1. Managing FraudDoug SchwegmanDirector Market Intelligence Managing Fraud Management: Work the Process

2. Agenda Origins of Online Fraud & Merchant Risk Fraud Management Process Operating Trends & Merchant Challenges Best Practices Questions 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process2 3. Online Fraud & Merchant Risk Profiles 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process 3 4. Credit card number: $1 Credit card with 3-digit code: $3-$5 Credit cardWork the Process Managing Fraud Management:with code and PIN: $10-$100 4 2010 CyberSource Corporation. All rights reserved. 5. How Is Information Obtained? Javelin ResearchPrimarily Business ControlledOnline purchasesOnline Access or transactions Some other way 2%Phishing2%4%Computer viruses, spyware,Data breaches 7% or hackers on PC8%In-store, mail, telephone purchasesor transactions 23%From a lost or stolen wallet, checkbook, or credit card33%From stolenpaper mail6%By friends, acquaintences,relatives, or in-home employees17%Primarily Consumer ControlledOctober 2007, n = 144(Based on the 35% of Victims Who Know How Their Information Was Obtained) Q26: How was your information obtained? Keep in mind 'other' is anBase: Victims Who Know How Their Information Was Accessed option. Was it obtained ... 2008 Javelin Strategy & Research 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process5 6. Determinants of Merchant Fraud Risk s rd t Ca f / Gi y elr ew Fungibility / Fencibility / J Fraudsters ct. El eRadarerlsum Appare ConPaper ClipsVisibility on the web 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process6 7. Fraud Trends &Management Process 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process 7 8. Fraud Loss Estimates U.S. and Canada % Revenue Lost to Online Fraud Online Revenue Loss Due to Fraud Estimated $3.3B in 2009N=132 N=220 N=341 N=333 N=348 N=404 N= 351 N= 294 N= 399 N= 317The rate of revenue loss due to online payment fraud declined in 2009 and total dollars lost to fraud declined by anestimated $700 million the first drop since 2003.Source: CyberSource Annual Fraud Survey 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process8 9. 11th Annual Fraud Survey Methodology Independent survey commissioned by CyberSource Fielded September 10 October 7, 2009 Industry-wide sample: companies involved in e-business activities 59% of 2009 respondents are CyberSource customers Email invitation to online survey hosted by Mindwave Research 352 qualified completed interviews Screening criteria: Current online sellers with online operations primarily based in the U.S. or Canada Must be ultimately responsible or influence policy and fraud management decisions for online payment risk management RESPONDENT PROFILE: 200948% of merchants are experienced online sellers (> 7 years)Respondent median annual online revenues in 2009: $2.0MA total of over $60 billion in annual online revenues was reported by participating merchants39% have annual online revenues of $10M or more31% have annual online revenues of $25M or more 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process 99 10. Automated ScreeningMobileWeb CallCenter KioskOrdersDetectors Rules Reject POSChargebackManagementManual ReviewTuning & Analytics 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process10 11. Top Priority Strategy / Area of Focus 201016% Manual Review (tasks / workflow) 20% 60%ProcessAnalyticsAutomatedDetection2% Outsourcing2% OtherSource: 2010 CyberSource Fraud Report Q: Which of these best characterizes your top priority strategy/area of focus forprocess improvement over the next 12 months? 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process 11 12. Automated Screening OrdersDetectors Rules Reject FraudChargebackRate Management18-25% Manual ReviewTuning & Analytics 2010 CyberSource Corporation. All rights reserved.Managing Fraud Management: Work the Process12 13. Total % of Orders Resulting in Fraud LossAverage % Accepted Orders Resulting in Fraud Losses(A fraud chargeback was received on the orders OR a credit was issued directly to a customer who claims not to have placed an order) (U.S. & Canada) 2009 vs. 2008 2009 20082.0%1.5% 1.3% 1.3%1.2% 1.1% 1.1% 1.1%1.1%1.0%0.9% 0.8% 0.6%0.5% n=326 n=280n=95*n=98* n=60* n=46* n=57*n=41* n=87*n=76*0.0%O verall