Digital Disruption: Regulators, Customers, Consumers

Transcription

1 Digital Disruption: Regulators, Customers, Consumers

2 The Digital Maze significant change is happening today Industries are being reinvented Growth of the sharing economy Barriers to entry are being lowered in every industry Pace of change and democratization of technology New entrants looking left and right for opportunities Regulatory, security and privacy concerns Public companies need to continue to succeed today while reinventing themselves for the future Everyone and everything is becoming connected Millennials and a new way of working

3 Cybersecurity is a consequence of global hyper-connectivity the ability to protect or defend the use of cyberspace from cyber attacks. 45 hosts ARPANET billion things 2017

4 While devices and data are growing disconnects create divergence 50 billion devices by % 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.

5 Attacks more global, conducted remotely, contagion more rapid The world is also becoming less secure, more vulnerable to attacks Explosion in complexity and connectivity. changing nature, scope & frequency of attacks 1 2 Connectivity Physical World and Digital World converging / becoming interconnected Device proliferation Proliferation of internet-enabled devices exposes everyone 3 Complexity Increasingly fragmented, complex digital ecosystem, explosion in ways to pay

6 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.

7 Payment Security A Hot Topic

8 A Seismic Shift: From In Store to Digital In store CP DigitalCNP 55% 45% Q Q Q Q Q SOURCE: WORLD PAY STUDY AND MASTERCARD ADVISORS ANALYSIS

9 What security means to different stakeholders Governments & Regulators 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) 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 Source: Charles Kulig and Juan Sebastian Alvarez, "Ciberseguridad en America Latina", October, 2016

10 The rapidly changing payment landscape drives the need for innovative solutions Digital is the new NORM GROWTH 30% YOY Mobile s share of web traffic 1 New Standards New Regulations Shift to CNP fraud 10X Higher than Card Present / POS 3 New Responsibilities Consumers expect Security + Convenience FRICTION: 75% carts checkout 5 FRAUD: 40% use card less - postfraud 6 1/5 consumers e-commerce = 2Trillion in retail e-spend 2 1. We are social, digital in 2017, global overview, Emarketer. Worldwide retail ecommerce sales: the emarketer forecast Mastercard. Q1 - Q data, across all card types App annie. Spotlight on consumer app usage Emarketer, three-quarters of the world s shopping carts are abandoned, Aite. Global consumer card fraud: where card fraud is coming from Digitas, connected commerce survey Connected consumers 5+ Devices 7 Avg.- 10 apps /per day are launched by Smartphone users 4

11 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

12 The digital society requires a leap of faith Its success depends on trust

13 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

14 Trust is even more indispensable considering what lies ahead in the future Regulation PSD2, Open Banking, Identity Management, Privacy, KYC, AML, Customer Consent Super Apps Consolidation of different features and ubiquity of a social platform to rule them all like a Super App i.e. WeChat AI & Machine Learning Proliferation of Connected Devices, Voice Authentication, Delegation of Decision Making to Machines

15 It all starts with setting the foundation right along with an innovative solution set... Fix ecosystem at industry level Innovate beyond payment space Customer Experience front & center Enhanced Data Inject Intelligence Industry Convergence Cross Vertical Identity Solutions Balance security and experience Data sharing bridging the gap Leverage any Interaction Payment and technology industry standards Connect Digital interactions to transactions Intelligent friction only peace of mind Harness Digital Data streams Connect the Dots no data siloes Artificial Intelligence to inform decisions while eliminating friction Build and improve on standards while maintaining interoperability Leverage solutions to have consistent security and experience across channels 5 5

16 Data interaction between layers improves Intelligence and Decisioning THEN COUNTERFEIT LOST & STOLEN THE EVOLUTION OF SECURITY NOW IDENTITY THEFT CYBER-FRAUD ACCOUNT AUTHENTICATION Magstripe CNP CVC2 EMV 3DS 2 EMV Chip Token CONSUMER VERIFICATION PIN Password Address SRC PIN on Glass Biometrics Mainframe Reports & Rule Engines TRANSACTION MONITORING Predictive AI Dynamic Rules Integrated Lifecycle Mgmt

17 KNOWN DATA COLLABORATIVE AI DECISION PRODUCT Building Intelligence throughout the journey Consumer Merchant Issuer 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? Spend per Account Whitelist Status Blacklist Status Behavioral/passive biometric anomalies 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 NuDetect Identity Check RBA Insights RBA Safety Net Decision Intelligence Spend Alerts & Controls MasterCom Authorization IQ

18 Key Technologies Risk-based authentication (RBA) Implements a risk assessment tool together with 3D Secure to silently identify and authenticate low-risk transactions Silent authentication (Up to 95%) Step-up challenge Challenge only suspicious transactions Delivers minimum impact, and an ideal experience, to the cardholder Decline authentication Biometric Authentication Dynamic password One-time password (OTP) delivered by Automated notice / notification (SMS) Mobile apps

19 Mastercard Digital Security Roadmap Improve Consumer Experience Increase Conversion Optimize ecommerce Friction Approval Rates Fraud

20 Thanks

21 Q&A