Global Consumers React to Rising Payment Fraud

Global Consumers React to Rising Fraud: Beware Back of Wallet

Confidential

ACI Worldwide & Aite Group 14 November 2012

Agenda

About the Speakers

Research Approach

2012 Research Results • Global

•  The Americas •  EMEA •  Asia Pacific

•  Year-to-year Comparisons • Key Trends • Recommendations Questions & Answers

14 November 2012 2 Confidential

Today’s Speakers

14 November 2012 Confidential 3

Mike Braatz SVP & Product Line Manager

Shirley Inscoe Senior Analyst

Research Methodology

• Q3 2012 survey of 5,223 consumers (over 300 per country)

•  The study was conducted in a total of 17 countries across the following regions: – The Americas (North and South America): Brazil, Canada, Mexico, and

the United States – EMEA (Europe, the Middle East, and Africa): France, Germany, Italy,

the Netherlands, South Africa, Sweden, the United Arab Emirates, and the United Kingdom

– Asia-Pacific: Australia, China, India, Indonesia, and Singapore


Research Key Takeaways

•  Financial institutions risk losing customers who experience fraud

•  Consumers fear identity theft

•  Some consumers continue to exhibit risky behaviors which could lead to fraud

•  Consumers have a strong desire to partner with financial institutions for fraud prevention


2012 Research Results


©2012 Aite Group LLC. 7

Agenda

•  2012 Research Results •  Global •  The Americas •  EMEA •  Asia Pacific

•  Year-‐to-‐year Comparisons •  Key Trends •  RecommendaEons


Global fraud rates by country

12%

12%

13%

18%

20%

24%

25%

25%

26%

31%

33%

34%

36%

36%

37%

42%

44%

Sweden

The Netherlands

Germany

Indonesia

France

Italy

Canada

South Africa

Singapore

Australia

Brazil

United Kingdom

China

The U.A.E.

India

United States

Mexico

Percentage of Respondents Who Have Experienced Card Fraud (N=5,114)

1 in 4 cardholders (27%) experienced fraud in the past five years.

Source: Aite Group, ACI Worldwide study of 5,223 consumers in 17 countries, Q3 2012


Credit card fraud rates by country

37%37%

33%31%

30%30%

27%27%

23%22%

20%19%

18%14%

11%10%

8%

United StatesMexico

The U.A.E.United Kingdom

BrazilAustralia

ChinaIndia

SingaporeItaly

South AfricaCanadaFrance

IndonesiaSweden

GermanyThe Netherlands

Q. Have you experienced fraud on your credit card in the past 5 years? (N=5,114)



Debit card fraud rates by country

25%24%

21%20%

17%17%

13%12%12%

11%11%11%

10%9%9%

8%6%

MexicoChinaIndia

United StatesUnited Kingdom

BrazilCanadaFrance

South AfricaSingaporeThe U.A.E.

SwedenItaly

AustraliaThe Netherlands

IndonesiaGermany

Q. Have you experienced fraud on your debit card in the past 5 years? (N=5,114)



Prepaid card fraud rates by country Country (N=5,114) Experienced fraud during past 5 years India 19%

China 16%

Mexico 10%

Italy 9%

Brazil 7%

Singapore 6%

The U.A.E. 6%

United States 5%

Indonesia 4%

South Africa 4%

Germany 3%

Sweden 3%

France 3%

Australia 2%

Canada 2%

United Kingdom 1%

The Netherlands 1%



Agenda




Sa@sfac@on levels and aBri@on

15%10%

37%

56%

12%7%

27%

15%

United States Canada Mexico Brazil

Q. How happy were you with the treatment from your card provider after experiencing fraud, and did you change providers?

(n=431)

Unhappy with treatment from card provider

Changed card providers after experiencing fraud


Sa@sfac@on level factors -‐ the Americas Q. What is the main factor that influenced how happy you were with your financial institution? (n=431)

Speed with which FI identified the fraud and brought it to my attention

Speed with which FI replaced my card

Speed with which FI reimbursed my money

How easy it was to notify my FI of the issue and get reimbursed

I was happy with all aspects of treatment from my FI

I was not at all happy with the treatment from my FI

Brazil 23% 7% 29% 19% 8% 14%

Canada 43% 14% 10% 10% 20% 3%

Mexico 17% 6% 12% 24% 17% 24%

United States

37% 9% 14% 12% 26% 2%



Back of wallet behavior – the Americas

Q. After you experienced fraud, did you use cash or an alternate payment method rather than your card? (n=431)

Yes, in all situations

Yes, but only in some situations

Used cash instead of my debit card, but not instead of my credit card

No

Brazil 15% 42% 4% 39%

Canada 3% 31% 5% 61%

Mexico 12% 56% 3% 29%

United States 7% 37% 2% 54%



Replacement cards – the Americas

Q. As a result of the data breach or fraud, did you use the replacement card less than the original card? (n=277) Yes No

Brazil 56% 44%

Canada 24% 76%

Mexico 63% 37%

United States 33% 67%



Risky consumer behavior -‐ Americas

Q. Which of these actions have you taken in the past 5 years? (n=1,224) Brazil Canada Mexico United

States Made a note of PIN and carried it with me or kept it with my card 16% 4% 9% 7%

Thrown bank statements or ATM receipt in the trash 45% 25% 36% 23%

Used online banking or Internet shopping without security software or on a public computer 22% 6% 20% 13%

Responded to emails or calls asking for bank details 8% 3% 7% 6%

Not used the auto lock feature on my mobile phone 21% 11% 17% 18% Source: Aite Group, ACI Worldwide study of 5,223 consumers in 17 countries, Q3 2012


Preferred contact method -‐ Americas


Fraud educa@on – the Americas

Q. Has your financial institution provided any guidance or tips for anti-‐fraud? (n=1,224) Brazil Canada Mexico United

States Yes, I've received emails from them with anti-‐fraud information 15% 15% 14% 19%

Yes, I've received mail from them with anti-‐fraud information 15% 13% 5% 22%

Yes, I've seen this on my financial institution's website 25% 17% 14% 13%

Don't recall receiving any anti-‐fraud information from my financial institution 42% 52% 65% 43%

Not applicable 3% 3% 2% 3%



Agenda





57%

45%37%

28% 26%21% 20%

13%15%

27% 26%

13% 9% 10% 12% 9%

Italy The U.A.E. Germany S. Africa The Netherlands

U.K. France Sweden


(n=519)

Were unhappy with treatment from card provider

Changed fraud providers after experiencing fraud


Sa@sfac@on level factors -‐ EMEA Q. What is the main factor that influenced how happy you were with your financial institution? (n=533)







France 32% 18% 13% 17% 13% 7%

Germany 24% 13% 29% 10% 16% 8%

Italy 32% 23% 11% 9% 3% 22%

The Netherlands 31%t 26% 9% 11% 14% 9%

South Africa 19% 20% 8% 17% 27% 9%

Sweden 30% 22% 11% 16% 16% 5%

The U.A.E. 27% 21% 17% 11% 8% 16%

United Kingdom 37% 30% 9% 10% 13% 1%



Back of wallet behavior -‐ EMEA Q. After you experienced fraud, did you use cash or an alternate payment method rather than your card? (n=533)


Yes, in some situations No

Used cash instead of debit card, but not credit card

France 13% 25% 60% 2%

Germany 18% 32% 45% 5%

Italy 15% 35% 44% 6%

The Netherlands 3% 14% 83% 0%

South Africa 15% 36% 45% 4%

Sweden 5% 33% 62%. 0%

The U.A.E. 12% 45% 41% 2%

United Kingdom 9% 30% 58% 3%


©2012 Aite Group LLC. Page 24

Replacement cards -‐ EMEA


France 25% 75%

Germany 36% 64%

Italy 34% 66%

The Netherlands 33% 67%

South Africa 51% 49%

Sweden 26% 74%

The U.A.E. 40% 60%

United Kingdom 38% 62%



Risky consumer behaviors – EMEA Q. Which of the following have you done in the past 5 years? (n=2,442)

France Germany Italy The Nether-‐lands

South Africa

Swe-‐den

The U.A.E. U.K.

Made a note of PIN and carried it with you or kept it with your card

3% 10% 17% 2% 12% 9% 14% 12%

Thrown bank statements or ATM receipt in the trash 33% 15% 32% 14% 58% 43% 41% 16%

Used online banking or Internet shopping without security software or on a public computer

10% 14% 19% 3% 17% 14% 24% 8%

Responded to emails or calls asking for bank details 4% 5% 4% 3% 5% 4% 12% 3%

Not used the auto lock feature on my mobile phone. 13% 16% 19% 16% 27% 25% 24% 23%



Preferred contact methods -‐ EMEA


Fraud educa@on -‐ EMEA Q. Has your financial institution provided any guidance or tips for anti-‐fraud? (n=2,442)

France Germany Italy The Nether-‐lands

South Africa

Swe-‐den

The U.A.E. U.K.

Yes, I've received email from them with anti-‐fraud information

11% 11% 14% 17% 43% 6% 47% 18%

Yes, I've received mail from them with anti-‐fraud information

12% 20% 13% 14% 7% 6% 10% 20%

Yes, I've seen this on my financial institution's website

19% 19% 16% 30% 30% 40% 19% 21%

Don't recall receiving any anti-‐fraud information from my financial institution

53% 39% 54% 31% 19% 43% 22% 38%

Not applicable 5% 11% 3% 8% 1% 5% 2% 3%



Agenda





63% 60%55%

50%

14%

45% 41% 40%45%

3%

Indonesia India Singapore China Australia


(n=445)

Unhappy with treatment from card provider Changed card providers after experiencing fraud


Sa@sfac@on level factors -‐ APAC Q. What is the main factor that influenced how happy you were with your financial institution? (n=445)







Australia 29% 19% 9% 15% 25% 3%

China 25% 17% 12% 27% 8% 11%

India 31% 19% 26% 3% 8% 13%

Indonesia 34% 12% 12% 26% 14% 2%

Singapore 29% 35% 8% 9% 9% 10%



Back of wallet behavior -‐ APAC

Q. After you experienced fraud, did you use cash or an alternate payment method rather than your card? (n=445)


Yes, in some situations No

Used cash instead of debit card, but not credit card

Australia 6% 34% 58% 2%

China 16% 50% 27% 7%

India 25% 52% 17% 6%

Indonesia 12% 68% 14% 6%

Singapore 8% 45% 45% 2%



Replacement cards -‐ APAC


Australia 37% 63%

China 73% 27%

India 73% 27%

Indonesia 78% 22%

Singapore 51% 49%



Risky consumer behaviors -‐ APAC

Q. Which of the following have you done in the past 5 years? (n=1,557) Australia China India Indonesia Singapore

Made a note of PIN and carried it with me or kept it with my card 6% 21% 26% 17% 11%

Thrown bank statements or ATM receipt in the trash 28% 51% 45% 39% 50%

Used online banking or Internet shopping without security software or on a public computer

10% 30% 32% 20% 22%

Responded to emails or calls asking for bank details 4% 13% 23% 16% 13%

Not used the auto lock feature on my mobile phone 19% 26% 24% 23% 23%



Preferred contact method -‐ APAC


Fraud educa@on -‐ APAC

Q. Has your financial institution provided any guidance or tips for anti-‐fraud? (n=1,557) Australia China India Indonesia Singapore

Yes, via email 14% 17% 51% 22% 23%

Yes, via mail 29% 10% 11% 16% 18%

Yes, via their website 17% 26% 13% 19% 16%

Don't recall receiving any anti-‐fraud information from my financial institution. 39% 39% 18% 36% 38%

Not applicable 1% 8% 7% 7% 5%



Agenda




Mul@ple incidents of card fraud globally

The increase in the percentage of cardholders who experienced fraud more than one time is statistically significant.



Confidence in FIs – the Americas

2%

1%

10%

7%

68%

61%

20%

31%

2%

0%

9%

6%

60%

51%

29%

43%

4%

1%

25%

23%

56%

55%

15%

21%

2011: No

2012: No

2011: Not really

2012: Not really

2011: Yes, to an extent


2011: Yes, absolutely


Q. Do you have confidence in your financial institution to protect you from card fraud? (2012, n=302; 2011, n=900)

Brazil

Canada

United States


Confidence in FIs-‐ EMEA

2%

2%

11%

8%

74%

74%

13%

16%

3%

12%

22%

20%

61%

50%

14%

18%

4%

8%

16%

14%

52%

54%

28%

24%

3%

3%

14%

14%

63%

57%

20%

26%

1%

10%

14%

17%

65%

56%

20%

17%

4%

3%

16%

5%

66%

71%

14%

21%

2%

2%

15%

12%

63%

57%

20%

29%

2011: No

2012: No

2011: Not really

2012: Not really





Q. Do you have confidence in your financial institution to protect you from card fraud? (2012, n=458; 2011, n=2,100)

France

Germany

Italy

The Netherlands

Sweden

The U.A.E.

United Kingdom


Confidence in FIs – Asia Pacific

2%

0%

18%

17%

63%

66%

17%

17%

3%

0%

15%

5%

54%

62%

28%

33%

3%

3%

39%

37%

45%

51%

13%

9%

2%

3%

12%

10%

73%

65%

13%

22%

2011: No

2012: No

2011: Not really

2012: Not really





Q. Do you have confidence in your financial institution to protect you from card fraud? (2012, n=395; 2011, n=1,200)

Australia

China

India

Singapore


Addi@onal comparisons to prior year…

•  Fear from iden@ty theO is increasing – 26% of 2011 respondents stated that their biggest fear related to fraud was reclaiming their financial idenEty if they became vicEms of idenEty theT; in 2012, 49% of respondents state they are “very concerned” about this issue

•  Iden@ty fraud was the top worry in 2012 followed by online banking fraud and card fraud – idenEty fraud did not appear in the top 2 in 2011

•  35% throw documents containing sensiEve informaEon into trash bins and 16% use public computers or computers without security soTware

•  No improvements in risky behavior: •  12% indicated making a note of their PIN and carrying it with them or with

their card in 2012 maintaining the same 12% rate who did so in 2011 •  16% shopped on the Internet or used online banking without security

soTware or on a public computer in 2012 , the same rate in 2011


Agenda




Research key takeaways

•  Financial insEtuEons risk losing customers who experience fraud

•  Consumers fear idenEty theT •  Some consumers conEnue to exhibit risky behaviors which could lead to fraud

•  Consumers have a strong desire to partner with financial insEtuEons for fraud prevenEon


Financial ins@tu@ons risk losing customers due to fraud

•  ABri@on rates aTer experiencing card fraud averaged 21% •  Of card holders who received replacement cards as a result of a data

breach or fraudulent acEvity, 46% used the new card less than the original

•  56% of card holders used cash or an alternate form of payment instead of a debit or credit card aOer experiencing card fraud

•  Only 25% think that government or law agencies do the best job of protecEng card(s) or account informaEon from fraud, compared with 43% who acribute that strength to large/mulEnaEonal financial ins@tu@ons


Consumers want to partner with banks for fraud preven@on

•  82% of respondents are “very interested” in being noEfied prior to the bank taking acEon

•  74% of cardholders prefer that no addi@onal transac@ons be posted unEl they respond to any noEficaEons of a fraud alert from their financial insEtuEon.

•  Mobile phone and text message lead way for aler@ng consumers as direct contact methods – a change from 2011 where home phone was the second most preferred method •  Asia Pacific lead the way with mobile and text message •  EMEA countries prefer call to mobile phone (except Netherlands who want call to

home) •  Mexico and Brazil prefer mobile and text message •  US prefers e-‐mail and Canada prefers call to home


Agenda


•  Year-‐to-‐year Comparisons •  Key Trends •  Recommenda@ons


Recommenda@ons for financial ins@tu@ons

•  Provide fast, easy recovery processes. Simplify and make fraud resoluEon process simple and easy -‐ it may curtail fraud-‐related acriEon.

•  Share your fraud policy. Make consumers aware of how you work with them aTer a fraud incident -‐ consumers care about fraud resoluEon.

•  Reassure your customers. InsElling confidence in your process will minimize risk of non-‐use of replacement cards or using cash alternaEves.

•  Educate consumers about fraud. The messages are sEll not being heard. In most countries, a large % of consumers do not recall ever having their insEtuEon providing informaEon related to fraud.


Recommenda@ons for financial ins@tu@ons

•  Telephone and text. By a large majority, customers indicate they prefer to be contacted about a fraud alert via their mobile phone by a call or text message or via their home phone.

•  Regularly update customer data. InsEtuEons should update their records of consumers’ email addresses and mobile numbers to facilitate communicaEon. A simple process will encourage customers to parEcipate.

•  Enlist consumers in comba@ng fraud. There is a willingness for acEve parEcipaEon when fraud is detected . Engage them in the fight.

•  Proac@vely prevent fraud. Consumers know fraud schemes are pervasive. Customer saEsfacEon rates with FI’s are highest when the company detects fraud and noEfies the consumer of it.


Aite Group: Partner, Advisor, Catalyst

Aite Group (pronounced eye-‐tay) is an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.

Shirley W. Inscoe Senior Analyst [email protected] +1.704.987.5087 www.aitegroup.com

Questions


More Information

For information on ACI’s payment fraud solutions

or to download a copy of the Global Consumers React to Rising Fraud

report, visit http://www.aciworldwide.com/annual-

fraud-survey

Thank you!

14 November 2012 51 Confidential

T: + 1 (781) 370-3637 E: [email protected]

www.aciworldwide.com

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Global Consumers React to Rising Payment Fraud