With risk and fraud commonly merchant chargeback risk comes to mind. But in a world of OBeP, SEPA Direct Debit, identity theft, alternative currencies and digital signatures, there is much more that goes into to a good risk assessment. What are the trends and developments in online payment fraud? And what is being done by the ECB and others to mitigate these risks?

2. Online fraud is still a big problem and as long as the number of online shoppers continues to grow, so will the number of fraud cases.
According to the European Central Bank there were 7.9 million cases of fraud with a value of 1.16 billion euros in 2011 of which 56%
took place in e-commerce.
European Merchant Services organizes the EMS RISK EVENT annually for retailers who are active in e-commerce and multichannel.
It is an excellent opportunity to increase your knowledge in the field of online fraud, risk management and advanced fraud prevention
and detection tools. We help you to stay ahead of online fraudsters and to protect your online business by sharing the knowledge and
experience of our fraud and risk experts, our customers and our partners.
Do you want to attend next year’s EMS RISK EVENT?
Please contact the EMS Marketing Department at T +31 20 660 3054 or send an email to marketing@emscard.com.
For more information visit www.emscard.com/riskevent
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3. tomorrow’s transactions today
Trends in online payments and online fraud
The broader scope of payment risk

4. 4 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Jacob Boersma, senior consultant @ Innopay
• Senior consultant at Innopay
• Passion for information security & European
Medieval Martial Arts
• 13 years of bridging gap between business & IT
− In e-identity: Dutch government PKI,
eHerkenning
− In e-payments: iDEAL SEPA-compliant,
FiNBOX, Masterclass Bitcoin
− In e-security: Masterclass Online Security

5. 5 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
innopay. tomorrow’s transactions today
Online payment
E-invoicing
E-identity
Mobile payment
• Consulting in payments and transaction services
• Innovation, products, channels, users
• Independent, international
From Strategy to Execution
Bridging providers &
merchants/corporates
Collaborative innovation
& scheme development

6. tomorrow’s transactions today
Trends in e-payments

7. 7 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
A brief history…

8. 8 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Once upon a time: ‘traditional’ payment instruments,
used in online contexts
1995 20152005
1. Making traditional payment products
suitable for use on the internet
(...cards were never designed for the web…)
Volume

9. 9 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Dedicated payment methods arose
1995 20152005
1. Making traditional payment products
suitable for use on the internet
(...cards were never designed for the web…)
2. Developing new payment products
designed for use on the internet
3-party based challengers
3-party
model
Volume

10. 10 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Followed by solutions from banks
1995 20152005
1. Making traditional payment products
suitable for use on the internet
(...cards were never designed for the web…)
2. Developing new payment products
designed for use on the internet
3-party based challengers 4-party based challengers
3. Developing new transaction services
designed for use on the internet
(...e-invoicing, e-identity, e-mandate…)
3-party
model
4-party
model
Online Banking
Online Banking
based ePayment
Volume

11. 11 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Now: new wave of new players,
focused on mobile contexts…

12. 12 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 1
[Payment methods follow users]

13. 13 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Significant differences in local preferences
Market share of (cards) brands for various geographies
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
Switch
Solo
Laser
JCB
Invoice
iDEAL
Dankort
Cheque
Carte Bleue
American Express
Visa Electron
Bank transfer
Direct Debit
Can I pay with
. ? Huh?

14. 14 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Merchants helped by PSPs

15. 15 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 2
[Offline and online are converging]

16. 16 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Traditional retailers continue moving online…

17. 17 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
…while e-commerce looks for offline presence
.com

18. 19 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Mobile internet is taking ‘e’ everywhere

19. 20 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 3
[‘m’ is the next ‘e’]

20. 21 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Mobile internet will soon surpass the desktop

21. 22 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Mobile important tool for shopping
• Mobiles used for purchases,
information, also in-store
• Consumers willing to pay,
payment methods lacking 0%
20%
40%
60%
80%
Mobile product
search
Instore product
search
M-commerce
Europe
Mobile phone usage, Q2 2012

22. 23 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 4
[Checkout becoming more complex]

23. 24 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Loyalty & marketing demand attention at
checkout

24. 25 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Payments integrated in advertising platforms

25. tomorrow’s transactions today
Contexts in e-payments: all about risk

26. 27 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Why so many payment methods…?

27. 28 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Payment methods address specific contexts
Built of many parameters
• Relation
• Product
• Location
• Timing
P
Pay
R
Risk
D
Deliver
A
Agree
RA
RD
RP
Context:
Relation (r)
Product (p)
Location (l)
Timing (t)
Source: Innopay, 2007
Risk
? ?
Key element is risk

28. 29 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Perceived risk higher online
• Risk in each step of
a transaction
• Online - less time
between steps
• Requires much
better risk analysis
Ordering | Order
Delivering | Delivery
Paying | Payment (via banks)
Contracting | Contract
Entity A
Procurement
Entity B
Sales
Tax returning | Tax return (via tax authorities)
Invoicing | Invoice

29. 30 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trends in payments and fraud
• Card fraud: organised crime
− Skimming
− Phishing
− Banking Trojans
• But banks are fighting back
− Blocking cards outside EU
− EMV standard
− 2-factor authentication online
• And so fraud is evolving…

30. 31 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 1: payment methods follow users
• From merchant initiated (credit card) to consumer initiated
• Trust in payment system shifts to trust in customer
(relationship)
• E-identity solutions needed to know your customer
• Criminals know this too:
− Card theft  Identity theft
• ECB proposal: SecuREpay

31. 32 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 2: offline and online converging
• Fraudsters look for the weakest link
• Offline methods to fuel online fraud (social engineering)
• Online gains go offline (pre-paid cards, gift cards)

32. 33 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 3: ‘m’ is the new ‘e’
• Smartphones 10 years behind in security
• Android malware on the rise
• Mobile convenience > security

33. 34 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Trend 4: checkout becoming more complex
• It’s about more than just traditional money
• Identity, computing power (botnets), digital goods
• Alternative currencies: Bitcoin
− Exchange rate risk
− DDoS
− Anonymous payments… but guaranteed
− Regulation?

34. 35 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Bitcoin in the news

35. tomorrow’s transactions today
Lessons for the future

36. 37 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Understanding the context is key
• Payment: more than just cards
• Fraud: more than just payments
• Know your business, know your customer
• Mobile context: news risks, new chances
• Choose the right partners

37. 38 EMS Risk event 2013 – The broader scope of payment risk – September 2013 © Innopay BV. All rights reserved.
Are you ready?

38. tomorrow’s transactions today
Thank you for your attention
Contact
jacob@innopay.com , +31 6 150 76 228