digital disruption: regulators, customers, consumers · digitas, connected commerce survey. 2015...
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Digital Disruption: Regulators, Customers, Consumers
Barriers to entry are being lowered in every industry
Public companies need to continue to succeed today while reinventing themselves for the future
New entrants looking left and right for opportunities
Everyone and everything is becoming connected
Growth of the sharing economy
Regulatory, security and privacy concerns
Pace of change and democratization of technology
Millennials and a new way of working
… significant change is happening today
The Digital Maze
Industries are being reinvented
Cybersecurity is a consequence of global hyper-connectivity
45 hosts – ARPANET 1973 8.4 billion things 2017
“the ability to protect or defend the use of cyberspace from cyber attacks.”
While devices and data are growing … disconnects create divergence
• 50 billion devices by 2023
• 90% of digital data created in the last 2 years
• 100 fold increase in data flows in the next 5-7 years
• Connected devices are not necessarily enabling
connected data.
• This can create divergence in our connected
world.
The world is also becoming less secure, more vulnerable to attacks
Explosion in complexity and connectivity…. …changing nature, scope & frequency of attacks
Att
acks
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Increasingly fragmented, complex digital ecosystem, explosion in ways to pay
3
1
2
ConnectivityPhysical World and Digital World converging / becoming interconnected
Device proliferationProliferation of internet-enabled devices exposes everyone
Complexity
The cost of ‘insecurity’ to society and the economy is massive
Source: World Economic Forum, McKinsey, Gartner, Nilson Report, European Central Bank, Lexis Nexis, BCG Global Payments Model.
Payment Security – A Hot Topic
A Seismic Shift: From In Store to Digital
SOURCE: WORLD PAY STUDY AND MASTERCARD ADVISORS ANALYSIS
45%
55%
Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q4 2021
CP CNPIn store Digital
What security means to different stakeholders
Account holder Bank Merchant
• Cybersecurity anxiety the new normal
• Users demanding data transparency
• Uncertain of the real financial risks
• consider security as one of the top criteria when evaluating financial services
• Attacks changing, increasing fear of
catastrophic attack
• Higher expectation on cyber risks. Boards / management prioritizing & investing in security
• Payments ecosystem security complex to
navigate
• Focused on abandonment, approval rates,
indirect & direct costs of fraud management
• SME merchants without tools or expertise, unable to keep pace
• Lack of urgency
• Significant financial & reputational risk
• Concerned about the integrity of financial system: increasing oversight, legislation, regulation, and criminalization of activities in several areas
• Increasingly demanding better cybersecurity practices, greater focus
• Some markets taking aggressive approach to regulation (e.g. strong authentication)Governments & Regulators
Source: Charles Kulig and Juan Sebastian Alvarez, "Ciberseguridad en America Latina", October, 2016
Avg.- 10 apps /per day are launched by Smartphone users4
Consumers expect Security +
Convenience
New Regulations
New Responsibilities
GROWTH 10X Higher than Card Present / POS3
5+ Devices 7
FRICTION:
75% carts abandoned @ checkout5
1/5 consumers – e-commerce =
2Trillion in retail e-spend 2
Shift to CNP fraud
↑30%YOY
Connected consumers
Mobile’s share of web traffic1
FRAUD:
40% use card less - post-fraud6
The rapidly changing payment landscape drives the need for
innovative solutions
New Standards
1. We are social, digital in 2017, global overview, 2017.
2. Emarketer. Worldwide retail ecommerce sales: the emarketer forecast. 2016.
3. Mastercard. Q1 - Q3 2016 data, across all card types. 2016.
4. App annie. Spotlight on consumer app usage. 2017.
5. Emarketer, “three-quarters of the world’s shopping carts are abandoned,” 2016.
6. Aite. Global consumer card fraud: where card fraud is coming from. 2016.
7. Digitas, connected commerce survey. 2015
Digital is the new NORM
Summary of the pain points
•Data: How to protect it & gain value of it
•Security: How to protect Customers & Consumers
•Standards: Interoperability. How to avoid isolated solutions.
•Consumer Experience: How to guarantee frictionless interaction
•Effective Sales: How to optimize e-commerce
The digital
society
requires a
leap of faith Its success depends on trust
The Value of Trust
Facebook, My Digital Life and the 2016 US Presidential Election
In March billions was wiped off the value of Facebook’s shares following reports that the data of millions of users were allegedly used to sway the US Presidential election. Facebook was accused of failing to properly inform users that their profile information may have been obtained and kept by Cambridge Analytica, a political consulting firm. Facebook admitted breaching its users’ trust, and in turn accused a Russian researcher of “an unacceptable violation of trust” after it was reported he had sold data harvested from a “My Digital Life” survey for commercial gain.
Mark Zuckerberg , Day 1 Senate hearing, opening comment
“Its clear now we didn’t do enough to prevent these tools being used for harm ….. We didn’t take a broad enough view of our responsibilities and that was a big mistake”
Regulation
“Super Apps”
AI & Machine Learning
PSD2, Open Banking, Identity Management,
Privacy, KYC, AML, Customer Consent
Consolidation of different features and
ubiquity of a social platform to rule them all
like a “Super App” i.e. WeChat
Proliferation of Connected Devices, Voice
Authentication, Delegation of Decision
Making to Machines
Trust is even more indispensable considering what lies ahead in the
future…
5
It all starts with setting the foundation right along with an innovative solution
set...
5
Inject Intelligence
Enhanced Data
Cross Vertical Identity Solutions
Industry ConvergenceCustomer Experience front & center
Fix ecosystem at industry level Innovate beyond payment space
Balance securityand experience
“Intelligent” friction only –peace of mind
Data sharing – “bridging the gap”
Harness DigitalData streams
“Connect the Dots” – no data siloes
Leverage any Interaction
Artificial Intelligence to inform decisions…
…while eliminating friction
Payment and technology industry standards
Build and improve on standards
…while maintaining interoperability
Connect Digital interactions to transactions
Leverage solutions to have consistent security and experience across channels
Data interaction between layers improves Intelligence and Decisioning
THENCOUNTERFEIT
LOST & STOLEN
NOWIDENTITY THEFTCYBER-FRAUD
ACCOUNT AUTHENTICATION
CONSUMER VERIFICATION
TRANSACTION MONITORING
THE EVOLUTION OF SECURITY
Magstripe CNP CVC2 EMV 3DS 2 EMV Chip Token
PIN Password Address SRC Biometrics
●●●●
Mainframe Reports & Rule Engines
PredictiveAI
DynamicRules
Integrated Lifecycle Mgmt
PIN on Glass
Spend per AccountWhitelist StatusBlacklist Status
Consumer Merchant Issuer
• Behavioral/passive biometric anomalies
NuDetect
Identity Check
Building Intelligence throughout the journey
Does this consumer interact with this device in a familiar way?
Has this consumer shopped at the merchant before?
Are the channel attributes valid?
Does the purchase fit the consumer’s historical transaction
behaviors?
How valuable is this consumer?
DEC
ISIO
NK
NO
WN
D
ATA
CO
LLA
BO
RA
TIV
E A
I
• EMV 3DS2.0 RBA Score• Merchant assurance of
PAN/device• Inverse Recommender
• BIN Profiling• Cross Border Profile• Simple Compare• Implication Score• Event/Venue Detection
• Cardholder Segmentation
PR
OD
UC
T
RBA Insights
RBA
Authorization IQSafety Net
Decision Intelligence
Spend Alerts & Controls
MasterCom
Key Technologies
Risk-based authentication (RBA)
• Implements a risk assessment tool together with 3D Secure to silently identify and authenticate low-risk transactions
• Challenge only suspicious transactions
• Delivers minimum impact, and an ideal experience, to the cardholder
Biometric Authentication
Dynamic password
• One-time password (OTP) delivered by
— Automated notice / notification (SMS)
— Mobile apps
“Silent”
authentication
(Up to 95%)
Step-up challenge
Decline authentication
Mastercard Digital Security Roadmap
Friction
Improve Consumer Experience
Increase Conversion
Approval Rates
Fraud
Optimize eCommerce
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