Leverage Gartner’s Insight for Assessing the Total Cost of Fraud in Your Payment Fraud Prevention Strategy

Leverage Gartner’s Insight
Scott Olson - VP of Product Marketing,
Global Fraud & Identity Solutions
Assessing the Total Cost of Fraud
in Your Payment Fraud Prevention
Strategy – A Global Perspective

© 2020 TransUnion LLC All Rights Reserved | 2
• Reduce payment fraud by defining a forward-thinking fraud
detection strategy
• Optimize your fraud investments by developing a “total cost
of fraud” model, and align it with organizational goals to
determine tolerable fraud rates
• Address fraud head-on by creating a cross-functional team
that identifies the challenges and requirements faced by all
stakeholders across your organization
Gartner, How to Create a Payment Fraud Detection Strategy at the Organizational Level, Akif Khan, 21
January 2020
Download the report today
How to Create a Payment Fraud Detection Strategy
at the Organizational Level

In this webinar, we discuss how to:
Work with a cross-functional team that can identify the challenges and requirements faced
by all stakeholders across your organization
Optimize your investments for fraud detection and prevention that drive down your total
cost of fraud
Optimize your fraud investments by developing a “total cost of fraud” model, and align it
with organizational goals to determine tolerable fraud rates for your business
Implement solutions that address fraud challenges throughout the consumer journey
1
2
3
4

TransUnion's global fraud and
identity solutions rely on rich,
robust and diverse data sets to
make trust possible between
businesses and consumers.

We unite personal and digital data into a more
precise and accurate data identity
Credit Non-Credit Digital
650 million
consumer credit history records
33
countries
7 billion
devices seen by network
30+
petabytes of data
90,000
data sources
54 billion
total transactions protected
4.8 billion
monthly data updates
1 billion
worldwide consumer records
83 million
fraud reports placed by network
Connecting credit, non-credit and digital data to provide superior consumer insights.
Stewarded with care for consumer privacy, security and compliance.

Gartner Total Cost of Fraud Model
Source: Gartner, Inc G00450210
Fraud
Losses
Tools and Head
Count
Customer Lifetime
Value Impact
Funds stolen from accounts
Stolen goods and services
Chargeback costs
Costs of detecting and mitigating fraud
Internal systems and vendor tools
Human resources
Customers directly impacted by fraud
who shop or bank elsewhere
Genuine customers who experienced
friction or declined transactions due to
overly strict fraud policies
False positives
Fraud Losses Tools and Head Count Customer Lifetime Value Impact Total Cost of Fraud Model
+ + =

© 2020 TransUnion LLC All Rights Reserved | 7Source: Gartner, Inc G00450210
Relationship Between Fraud Rate and
Total Cost of Fraud
Total Cost
of Fraud
=
Fraud Losses
+
Tools and
Head Count
+
Customer Lifetime
Value Impact
(CLVI)
High
Low
HighLow Fraud Rate
OptimalZone
TCOF increases
due to false
positives and
cost of tools
TCOF increases
due to fraud
losses and CLVI

Total Cost of Fraud at Account
Access, Onboarding, and Payments

Account
Login
Manage
Account
High Risk
Transaction
Contact
Center
Transactions
or Payment
Onboarding
Consider total cost of fraud across
the customer lifecycle

TransUnion’s account access solutions can unlock value
across a number of revenue, cost, and margin drivers
Improved customer experience
Revenue per customer
Improved login experience
Reduce friction
Better target promotions
Loyalty & cross-selling
Higher throughput
Fraud mitigation
Operating efficiencies
Contact center agent utilization
Expedite low-risk requests
Revenue
Profit Margin
Cost
ATO and fraud loss reduction
Reduce unnecessary step-ups
Account access issues in call center
Manual review reduction
Decrease account resets
Optimized point solutions & vendor mgmt.

Password resets through the call center cause
customer friction and increases expenses for
financial institutions
$8
Cost for each manual
password reset
35%
Of calls to a financial
institution’s call center are
for password resets
10 minutes
For a CSR to manually
reset a password

• Previous authentication solution caused customer friction
and too many false positives
• Previous solution did not provide enough data for the fraud
team to analyze when investigating customer complaints
• Adding device-based reputation at login reduced volume
of password reset requests to the contact center
• Decreased customer complaints about login and improved
overall customer experience account takeover attacks are
no longer an issue
I call it a golden age of fraud. As far as account takeover is concerned, I don’t
think we’ve been in this good of a position for a year and a half.”
- Business Data Analyst III, Fraud Department
Major U.S. Telecom Provider
Improves Customers’
Login Experience
Challenge
Results

TransUnion’s onboarding solutions can unlock value
across a number of revenue, cost and margin drivers
New customer conversions
Lower drop-offs
Higher pass rates
Balance transfer
Loyalty & cross-selling
Higher throughput
Fraud mitigation
Agent & kiosk utilization
Digital optimization
Revenue
Profit Margin
Cost
Prevent identity fraud
Identity verification
3rd party document collection
Manual review
Improved C/X & higher digital utilization
X
Data entry

Shut Down Application Fraud
FinTech
Challenge
Results
• 9,500 fraudulent debit card applications flooded
Cashplus in just a few days. Applicants’ personal data was
passing KYC inspection, and attacking scripts varied IP
addresses through VPNs and countries.
• Cashplus saved £19,000 in KYC service fees and prevented
fraudulent accounts from opening lines of credit worth £2,000
each. The Fintech company also alerted victims whose
personal information was used in the applications, potentially
preventing millions of pounds in identity theft.
• Adding device-based intelligence revealed that all of the
applications were coming from the same device type.
This insight led to a change in Cashplus’ application
process, which stopped the attacks permanently.
Solution

Potential for account access solution to drive
$277 - $327MM annual profit for Top 10 Canadian Bank
Improved
conversions
Operating
efficiencies
Fraud loss
reduction
940,000 annual digital applications (42% abandonment)
394,800 abandoned annual digital applications
35% increase in conversion from streamlined reviews
138,180 increased conversions
$912 average annual revenue per account
X
=
X
4.7MM unique user accounts
1% account takeover (ATO) fraud rate
470,000 potential instances of ATO
$394 average ATO fraud loss per account
$185MM potential fraud loss reduction
X
=
X
=
~$5-10 per call for account access reset
~$1.36 per OTP step-up
1% of 82MM customer logins per month
$5.2 – 9.3MM in cost savings per month
+
=
X
Illustrative Value Creation
Revenue Profit
$126MM $30MM*
$62.5 -112MM
$185MM
*Assumes a 24% profit margin

TransUnion can unlock value across a number of revenue,
cost and margin drivers at payments and transactions
Increased conversions
Abandonment decrease
False decline reduction
Better target promotions
Upsell and cross-sell opportunities
Higher throughput
Fraud mitigation
Contact center agent utilization
Expedite low-risk requests
Revenue
Profit Margin
Cost
Decrease chargebacks
Manual review reduction
Clearly Expose Risk
Email and Phone Verification
Optimize checkout experience
X

The ability to find any product at the best price, regardless
of geography
Making both the shopping and checkout experience easy
for consumers
Innovation in retail needs to focus on
three critical consumer expectations
Source: Baymard Institute, 41 Cart Abandonment Rate Statistics
of Online Shopping
Carts are Abandoned
69.8% Transparency
Convenience
Consumers have more choices than ever, what value do
you provide to differentiate yourself
Value

UK Mobile Retailer stops
fraud rings using
device-based intelligence
Saving
£17,000
in One Month
Challenge
• Fraudsters were taking advantage of the retailers lack of upfront
payment requirement for mobile devices, such as iPhones
• Experienced promotion abuse and synthetic identity fraud by
sophisticated fraud rings on both offline and online channels
• Tracked real IP location, common ISP, linked accounts and
devices to uncover and shut down a major fraud ring
• Reduced fraud and easily identified good customers for all
channels across the business
• Saved the retailer £17,000 in one month
Balancing the risk of fraud against our product offerings is something we’re
always considering. TransUnion has massively helped us reduce the amount
of fraud we see from impersonation and synthetic identity theft.
⎻ Fraud Systems and Analysis Manager
Results

Optimizing Fraud With
a Cross-Functional Team

© 2020 TransUnion LLC All Rights Reserved | 21Source: Gartner, Inc G00450210
Leadership is Required to Align
Cross-Functional Stakeholders
IAM
Finance
Fraud Analysts and
Data Scientists
Customer
Experience
Infrastructure and
Cybersecurity
Growth and
Marketing
Customer
Support
Legal and
Compliance
Fraud Leader

Illustrative Stakeholder Challenges & Requirements
Stakeholder Group Challenges Requirements
Fraud Analysts
and
Data Scientists
• Lack of reporting and BI
• Disparate fraud management tools
• Lack of transparency from machine learning
models for fraud detection
• Consolidated data warehouse and reporting capabilities
• Centralized decision platform to ingest outputs from
disparate tools and orchestrate responses
• Explainability in machine learning models
Finance • Overt cost of fraud losses
• Cost of fraud management tools
• Operational costs of fraud management
• Deeper understanding of overall fraud management costs
— including human resources, false positives,
abandonment
• ROI considerations in vendor selection
• Impact on overall profitability from different approaches to
fraud detection
Growth and
Marketing
• Launches of new products and services
• Geographic expansion
• Brand reputation
• Flexible and extensible fraud detection strategy that can
easily adapt to evolving services and global growth
• Focus on CX and resolving fraud-related complaints
Legal and
Compliance
• Multiple fraud tools w/ varying use of user data
• Compliance — GDPR, PSD2, CCPA, LGPD
and others in addition to KYC/AML
• Involvement in vendor selection based on privacy
considerations and impact on customer T&Cs
• Meeting and exceeding regulatory requirements
Source: Gartner, Inc G00450210

Implement solutions that optimize
your Total Cost of Fraud throughout
the consumer journey

Consumers want a
consistent, friction-right
online experience.
Data breaches exposed
millions of customer account
credentials. Account access is
a conduit to fraud.
Customer Experience
PRODUCT UX/CX
Reducing Risk
FRAUD / INFOSEC
Competing demands exist between providing the
best customer experience and reducing fraud risks

IDVision with iovation
Prevent fraud
• Assess fraud risk of online
transactions or identities
• Identify potentially fraudulent
actions or behaviors
• Investigate suspicious
behavior and inconsistent
data elements
Authenticate consumers
• Validate the claimed identity is
who they say they are
• Utilize authentication at
specific touchpoints
• Employ methods that match
the risk level
Establish identity
• Verify consumer identity
against a broad set of global
personal and digital data
• Utilize when an account is
originated or provisioned
• Form a basis for greater
identity confidence

Leverage Gartner’s Insight for Assessing the Total Cost of Fraud in Your Payment Fraud Prevention Strategy

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