Mobile wallet versus wallet service

There is a distinction between the mobile wallet and a wallet service. The wallet service provides the business context for a specific valuable stored in the mobile wallet. The mobile wallet itself is only the container to store digitized valuables, but it does not add any meaning to them.

Only in the business context of a service does the digitized valuable become meaningful; otherwise it is useless. In payments, for example, the credit card number is a digitized valuable that can be stored in a mobile wallet. The business context for this credit card number is the payment service that is provided by a bank (and/or the card scheme). The bank links the card number to the user’s account and authorizes the payments transaction. Hence, the bank is the payment service provider.

What is a mobile wallet?

What is a mobile wallet?

Terms like wallet and mobile wallet are still missing consistent definitions, especially across industries. The fundamental definitions of mobile wallets, however, have provided a foundation for defining the concept.

A mobile wallet is the digital equivalent to the physical wallet we already have in our pockets today. It is a container (or vault) to store digitized valuables for authorization. These valuables grant permission for usage or access to goods, services or places. They can be:

• A personal identification like an ID or social security card, driving license, health card, payments card, loyalty card, website access or login data, and so forth
• Non-personal means of authentication like tickets for public transport or events, car and hotel keys, gift cards and coupons..

How do mobile wallets work?

The digitized valuables stored in a mobile wallet can be represented in many different forms. They might taken the form of a number, like on a credit card or a password, a digital certificate, a QR code, an image of the owner or something else. These representations are linked to the owner’s sensitive personal information, which means that mobile wallets provide valuable access but also require protection.

Because of the storage of sensitive personal information, strong security is a major issue for mobile wallets. Therefore security features are important for a mobile wallet vault. Requirements for security may vary depending on the wallet’s content, since, for example, a loyalty card is certainly not as valuable as a personal ID or a car key.

History of Rabobank

In the 19th Century, Europe was in Turmoil.

Social conscious pioneers encourages people to standup for their rights to form a political parties, unions and cooperatives.



Its here, Rabobank Story Begins, inspired by Friedrich wilhelm Raiefeisen who was Mayor of small town in Germany Heddesdorf in 1850, was deeply concerned with lot of its citizens. Farmers really had tough time, they left with little to enable them to survive, much less buy new seed.

Raiefeisen came up with solution that was both effective and simple : self sufficiency through self organization and self management. He called on the farmers and setup their own bank, Agricultural bank.

Towards the end of 19th century, string of small banks runs by people for the people sprang up in various cities in Nederland. This leads into the form of Rabobank.

RABOBANK, officially Coöperatieve Centrale RAiffeisen-BOerenleenbank B.A., cooperative banking system in the Netherlands

EMV in US - until 2020???

According to Forrester Report,

Adoption of chip-and-PIN and chip-and-signature technologies for plastic payment cards won’t be broadly adopted in the United States until 2020.

New payment standards don’t address fundamental security issues, Forrester says, and adoption could be slowed by the rise of new technologies like mobile and contactless payments.

Fraud in Cards V

IMPORTANCE OF CUSTOMER

Cardholders who understand how to safely use their payment cards are reasserting themselves as one of the strongest lines of protection against card fraud. Up-front cardholder education increases cardholder awareness which helps decrease unauthorized card use and fraud loss. Industry statistics show that cardholders who review their account activity on a routine basis are more likely to detect and report fraudulent activity, thereby reducing losses. Implement a comprehensive cardholder awareness strategy that emphasizes protecting payment cards and account information from disclosure or risk exposure. Strategies can involve providing card usage instructions to cardholders as accounts are opened or sending statement stuffers and educational mailings. All cardholders should be made aware of:
Safeguarding personal information and records
Understanding their physical environment when using their cards—are people around who could pose a threat?
Actively reviewing statements and receipts to ensure their records are accurate and that their card is not being used without their authorization
Procedures for reporting lost, stolen or compromised cards.

THE PROMISE OF TOKENIZATION

The emergence of tokenization, which enables financial institutions to substitute their cardholders’ personal account numbers (PANs) with a unique substitute value for use in the digital payments environment, shows how savvy consumers can aid financial institutions in the fight against fraud.

By choosing tokenized payments, consumers can simplify their purchasing experience by largely eliminating the need to enter and re-enter the card number when shopping on a smart phone, tablet, or PC. Payment tokens also help mitigate risk in the remote and proximity payments space by removing sensitive card information from the payment process.

Tokenization benefits include:

Enhanced transaction efficiency
Improved transaction security, allowing transactions to be signed and verified as originating from a specific device
A secure method for third party enablement—e.g.: wallet, near field communication (NFC)
Reduced risk of fraud in digital channels such as e-Commerce and m-Commerce. EMVCo, the global standards organization that oversees EMV specifications, has expanded its scope to include tokenization specifications. The development of a global tokenization standard enables a new generation of payment products while maintaining compatibility with the existing payments infrastructure.

PUTTING CONTROL IN A CARDHOLDER’S HANDS

Aware consumers are also being empowered via new technology capabilities that will enable them to actively manage their card usage by defining when, where and how their payment cards are used. These services are ideal for cardholders who want to proactively manage their card accounts through their mobile devices. The financial management capabilities of these tools will enable cardholders to:

Monitor and control card transactions

Manage and review card usage for their dependents

Enforce spending policy compliance for transactions on business cards. Cardholders can simply download these applications to their mobile device then customize usage settings and alert preferences. Mobile card control apps can report or restrict PIN and signature transactions performed by payment cards, enabling cardholders to manage, track, and report specific types of transactions and quickly detect unauthorized activity. Cardholders can generally customize their experience by choosing from a variety of options. With card usage controls, spending limits can be established to allow transactions up to a certain dollar value and decline transactions when amounts exceed pre-defined thresholds. Transactions can also be monitored or controlled for specific merchant categories such as gas, hotel, travel, restaurants and groceries. Card on/off settings are also invaluable. When the card is "on," transactions are allowed in accordance with the cardholder’s usage control settings. When the card is "off," no purchases or withdrawals are approved until the card is subsequently turned back "on." This control can be used to disable a lost or stolen card.

Location controls can restrict transactions to merchants located within a certain range of the cardholder’s location (using the phone’s GPS); transactions requested outside of the specified range can be declined. Regional controls use city, state, country or zip code on an interactive map; transactions requested by merchants outside of a specific region can be declined. Alerts can also be set up to inform cardholders of specific types of transactions. Generally, card control apps can send an alert when a card is used, when a transaction is approved and exceeds any of the permitted use policies, or when a card transaction has been attempted but is declined. The alert is sent in real time, immediately after the transaction has taken place or has been declined.

FINANCIAL INSTITUTION SUCCESS

Cards – debit, credit and prepaid – are the payment method of choice for U.S. consumers, but their fraudulent use won’t stop just because you’re not ready for it.

Unfortunately, EMV is only a partial solution since it focuses on counterfeit fraud only. Every financial institution must still examine its other vulnerabilities, identify its unique needs, and determine an appropriate balance between investigating fraud and processing consumer transactions quickly and efficiently. Incomplete fraud services will seriously imperil your success, so you must do everything you can to ensure the integrity of card account information. Rapidly identifying when fraud has occurred will advantageously position your financial institution. To succeed, you’ll need to build comprehensive and holistic fraud detection strategies that combine risk solutions with personal, hands-on investigative and support services and significant consumer empowerment and engagement. Comprehensive tools, rules, and strategies will provide you with prudent business practices you can use to highlight your commitment to risk management and cardholder satisfaction. Today’s fraud trends demand risk management strategies that improve detection and operational efficiency. An integrated and coordinated risk management solution enables you to build a seamless, multilayered defense against increasingly complex fraud scenarios.

Fraud in Cards IV

RISK MANAGEMENT SERVICES

The risk mitigation needs of financial institutions are as varied as their asset sizes. When formulating a comprehensive strategy, you may want to consider customizable options – like risk management services – that complement your best practice toolset and provide additional insight and controls to assist in managing your fraud and risk management program. Ideally, financial institutions can establish a one-to-one relationship with a member of their processor’s risk analyst staff to assist in managing more complex and damaging fraud cases.

This industry expert can provide advice on remediation strategies, design and implement fraud rules tuned to the unique characteristics of your cardbase, generate specialized reports, gather additional information, provide additional analytic services and supply other assistance to reduce your fraud exposure. This service allows financial institutions to augment their risk management program with highly seasoned and experienced risk analysts.

With risk management services, you receive insight and direction designed to address your institution’s unique credit, debit and prepaid fraud risk exposure. The old adage is especially true here, "one size does not fit all," as it relates to fraud rules and strategies. As fraud evolves, these capabilities have never been more important. When fighting fraud, timing is critical – so a risk management service is designed to help you take swift action.
One obvious area a fraud risk analyst can assist you with involves strengthening card change authentication methods. Although you understandably want to provide your cardholders with flexibility to activate a card or make PIN changes at their convenience, you should first work with an analyst to understand the options and specific information you can use to authenticate cardholders.

Your analyst can recommend the information needed beyond a social security number or date of birth. Understanding your options can help prevent fraud and provide a better and more secure cardholder experience. Once a cardholder is reliably authenticated, you can be assured your cardholders can safely use their cards at ATMs and the point of sale for purchases

Fraud in Cards III

AUTHORIZATION LEVEL TRANSACTION BLOCKING

 

Transaction blocking gives you the ability to prevent the authorization of all transactions originating from countries or merchants known to generate fraudulent transactions. By taking advantage of the ability to override blocks at the card level, you can maximize your protection without inconveniencing your cardholders who may be traveling or working outside the United States.

The benefits include more precise fraud detection and increased fee income as you no longer unnecessarily block international card present transactions. According to industry statistics these transactions are an issuer’s most profitable ones because the average value of an international card present transaction represents 175 basis points in value versus 16 basis points for a domestic transaction.

These tools provide a method of blocking transactions you consider highly likely to be fraudulent by routinely denying the transactions in the authorization process. Issuers often look to Visa or MasterCard to implement blocks for specific countries. The associations’ capabilities are adequate for blocking countries but they do not address other high-risk criteria such as merchant ID.
 

Issuers should take advantage of all available tools to mitigate risk. Transaction blocking capabilities are a key component of a sound risk management strategy and can be used to stop fraudulent transactions originating from specific countries, specific merchants and/or specific merchant types. Your transaction blocking approach should provide you with the ability to place transaction blocks at the BIN and individual card levels. This approach enables you to block transactions you deem high risk, at your discretion. Any combination of BIN and card level blocks should be set giving you the ability to override blocks for those specific cardholders who are traveling or working overseas. Blocking criteria should be set for all transactions or specific transactions —ATM, POS, eCommerce — within BIN and card levels.

You assign the expiration date of each block to ensure compliance with card association rules regarding international/country blocking. Approve/deny options for each block include report and continue, deny, and deny and capture card. Daily and monthly reporting is important and block-related information should be incorporated into online transaction review screens, making it easy to manage your blocking strategies. It is important to note that rules implemented for blocking transactions may only prevent the authorization of transactions through your processor’s switch. Any transactions authorized through Visa and MasterCard during stand-in may require additional steps to implement blocks on the associations’ systems. Additionally, blocking of transactions does not necessarily protect your chargeback rights.

NOW ADD COMPROMISED CARD TRACKING . . .

Industry trends indicate that blocking and reissuing cards each time a compromise occurs is not only expensive but also causes cardholder churn. Cardholders receiving reissued cards multiple times due to compromises, especially those that they may not have heard about in the news, frequently question the security of their issuing institution and a relatively high percentage will move their banking relationship to another institution. Although compromised cards are more likely to be used to conduct fraudulent transactions, taking this into account in the neural network process aids in stopping fraudulent transactions. Visa and MasterCard provide alerts to you or your sponsoring institution when a data breach or card compromise event involving card data occurs. Issuers historically have routinely blocked and reissued cards to prevent losses. Consider closely monitoring the activity on compromised cards and reissuing only those cards with suspicious or fraudulent transactions. Ensure your processor enables you to more closely scrutinize transactions for compromised cards in neural network processing. . . .

AND CASE TRACKING

A sensible case tracking tool will enable you to immediately serve any cardholder regarding cases that have been created or are being worked.

Case tracking tools put information online and at your fingertips so you have a complete repository of all actions taken on your cases and immediate access to updates and case statuses. Customized search options will enable you to view the information you need quickly and easily. With an appropriate case tracking tool, you have real-time access to information and can:
Search and download by case creation date, case status, card number, last name, tax ID, phone number, or city, state and postal code

Download and review available transactions associated with a specific case

Status cards and manage cardholder records optimizing back-office operations

Determine a case status (Fraud, No Fraud, Unconfirmed)

Directly enter actions or review actions already taken by your team, including:

•Send a letter to the cardholder

•Review case and cardholder demographic details

•Dynamically select data to generate a custom report or print records.

Case tracking is made especially efficient through the use of transaction tagging – a feature that provides enhanced visibility to potential fraud trends. With tagging, transaction details – including the merchant, country and state – are already verified when you review cases, significantly streamlining the research process, resulting in quicker identification of fraud and expedited implementation of fraud prevention solutions.

Fraud in Cards II - Neural Networks and Real time Decisioning.

The most sensible starting point is the implementation of neural network capabilities that achieve a balance between aggressive fraud detection and serving cardholders:

 

A strong neural network helps reduce fraud losses and focuses investigations on accounts and transactions that are most likely to be fraudulent.

 

 

Neural network technology builds cardholder profiles and utilizes predictive models to detect potentially fraudulent card usage.

 

The predictive models are used to determine the fraud potential of each ATM and POS transaction by evaluating it against a complete history of cardholder usage patterns as well as unique transaction characteristics that are known to be fraudulent and legitimate.

 

This process results in the recognition of any uncharacteristic transaction behavior.  

• Transaction
• Industry
• Cardholder 
• Merchant data

Are all used to forecast the likelihood of fraud.

With all neural networks, some level of false-positives will be generated. In a real-time environment, cardholders’ transactions will be denied if the transaction score exceeds a defined scoring threshold. The lower the scoring threshold, the higher the false-positive rate and the more likely that legitimate transactions will be denied.

Conversely, the higher a scoring threshold, the fewer actual fraudulent transactions you will prevent.

Real-time decisioning involves taking the neural network score into account in the authorization process.

While the industry norm has historically been to review the neural network score after a transaction has already been approved or denied, there is increased interest in considering the likelihood of fraud (neural network score) in the transaction authorization process.

Although this practice can drastically reduce fraud exposure, it can also have a negative impact on cardholders’ ability to perform legitimate transactions and potentially impact overall card usage due to a higher rate of false-positives experienced with current technology.

Financial institutions should carefully weigh the level of risk they are willing to accept against the level of cardholder satisfaction they wish to deliver. An appropriate balance of the two is necessary to ensure you are protected against the majority of fraudulent transactions and that cardholders continue to view their cards as a safe and dependable payment method.

Inserting the neural network process into the authorization path provides more information upon which to make approve/deny decisions, enabling you to stop suspect transactions before they are approved.

You will be able to select the criteria for those transactions you deem high risk that should be sent for real-time neural network processing (e.g. dollar amount, international, country codes, merchant category codes).

But even the most robust authorization systems can be enhanced. That’s where a rule authoring capability becomes a differentiator.

When you layer in rule authoring, you are ready to immediately address flash fraud – reducing fraud losses, maintaining consumer confidence and protecting the reputation of your institution.

A robust rule authoring service will provide more availability to fields in the online message and greater flexibility in the number and complexity of rules that can be deployed, automating actions so risk mitigation can start immediately.

Fraud in Cards - I

 

Is EMV going to stop the fraud? The answer is NO.

 

Its going to mitigate only partial fraud in the overall fraud issues.

It can't mitigate the fraud in CNP(Card NOT Present).

 

To protect FIs, Banks, CUs and Cardholders, We would need sensible risk management approaches that should complement EMV and Tokenization with best practices.

 

These best practices includes

 

- Real Time scoring that blocks the fraudlent Transactions

- Real Time case management and Monitoring

- Tracking and Monitoring Fraud Alerts

 

In its earliest form, card fraud resulted primarily from stolen cards which FIs, Banks able to combat through card activation processes and first-generation neural networks.

But as new payments technologies proliferated, fraud also became more sophisticated and increased through large scale operations that included phishing, skimming, and data breaches. Enter EMV, which provides new safeguards during card present transactions.

Despite (and likely because of) the positive impact of EMV, a large percentage of new fraud is moving to CNP transactions (like ecommerce transactions) which EMV does not protect.

CURRENT FRAUD Trends Includes:

More diverse cardholder activity – making it more difficult to recognize cardholder patterns
More creative and pervasive fraud, including flash fraud which can result in huge losses before issuers can react and respond

Criminal attacks that have increased in magnitude via both local and global criminal organizations

Social engineering tools that exploit consumers with phishing attacks that take advantage of cultural and current events

Criminal efforts to install malware to obtain online credentials and any pieces of personal information

Vishing/SMiShing.

 

 

Evolution of Payments

ABCs of EMV.....

The FRAUD in CREDIT CARD is one of the TOP Concern in the US - Cards Industry. EMV uses chip card technology to provide more secure card for payments.

By moving to EMV, Merchants, Banks and Software Solution Providers wil lget benefits.

-  Reduced Fraud
-  Better Data protection
-  Enhanced Payment Security

Merchants partcularly needs to be prepared as a libality for NON EMV Transactions will shift from Card ISsuers to Merchants from OCTOBER . 2015.

"A" for Anticipation

EMV Chip cards also known as
 
- SMART CARDS, 
- Chip and PIN Cards,
- Chip and Signature

EMV Cards offer an added Level of Security with Chip that assigns a unique code using dynamic data during authentication process when customer uses their cards.
Customers, instead of swiping, they enter card into Terminal with PIN or Signature.

"B" for Benefits

One of the main benefits is PEACE OF MIND since their Data protection has been ensured with chip security. Another major benefits for Travellers. Most of countries started supporting EMV Terminals.

Most of the current EMV Terminals supports contactless transactions. So its good to have EMV Cards.

"C" for cohesiveness

All the Merchants who is making investment into this business, will need to assess the investment they are making in the transition with over all payment program.