International Risk and Fraud Managementby

Moneybookers

AGENDA

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Quick introduction of Moneybookers

Risk and fraud in global online payments

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Most common fraud types

Moneybookers’ fraud protection system

? Q & A

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• Moneybookers Ltd. was founded in July 2001 and is based in London, United Kingdom

• Moneybookers USA, Inc. founded in October 2008 as part of the Moneybookers group, based in New York

• Moneybookers Ltd. as first regulated e-money issuer, regulated by the UK financial authorities (FSA)

• Owned by Investcorp, Chairman of Moneybookers’ Board: Dr. Thomas Middelhoff• 250 employees, supporting 12 languages• Most comprehensive Payment network for borderless money transfers worldwide

and in real-time• Over 7.5 Million account holders and 12,000 new account openings per day• More than 35,000 Merchants already use the Moneybookers solution• Moneybookers is an independent payment provider

*Moneybookers USA, Inc. is a payment service provider that enables US merchants to accept major credit and debit card payments from domestic and international customers. Moneybookers USA, Inc. is affiliated with Moneybookers Limited, a UK-based money services business regulated by the FSA. Moneybookers Limited provides a service whereby US merchants can accept alternative payment options from non-US residents. The proceeds of those alternative payments are settled into the merchant’s Moneybookers Limited account, from which they can be withdrawn into the merchant’s bank account. In order to obtain the services offered by each entity, the merchant must enter into a separate agreement with the appropriate entity.

Key facts about the Moneybookers Group*

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• Laser• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Solo• Cheque• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• directebanking• e-Wallet

• Carte Bleue• Cheque• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• E-Wallet

• Euro6000• 4B• Bank transfer• Amex• Visa• Visa Electron• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• directebanking• e-Wallet

• iDeal• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• directebanking• e-Wallet

• Sofortüberweisung•Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club•e-Wallet

• Poste Pay • Carta C• Bank transfer• Amex• Visa• Visa Electron• Mastercard• JCB• Diners Club• e-Wallet

• Sofortüberweisung• ELV• Giropay• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• EPS• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club•Sofortüberweisung• e Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• P24• BPH• Inteligo• Mbank• Multitransfer• Nordea• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club • e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Nordea• Solo• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• eBG • Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• Epay• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Nordea • Solo• Bank transfer• Amex• Visa• Mastercard• JCB•Diners Club• e-Wallet

• Bank transfer• Visa• Amex• Mastercard• JCB• Diners Club• E-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Poli• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Poli• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet• Bank transfer

• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Allpay• Local Instant Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank Wire• Amex• Visa• Mastercard• JCB • Diners Club• e-Wallet

• eNets• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

Moneybookers : Widest support of local payment options

• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

• Visa• Mastercard• Amex

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• Poli• Bank transfer• Amex• Visa• Mastercard• JCB• Diners Club• e-Wallet

AGENDA

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2

3

Quick introduction of Moneybookers

Risk and fraud in global online payments

4

Most common fraud types

Moneybookers’ fraud protection system

? Q & A

Worldwide eCommerce spending (US$bn)

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Global e-commerce revenues are still growing

Source: JP Morgan, Forrester, US Dept of commerce

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Online fraud losses however grow as well

Source: Cybersource 2009

Loss due to online fraud (US$ billion)

• Organized international internet crime organizations are on the rise • Underground international hackers organize in community & marketplaces• Prosecutors are chasing moving targets – pinning them down becomes more difficult• Medium Internet allows for great economies of scale – also in the criminal world!

2008 top IC3 complaint categories

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Auction fraud is the second most common complaint reason at the Internet Crime Complaint Center (IC3)

Source: IC3

Order rejection trends

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International orders are riskier and get rejected more often

Source: Cybersource 2009

• Merchants report 3.5 times higher order rejection rate for international orders than for domestic ones

Domestic and international fraud rate

• Fraud risk on international orders is over 3.5 times that of domestic orders

Domestic Orders International Orders

Perpetrators come mainly from the USA, United Kingdom and NigeriaOrigin of perpetrators: Worldwide

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66.1%

10.5%

7.5%

Source: 2008 Internet Crime Report – IC3

Global risk and fraud: Threats by stateOrigin of perpetrators: United States

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Source: 2008 Internet Crime Report – IC3

15.8%

9.5%

9.4%

6.4%

AGENDA

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Quick introduction of Moneybookers

Risk and fraud in global online payments

4

Most common fraud types

Moneybookers’ fraud protection system

? Q & A

We differentiate between criminal fraud and friendly fraud

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• Phishing pharming, vishing• SPAM - Fraudulent notification or

requests for information• Malicious software – spyware, virus

infection, key stroke capture, turn off protections, crimeware

• Website impersonations (spoofing) & redirection – collection of account & authentication information

• Man in the middle & session hijacking• Breach of credit card & merchant sites

for theft of customer and account information – followed by fraudulent transactions & card counterfeiting

• Identity theft/customer impersonation – establishment of new account & remote authentication challenges

“Friendly” Fraud (1st or 2nd party)Criminal Fraud (3rd party)

Order was valid, but buyers trigger chargeback•Disappointment with about actual product (-quality)•Financial hardship due to job loss•Unrelated anger/protest

Chargeback's+ Refunds+ Viable orders that got rejected in error+ Risk and fraud personnel+ Risk and fraud related tools (34% of merchants

spend 0.5% or more of their online revenues to manage online payment fraud)

+ Collection cost+ Reputational risk

LOSS OF REVENUE AND INCOME

Risk and fraud related cost can be substantial

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AGENDA

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Quick introduction of Moneybookers

Risk and fraud in global online payments

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Most common fraud types

Moneybookers’ fraud protection system

? Q & A

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The pre-transaction fraud prevention process features three different steps

Automated Screening

Manual Screening

Accept payment

Refuse payment1 2 3

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A localized automated screening process is crucial

Automated ScreeningValidation Measures•Address verification services•Name and DOB verification (MB uses local premium agencies -> maximum relevancy and accuracy)•Credit history check etc.

Company specific records•Customer order history•Negative lists (Cards, known fraud etc.)•Fraud scoring (Moneybookers uses a risk models with more than 400 configurable rules)

Industry specific records•Shared blacklists (e.g. OFAC, Match, PEP etc.)•Multi-merchant fraud models

Tracking methods•IP geo-location tracking•Device fingerprinting (PC, MAC, Linux, iPhone etc)

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Manual screening requires highly trained personnel and a close relationship with local and international law enforcement agencies

Manual Screening

Personal investigation•Contact card issuer and customers for verification•Co-operation with national and international law enforcement agencies e.g. FBI, FTC, Interpol, SOCA etc.•Constant identification and update of new fraud patterns

Accept payment

Refuse payment

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• Moneybookers’ chargeback team works hard on behalf of our partners to avoid the execution of chargebacks

• Our transparent and scalable re-presentment process is the result of 8 years experience

Contesting and re-presenting chargebacks is part of the process

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Buyer initiates chargeback via

bank

Bank requests CHB from

Moneybookers

Moneybookers informs

merchant

Merchant provides “proof

of delivery”

Moneybookers informs

processor

Chargeback is not executed

Negotiation with bank

Successful: Merchant keeps

Money

Not successful: CHB is

executed

AGENDA

1

2

3

Quick introduction of Moneybookers

Risk and fraud in global online payments

4

Most common fraud types

Moneybookers’ fraud protection system

? Q & A

Markus KroegerManaging Director Moneybookers USA, Inc.

Mobile: +1 (347) 967 9222

Markus.Kroeger@moneybookers.com

www.moneybookers.com

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