standardization With resources being tighter than ever, Registrar Offices now are placing emphasis on mailing accuracy and reach. Through third-party-verified data and advanced approaches to managing contact information, Registrar Offices can benefit from truly connecting with their citizens while saving on communication outreach efforts. Experian Public Sector recently helped the Orange County Registrar of Voters increase the quality of its voter registration process. Click here to view the write-up, or stay tuned as I share more on progress being made in this area across states.
More than ever before, there may now be credence in the view that the majority of consumers’ personally identifiable information (PII), user names and passwords, and even some authentication tokens have been, or are, at risk of compromise. Between sophisticated hacking schemes and regularly reported and sometimes unreported data breaches, those charged with implementing and maintaining identity authentication and management systems must assume this to be true. In doing so, the need for layered authentication becomes readily apparent. Layered authentication can mean many things to many people, but I would offer it up as diversifying authentication and risk assessment techniques and processes across multiple elements and attributes throughout the customer lifecycle. These elements and attributes corresponding techniques can include: traditional PII validation and verification identity transaction link analysis and risk attribute derivation credit and non-credit data and risk attributes identity risk scores knowledge-based authentication question performance device intelligence and risk assessment credentials biometrics and should be layered proportionally by inherent risk per application, addressable population, transaction history and types, current transaction, and access channel for example. Industry guidance such as the FFIEC Guidance of Authentication in an Internet Banking Environment is a solid foundational direction that calls out the need for institutions to move beyond simple device identification — such as IP address checks, static cookies and challenge questions derived from customer enrollment information — to more complex device intelligence and more complex out-of-wallet identity verification procedures. I would suggest that while this is a great start, it is by no means comprehensive. Institutions across all markets, both private and public sectors, should be exploring all available services and technologies in an effort to reduce reliance on one or only a few methods of authentication and identity management. Particularly, again, assuming that the one method an institution may rely on could be greatly weakened or without value if subject to mass compromise. Make sure to read our Comply whitepaper to gain more insight on regulations affecting financial institutions and how you can prepare your business. Learn more about how your business can authenticate consumers confidently.
As data breaches continue to attract publicity, consumers are expecting more from impacted organizations.