Experts from Featurespace, TSYS a Global Payments Company, Mastercard, and Worldpay from FIS share how they designed their award-winning solutions.
In part one of this blog series, our experts shared their initial insights from Money20/20 USA.
- Dave Excell, Founder at Featurespace
- Dondi Black, SVP, Chief Product Officer at TSYS
- Liam Cooney, Vice President at Mastercard
- Mina Khattak, Director, Crypto & Emerging Business, Worldpay from FIS
In part two, these payments powerhouses explain how their issuing, acquiring, and payment network businesses developed and launched fraud and AML products that competitively differentiate them in a crowded market.
Customer Centric Value Propositions
Excell: “What I’ve learned through the journey of Featurespace is it is one thing to have technology, but there’s the next piece around about packaging it. How do you prioritise it? All organisations are focused on generating revenue, so how do you see it as a ramping new generator within your organisation?”
Cooney: “In my experience at Mastercard and just in general in terms of designing products, I think what’s really important is to always be client centric and market driven, really understand the pain point that you’re trying to solve before you go out and start trying to design a product around. What that really helps you do is inherently align your pain point that you’re trying to solve in the customer with your value proposition. It’s really important in the fraud and AML space because our value proposition is preventing fraud, preventing money laundering. These are obviously going to help you improve your brand reputation, your customer experience and protect your P&L. Those are the types of benefits we’re trying to drive by these solutions.
At Mastercard, one of the things that we’ve learned over time is to avoid commoditized solutions and products, avoid competitive spaces, and really focus on where we’re differentiated and how we can add incremental value to the ecosystem and for us. That’s rooted in the fact that we operate a global card network, and real-time payment systems in over ten markets around the world. We look at how can we leverage the view of accounts and billions of transactions to garner insights that are signals that indicate anomalous behaviour indicative of fraud or money laundering. What we try to do in product design and development is focused around being that connected intelligence that helps create security and trust across the payments ecosystem, and supplements what the FIs can do on their own. Our experience has been pretty good at being able to bring those products to market. And obviously the benefits that we capture for our customers end up helping drive our business forward.”
Packaging and Pricing
Khattak: “We commercialise our product on a per transaction basis and we charge on a tiered volume pricing model. But when you take a step back, it’s actually beneficial for an acquirer to have low fraud rates across their merchants. If our fraud rates are low, then the underlying issuing bank tends to approve more and more transactions, and so the merchant experiences a lower rate of network declines, and so this creates this positive flywheel effect. Where fraud is lower amongst merchants they experience more approvals, and the underlying customer has a better experience.
In the UK and Europe, if we can keep our fraud rate for the underlying merchant base lower than a certain threshold, we’re able to offer an exemption product whereby the merchant can send a transaction to the issuing bank and require that transaction not to be authenticated, whereas without that product the bank would have to authenticate it. If the merchant is flagged as high-risk then the underlying cardholder would have to validate the fact that it is indeed them that’s trying to make a purchase for a good or a service, and so that creates more friction in the customer experience.”
“For an acquirer, you know it’s not our bread and butter to offer fraud services, and we do commercialize it, but taking a step back into our role; mitigating, detecting and reducing fraud in the ecosystem just creates a healthier ecosystem for us, where there’s low fraud and merchants have higher approval rates, and customers don’t need to authenticate their identity through 3D Secure (3DS).”
Excell: “Helping those merchants stay in business is key to keep them continuing to transact with you as well.”
Foresight in Fraud Prevention
Black: “The TSYS Foresight solution, which again we’ve embedded, this is a solution that we developed. It uses our proprietary information, all the intelligence and deep learning that we have in terms of our global ecosystem. We partnered with Featurespace to deliver Foresight and it’s incredible because it’s a lot of the similar value propositions to merchants.
When we talk about removing friction, we’re really talking about creating organic loyalty because the reality is if you’re an issuer, at the end of the day you are constantly balancing that line between, ‘I want to have this incredible experience’, but also, ‘I have this responsibility, this obligation to manage the risk for my customers or cardholders’.
We have a great example as we looked at how Foresight was rolled out and was able to be adapted and leveraged during the pandemic. You had entire segments of the population transacting digitally in ways that they never had before, and under a traditional machine learning model, it would have been very simple, very easy for that to look like an anomaly, for that to look unlike unusual behaviour. And typically you experience higher declines until a model had learned. The beauty of Foresight is that that real time, Adaptive Behavioural Analytics and the application of that with our data and insights. It’s learning in real time and it’s really focusing on the positive behaviours.
For example, we have an issuer who looked at how Foresight had been adapted throughout the pandemic. They observed (before they rolled in an embedded Foresight score into their offering), that for every activity where there was one real fraud incident, they also stopped 10 good transactions. And it got even worse when they looked at Card Not Present (CNP), for every event of true fraud that they captured, they stopped 23 that were good.
For issuers who have adopted Foresight real time, Adaptive Behavioural Analytics into their wallets, they’re seeing this layered benefit of not only reducing their false positives, but they’re also getting the benefit of lower fraud losses as a whole. In terms of revenue, in terms of the balance sheet, it’s tangible within the transaction volumes and revenue increasing. And then there’s also that intangible benefit of actively taking friction out and managing this great experience for clients.”