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Insecure Transactions

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Insecure Transactions

  1. 1. Insecure Transactions The Need for a Token Based Transaction System
  2. 2. Houston we have a problem! 2 Target Credit Card Data Breach o Target’s CEO Gregg Steinhafel announced his retirement o Significant fall in profits o $100 Million POS revamp o Possible $3.6 Billion in PCI liability o Currently being sued by shoppers
  3. 3. Typical Card Based Transaction 3 1 1. A customer provides the merchant with payment card information. 2. The transaction information is then routed through the required CC network. 3. The Issuing bank receives the transaction information and either approves or declines it. 4. The response code from the issuing bank is then routed back through the CC network back to the merchant. 5. The merchant then completes the sale and the transaction is then settled via the merchant’s bank.Customer Merchant Issuing Bank CC Network 2 3 4 5
  4. 4. Symptoms of a Problem 4 o Card based payments is a 50 year old concept o Card based payment data is easily stolen o Card based fraud resulted in losses amounted to $11.27 billion globally during 2012 o Another $6.47 billion was spent on card based fraud prevention during 2012 o Globally out of 691 data breach investigations during 2013: e-commerce accounted for 54% and PoS systems accounted for 33% of the breaches o Of these intrusions over 50% specifically targeted payment-card data o 67% more Americans were impacted by financial data breaches in 2012 than in 2010 o In 2012, the US accounted for 47.3% of the worldwide payment card fraud losses but generated only 23.5% of total volume of card based transactions o Identity theft is the No. 1 consumer complaint (per FTC)
  5. 5. Looking Deeper 5 Identity Theft / Fraud Statistics Average number of U.S. identity fraud victims annually 11,571,900 Percent of U.S. households that reported some type of identity fraud 7 % Average financial loss per identity theft incident $4,930 Total financial loss attributed to identity theft in 2013 $24,700,000,000 Total financial loss attributed to identity theft in 2012 $21,000,000,000 Total financial loss attributed to identity theft in 2010 $13,200,000,000 $0 $5 $10 $15 1 2 3 4 5 6 7 BILLIONS Annual Global Fraud Losses (Credit & Debit Cards) Other Statistics 14% of persons experienced identity theft at some point during their lives 10% of persons experienced identity theft spent more than a month dealing with an incident. 14% of identity theft victims suffered an out-of- pocket financial loss 85% involved the fraudulent use of existing account information Merchants and Issuers
  6. 6. The Rabbit Hole Continues 6 Company Year Number of Accounts Affected CardSystems Solutions 2005 40 million TJX Companies, Inc. 2006 94 million U.S. Veterans Affairs 2006 17.5 million Certegy 2007 8.5 million Fidelity National Information Services 2007 3.2 million Heartland Payment Systems 2008 134 million Bank of New York Mellon 2008 12.5 million Hannaford Bros. Supermarket Chain 2008 4.2 million (credit & debit) Sony 2011 12 million Global Payments 2012 1 million Signature PIN Difference Revenues $14.20 $6.70 $7.50 Interchange Fees $14.20 $6.50 $7.70 Account Fees N/A $0.20 N/A Costs $4.50 $1.10 $3.40 Network Fees $1.70 $0.50 $1.20 Processing Fees $0.80 $0.20 $0.60 Rewards Programs $1.20 $0.00 $1.20 Fraud $0.80 $0.40 $0.40 Profit Margin to Issuing Banks $9.70 $5.60 $4.10 Largest Credit Card Data Breaches Issuers’ Profit and Loss Analysis Per $1,000 in transactions
  7. 7. Opportunity? 7 Yes, find a better way to securely conduct transactions.
  8. 8. The Future 8 Imperial London College Timeline of Emerging Science and Technology 2015 – 2030 Physical payment cards become obsolete
  9. 9. Current Investment Activity 9 o The payments space is ripe for disruption as evident by investment activities and consumer demands for new payment methods. o Payments startups raised $1.2 billion in 2013 (A Five Year High!). o Deal growth in the payments marketplace has been heavily concentrated at the early stage (Seed/Series A). o Investment is coming from all areas, and not just the typical players (Google, Amazon, AT&T, Telefonica, American Express, Visa, Mastercard, First Data, etc.).

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