Innovators the First Data
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
VOLUME 3 | 2018
T H E C E N T E R O F C O M M E R C E
the
innovators
INFORMATION 2 CASE STUDY:
QSR Company
COVER
& ANALYTICS
QSR customer upgrades their fraud
detection to enable a new mobile RESULTS:
application launch
14
PROBLEM:
When this customer launched a new version
80%
SOLUTIONS
of their mobile app, they saw fraud spikes that decrease
called for new tools. in fraud.
SOLUTION:
The Advanced offering of Fraud Detect was
implemented with a machine learning QSR-
industry model, a rules engine, and Case
Manager. First Data also implemented a capability $200K
The innovators
allowing this customer to test the model at saved after fees.
DATA AT THE SPEED OF COMMERCE
different scoring thresholds.
Building the new retail frontier.
19
bonus: SPECIAL section
Unlocking Merchant Innovation
Using machine learning to combat fraud.
Shopping is about to get interesting.
8 Mobility Hits Its Groove 44 Fintech & Bank Fusion
10 Outsmarting Fraudsters 47 The Power of Partnerships
12 Rewards Revolution 48 Payments Everywhere
35 The New Big Data 50 Gen-Z Rising
39 Food for Thought 54 Financial Literacy in the Gig Economy
40 Tackling the Pay Gap
download the digital magazine At: FirstData.com/Connected
Not sure about you, but our dogs are always finding
innovative new ways to get our attention.
Through this issue of Connected, we take a look at how partnerships, changing
consumer landscapes, and fraud breakthroughs are fetching innovative ideas across
industries – Labonardo da Vinci and Thomas Pugison would be so pleased.
As you’re reading, keep an eye out for the pooches and pups hidden throughout the
pages and count them up. Then, send your total to CONNECTED@firstdata.com by
How well do First Data® Analytics Solutions can
help you make data-driven decisions
June 30, 2018. We’ll gather all the correct answers and randomly select
five winners to receive a $200 Gyft® digital gift card.
you know your
based on customer spending habits Sniff them all out!
to help you retain loyal customers Say hello to Melody, the best friend of
CONNECTED Managing Editor, Lexi Koutrelakos.
and attract new business.
customers? To learn more, visit: FirstData.com/spendtrend
FirstData.com/Connected 3
In the 1960s, banks had a cool idea. They wanted to make it easy for their
customers to shop and pay at many different retailers using a single card
Executive Editor from a single line of credit. No more hassling with different charge cards from
Mia Shernoff multiple retailers, or having to deal with cash or checks. From this important
consumer demand birthed the modern network credit card industry.
Editor-in-Chief
Euphemia Erikson Having an idea is just the first step in turning an unmet need into a valuable
Executive Design Director Executive Creative Director Managing Editor innovation. But, translating the idea into a workable, scalable and secure
Jamie Kasman Christopher Sanna Lexi Koutrelakos solution is where true innovation happens.
Senior Art Director Deputy Editor Associate Editor First Data® has quietly delivered such innovative breakthroughs over and over again.
Greg Gatlin Brad Rhoads Keitha Maciel
In the beginning, First Data built the infrastructure for interoperable card
Graphic Designers & Illustrators
Jason Abbott, Brahndi Asadi, Jeff Bell, Greg Hildebrandt, payments that we still use today. That infrastructure allows financial
Joseph Sigillo, Mark Watkinson institutions to issue and manage cards from any brand safely, securely and
with great efficiency. First Data also built the capability for consumers to
Copy Editor/Proofreader use those same cards to shop nearly anywhere, anytime, in any currency,
Angela Jackson using any network. Today, these systems host more than 1 billion cards and
Production Manager
6 million merchants around the world. Every second of every day, consumers “It takes a diverse
Macrae Cain rely upon First Data to conduct commerce, completing more than $2.5 trillion
in transaction volume annually. First Data built a new way to get something
Senior Copy Editors important done – one of the most impactful, enduring and transformative network of
Amy Chan, Francine Dalton, Jameson Cox, Wesley Fowler, Chris Howland, Krista Lee, innovations of the 20th Century.
Julie Lyons, Jaime Mercer, Jean Park, Melanie Skotarski, Chantelle Uischner, Julia Wolfe
Contributing Writers
Today, the pace has accelerated, demanding more from all involved. Darwinian forward-thinking
survival can’t be assured, because the ecosystem is no longer static. Customers
Anita J. Finkelstein, Lisa Schoolcraft, Robyn Ware
are disrupting the core ecosystem by making new, moment-to-moment choices.
Contributing Photographer In response, financial institutions and businesses must hyper-accelerate their leaders working
Christopher Amaral own innovation to meet these rapidly evolving demands.
Special Thanks
Innovation is all about execution. No one company, no matter how big or together across
Chris Abele, Alexander Avramenko, John Blevin, Michael Borda, Dori Bright, Kelly Coughlin, agile, can innovate alone. Every innovator chooses their partners wisely.
Brooke Charron, Chris Crawford, Joseph Delsoin, Christopher Demetriades, Michael Douglas, It takes a diverse network of forward-thinking leaders working together
Ian Foley, Greyson Ford, Julie Kontes, Craig McGuire, Sean McNeece, Janeen Millsaps, across companies, industries and regions to turn an idea into a value-creating companies,
Kate Nicola, Seth Perlman, Greg Piel, John Staple, Oliver St. George, Rick Stone innovation success.
Connect with First Data In this issue of Connected magazine we look at The Innovators – those moving industries and
beyond ideas to execution, using partnerships, the speed of technology and a
little spark of intuition to capture, create and define our tomorrows.
FirstData.com First Data Corporation @FirstData
regions to turn
First Data is the right partner for these times. We stand at the intersection
where financial institutions, businesses, merchants and consumers all connect
an idea into a
Connected magazine is a publication of the
First Data Corporation, 5565 Glenridge Connector NE, Atlanta, GA 30342. to conduct commerce. Our role in the ecosystem is vital and our perspective
and expertise allow us to help turn good ideas into powerful innovations.
Reproduction of any part of the publication is strictly prohibited without prior consent from the publisher. ©2018 First Data Corporation. All Rights
Reserved. The First Data® name, logo and related trademarks and service marks are owned by First Data Corporation and are registered or used in
the U.S. and many foreign countries. The Clover® name and logo are trademarks owned by Clover Network, Inc., a wholly owned subsidiary of First
Data Corporation, and aree registered or used in the U.S. and many foreign countries. All trademarks, service marks and trade names referenced
Very simply: First Data executes. value-creating
in this material are the property of their respective owners. See Sources for additional trademark information. How can we help you succeed?
innovation success.”
Printed in Atlanta, Georgia U.S.A.
Barry McCarthy
First Data, EVP, Head of Network & Security Solutions
Connected is produced in cooperation with Atomic Wash, a branding and marketing agency. AtomicWash.com
4 First Data | Connected | Volume 3 FirstData.com/Connected 5
Peter O’Halloran
Just as “no man is an island,” the success of a company does not stand on a single person. First Data, VP, International eCommerce
This is especially true at First Data®, where every employee is considered an “Owner-Associate.” This not only gives them a Peter is responsible for First Data’s eCommerce strategy and the
commercialization of the eCommerce value proposition throughout
stake in the company, but also makes everyone accountable for company growth. Thankfully, the collective expertise of our
EMEA, APAC & LATAM. This includes partnership formations, top-
team supports our ability to innovate and deliver solutions that help drive the new world of connected commerce. line eCommerce revenue growth through existing First Data sales
channels, and increasing the addressable market through product
innovation and client acquisition.
Seth Perlman
Chris Abele Barry McCarthy First Data, VP, Global Head of Strategy
First Data, Director, Corporate Strategy First Data, EVP, Global Head of Network & Security Solutions Seth has been with First Data since 2014, and from his home base in
Corporate Strategy Director helping to chart new paths of growth A 13-year veteran of First Data, Barry has run most of the firm’s Silicon Valley, he has his finger on the pulse of the rapidly evolving
for First Data. Always interested in digging into the latest in businesses and is known for his ability to deliver strong revenue world of fintech. He and his team develop growth strategies for all
payment technology. and profit growth through innovation. He served previously as an of the company’s business lines globally. Seth frequently presents
executive at Procter & Gamble, Wells Fargo, Verisign and Silicon First Data’s insights about commerce innovation and financial
Rishi Chhabra Valley micro-payments start-up, MagnaCash. He currently oversees services trends to clients and industry partners around the world.
First Data, VP, Information & Analytics Solutions Network and Security Solutions (NSS), one of the firm’s three
Rishi joined First Data in 2013 and is responsible for building, publicly reported segments. NSS hosts many of the firm’s value- David Ridenour
commercializing & launching the next era of Big-Data and data- added solutions that help clients protect, grow, and operate their First Data, Director, Universal Commerce Solution Consulting
driven solutions powering multi-channel commerce and customer business more efficiently. NSS is a $1.5 billion revenue portfolio David serves as Head of First Data’s Universal Commerce Solutions
Secure
engagement for Merchants, Retailers, Financial Institutions and of solutions including: Gyft ® and Gift Solutions, TeleCheck ®, group, which is responsible for enabling our clients’ digital
third-party institutions. He has spent over 12 years in the financial ConnectPay ® (ACH), TRS Collections, RAPID ®, FRIS® strategies. David has been with First Data for 10 years and is a
institutions and payments industry building analytical solutions and Fraud Detect ® fraud solutions, Money Network®, seasoned payments veteran; having worked in a variety of roles
Commerce
to optimize the use of payments data and enable cross-channel STAR Network ®, TransArmour ®, debit processing, Apiture ® from fraud, point of sale, issuing services, loyalty and analytics.
commerce at multiple pioneering and leading companies. online and mobile banking, tokenization for mobile payments, Prior to First Data, David was a top-performing sales executive in
and government solutions. the marketing automation space with Oracle.
Glenn Fodor
First Data, SVP, Head of Information & Analytics Solutions
Glenn Fodor joined First Data in August of 2014 as Senior Vice
President and is head of Information and Analytics Solutions (IAS).
Sandy Mollett
First Data, SVP, Head of Network & Security Solutions
Operations & Controls
Dania Ruiz-Paramo
First Data, Senior Account Executive
Dania is currently an Account Executive within the National
for a
Connected
The reports and insights that IAS compiles are frequently referenced Sandy has over 30 years of experience in IT, Operations, Product Retail Vertical, overseeing 12 strategic accounts. Having spent
in the press, including the Associated Press, CNBC, Wall Street Journal, Development, Project/Program Management, Strategy and Business 20 years with First Data, Dania has supported hundreds of
Reuters, Bloomberg TV, and more. Previously, Glenn was a Partner Development. She has driven some of First Data’s largest strategic national merchants in both technical and relationship roles.
World
and Senior Equity Research Analyst at Autonomous Research, a initiatives and is named on over 25 issued patents. Sandy served
boutique research firm focusing on the financial and payment on the Executive Planning Group for FinTech Atlanta. She is also Mark Schulze
technology industries and has held equity analyst roles at Morgan President of the AGLCC (Atlanta’s LGBT Chamber of Commerce). First Data, VP, Business Development & Co-founder of Clover
Stanley, UBS and JP Morgan. Sandy was honored by the Georgia Diversity Council as one of 2017’s Former product guy, now a Business Development leader for
“Most Powerful & Influential Women”. Mobile, Web, Android, and iOS.
Scott Mackay Guiding your business into the future is
First Data, VP, Digital Commerce Solutions Dom Morea Nandan Sheth no easy task. It makes sense to partner
Scott’s focus is on directing the development of digital commerce First Data, SVP, Head of Gift Solutions First Data, SVP, Global Debit Solutions
solut ions, target ing innovat ions that meld the tradit ional Currently, Dom oversees First Data’s prepaid Closed Loop Nandan is a seasoned innovator with over 20 years of FinTech
with an experienced leader that knows
components of financial services and payments with emerging product suite, Gift Solutions, spanning processing, card program experience within large corporation and high-growth, venture next-generation technology inside
mobile, marketing, and web-enabled technologies. He also manages management and robust digital services. He was formerly capital-backed companies. He is the founder of three disruptive
the commercialization and sales processes necessary to bring these First Data’s SVP, Business Development, where he was responsible
and out.
FinTech ventures: CollectionsX, Harbor Payments, and Acculynk.
new solutions to market. for the creation and growth of enterprise-level transformational His expertise includes cross-border commerce, online/mobile
mobile commerce and loyalty solutions initiatives and he headed commerce, debit/alternative payments, B2B receivables/payables, Our innovative solutions enable
Anthony Marino First Data’s Innovation Lab & User Experience team. and online bill pay.
First Data, EVP, Global Head of Human Resources commerce to be conducted more
Anthony S. Marino is the global Head of Human Resources for Nigel Motyer Mia Shernoff securely and intelligently across the
First Data. He is a thought leader in the human capital management First Data, SVP, Head EMEA Acquiring First Data, EVP, Global Head of Marketing
space having served in senior roles with some of the world’s largest Nigel has a wealth of experience in the card payment business,
globe, helping you deliver better
Strategic marketing, product management, digital account
corporations. He is a frequent lecturer and has written several having held a number of senior roles during his 30-year career. acquisition, and brand innovation executive with over 20 years experiences to your customers and
articles on people and performance-related topics. In 2007, Nigel was part of the management team that created the of global payments, and FinTech industries, with focus on B2B drive more value to your business.
AIB Merchant Services joint venture and he later became General business development.
Manager. Having previously been a member of the Board of Directors
of AIB Merchant Services, Nigel currently sits on both the Board of Meagan Johnson
directors for ICICI Merchant Services, First Data’s joint venture in Generational Expert
India and the Board of First Data Europe. In February of 2018, Nigel Megan Johnson is a professional speaker and generational
was elected to Visa’s Client Advisory Council. expert who has chronicled the rise of Gen-Z in her book,
Generations, Inc. She’s a bright, funny, and delightfully obnoxious
Generational Humorist! FirstData.com
FirstData.com/Careers
6 First Data | Connected | Volume 3
Technology
Not only are they catching the customers where they
are, but they’re also able to hyper-personalize the user
3
Average number of
orders placed per experience. Through loyalty programs, customers can get
month on Amazon
a drink made exactly the way they like it at Starbucks®.
David Ridenour
Average time per day
First Data’s Director of Universal Commerce Solution Consulting
spent on Facebook
55
Ridenour, First Data’s Director of Universal
Number of visits to Starbucks in January 2018 Time spent streaming music on Commerce Solution Consulting.
MINUTES Spotify per week “Not only are they catching the customers
||||||
||
12
where they are, but they’re also able to
11
|||
|
hyper-personalize the user experience.
HOURS Through loyalty programs, customers can
get a drink made exactly the way they like
it at Starbucks®.”
Like planets clustered around a star,
physical retailers are aligning themselves Both Ridenour and Mackay are helping
Average hours per week with online giants. With First Data’s help, design personalized experiences through
18
spent watching Netflix both Google and Amazon have compiled connected car platforms that learn
an impressive list of traditional brick-and- from passive inputs, using artificial
mortar clients who can now offer their intelligence. “GM gives merchants access
customers voice-ordering over to its head units, which can track [the car
smart speakers. owner’s] shopping habits at fuel stations,
restaurants, and retailers,” Mackay says.
In turn, Amazon and Google have expanded “First Data® then links payments from
their footprints into the physical world, the car to those merchants for a
giving them the ability to deliver goods seamless experience.”
with even more immediacy than before,
and leveraging retail locations to deliver All these solutions require some device
Mobility
products and accept returns. to make them work. But, are we close to
Amazon’s Alexa and Google Assistant a truly device-free solution? Absolutely.
were smarter than Siri and they were “We’re bringing together mobility Apple already allows facial-recognition
multifunctional, with better common- solutions on any platform,” says Mackay. technology to authorize payments from
language capabilities. And, because they “For instance, Ford® says it’s no longer an a smartphone. And in Japan, Alibaba’s
Hits its
weren’t app-based, they were able to automobile manufacturer, it’s a platform Ant Financial has experimented with
deliver personalized connected experiences for consumers in motion. So, we’re here facial recognition at KFC™ kiosks where
across every device that a consumer owned. to help [them] with their payments customers paid for their meals with
Google Assistant is accessible with connections. That means, you can now just a look, no smartphone needed.4
Google Home smart speakers, on phones, bring the virtual assistants with you, and
Groove
computers, tablets, smart watches, smart pay at the pump with, say, Google Pay.” Of course, there are ample, and
displays, connected TVs, and in your car.1 Amazon might be taking mobility to its justifiable, concerns about privacy.
It started with Siri, almost seven years ago. Google saw the potential of multiplatform furthest extremes. They completed their For instance, consumers might not be
The first widely-adopted virtual assistant, virtual assistants early in the game when acquisition of Ring®, the video doorbell thrilled when Amazon correctly alerts
she – um, it? – gave us access to our apps it bought Nest® back in 2014. Today, a service, just a few months after buying the them to restock bath soap or toilet paper.
through voice commands. It was more user can remotely set their thermostat, Blink® home security unit.2 On the surface, But, as the world becomes more mobile,
seamless than typing but less intuitive. The dim lights, or access security cameras those purchases could look like more and as we become more accustomed
menu of available commands was limited. from anywhere in the world. moves to secure Amazon’s dominance to sharing our shopping experiences,
Still, there was something excitedly Star within the smart home market. But, all merchants will seize any opportunity
Advances in Artificial Intelligence It’s not noisy or sudden. There’s no Trekkian in our ability to project our will Mobility is also extending into streaming those cameras also give Amazon access to to cater to the new mobile consumer.
Steve Jobs pacing a giant stage in a black across open air, even if it was just to say, services. “Now, you can be listening to consumer information. Down the road, that
are ushering in a new era of turtleneck holding up alien technology to “Hey Siri, play Firework.” Spotify® or Sirius XM® in your house technology could allow Amazon (with your
cheering fans. But, if you listen closely, you over Amazon Echo, then have that same permission) to scan your home for needed In This Article:
personalized experiences and can hear the opening salvo of revolution – But, while Siri, and later Microsoft’s channel follow you as you walk to your items, like cereal or toothpaste, and alert
one that’s killing the app and freeing up Cortana, remained app interfaces, car, and for the whole ride into work,” you when it’s time to restock.3 #MobileShopping
cross-platform convenience. our mobile shopping experience. It’s being competitors like Amazon and Google had says Scott Mackay, First Data’s Vice #ArtificialIntelligence
driven by advances in artificial intelligence different ideas. Amazon sought innovative President of Digital Commerce In other words, these platforms, which #VirtualAssistants
and a new generation of virtual assistants ways to sell more stuff on its online Solutions, who’s working to connect help make everything more mobile, work #RuleTheWorld
that we can now access without our marketplace – and Google … well, Google the clients on First Data’s long list of in both directions. “Corporations can now #SmartTechnology
Brad Rhoads smartphones or tablets. wanted to take over the world. formidable partners. look at consumers holistically,” says David
8 First Data | Connected | Volume 3 FirstData.com/Connected 9
$ 8.45
BILLION
40%
GROWTH
$189
BILLION 1.50 + Merchant outlets protected by
TransArmor® which encrypts
and tokenizes consumer data
MI LLI O N both in-flight and at-rest.5
Current scale of annual Current Compound Annual Growth Total annual commerce on
fraud on the dark web1 Rate (CAGR) of the dark web1 the dark web by 20201
First Data : Fighting Fraud
®
The New Face of Fraud with End-to-End Solutions
Forget unkempt, pale figures in dimly lit rooms filled with computer screens. Today’s
fraudsters wear business suits. They work in real offices, keep regular hours, and openly
market their products and services. “The reality is, it’s become big business,” explains
The Security & Fraud Solutions team that Jackson
heads up at First Data, continually develops
and innovates products that help issuers and
merchants prevent, detect and mediate fraud.
80%
REPORTED
Reported improvement in
fraud detection by a big-box
retailer using Fraud Detect®.5
EJ Jackson, SVP & GM, Security & Fraud Solutions at First Data®. “It’s moved away from We encrypt and tokenize card data for over 170
this lone individual on their computer wearing a hoodie to organized groups who are billion transactions a year, while Fraud Detect ®
collaborating, using cutting-edge technology and leveraging machine learning to defraud analyzes and scores incoming transactions
businesses as much as they can – and doing it out in the open.” to help identify fraud before it happens 80%
of the time. “By combining our access to big
.5
data, with machine learning and a 200+ person Amount of time it takes
cybersecurity team that actively monitors the Fraud Detect to deliver a
dark web, we can identify fraud more quickly risk assessment score for
SECONDS a transaction to ensure
Outsmarting
than ever, dramatically reducing fraud, and
fraud costs for merchants,” says Jackson. it does not impede the
customer experience.5
fraudsters on
an ever-changing
battlefield
Anita j. Finkelstein GREG GATLIN
The New Direction of Fraud Prevention
Jackson’s team is also working with solutions that render stolen data
useless. FirstSense™ improves fraud alerting for financial institutions
by mining the dark web and using machine learning to identify stolen
data much earlier in the resale cycle. The goal is to warn institutions
99.7%
when their data is in the hands of criminals, so they can scrub accounts
The percentage of web applications that before they reach the dark web marketplace, lowering their value to
Trustwave scanning services tested in 2016 fraud organizations.5 Jackson believes the breadth of data First Data
VULNERABLE that displayed at least one vulnerability.2 works with is what ultimately enables his team to outsmart fraudsters.
“Having access to such a large set of global data from credit cards,
debit cards, and gift cards provides us with massive truths that
machine learning can use to make better and better decisions, which
Fraud as a Lucrative
5
helps us identify and prevent potential fraud better than ever.”
$ Estimated cost for cybercriminals to
infect 1,000 vulnerable computers Career Choice
PER AD with malvertisements.2 The biggest fraud organizations now recruit
top talent from universities. “The stigma of
this sort of endeavor seems to be gone, and
20
$ Dark market value of a single
individual identity (name, SS#,
the financial rewards are greatly motivating,”
points out Jackson. “It’s not perceived as a
criminal activity. In some cases, it might not
be illegal in the locality they are in, or if it is
3 , 800
FINANCIAL INSTITUTIONS
130
LOCAL CURRENCIES
99%
ACCURACY
PER IDENTITY DOB, address, phone number).3 illegal, it’s not enforced.” So, he says, the risk
of getting caught is low. “In many places, the
local government turns a blind eye. They not
The number of Financial Institutions The number of local currencies After identifying a compromised Bank
30
only advocate it, they promote it, because it’s
that use First Data Security & Fraud First Data processes payments in Identification Number (BIN) First Data
in their state’s interest to allow the activity to
Number of cybercrime organizations Solutions to protect their data and their for merchants in over 40 countries, can accurately identify compromised
go on for the economic benefits.”
in Russia, generating a black market customer’s data.6 across all networks, all brands, Personal Identification Numbers.
CYBERCRIME valued at $2B per year.4 and all payment methods.6
ORGs
10 First Data | Connected | Volume 3 FirstData.com/Connected 11
Industry Trends
has given brands from big analyze individual customer specifically to take advantage
box retailers to financial data, they’re able to use it to of the special discounts,
institutions new opportunities send personalized instant rewards programs benefits, When delivery
to use them as rewards and
incentives that can both gain
rewards, discounts, or
promotions when they’re
and for the ease of online
shopping that come with
is purely digital,
Rewards
and retain customers. most relevant. branded currency.3 merchants can
“The gift space is really For example, Chick-fil-A may Morea points out that
move much more
Revolution
evolving because of the send a promotion at the end merchants are not the only nimbly to set up
influence of connectedness,”
explains Dom Morea, SVP, Head
of a work day to a customer
who traditionally comes in
ones looking to branded
currency as a way to engage
promotions.
of Gift Solutions at First Data®. for dinner, and Starbucks today’s consumers and Dom Morea
“The ability of mobile to track, may send an instant reward increase customer loyalty; SVP | Head of Gift Solutions | First Data
send, and store data enables us whenever their system receives financial institutions (FIs) are
The humble gift card has evolved to deliver branded currency to a geo-location alert that a also jumping into the game. of branded currency that many
from a quick and easy gift to a consumers in a way that goes frequent customer is near one First Data’s Gift Solutions is U.S. companies are enjoying.
powerful form of branded currency. beyond standard gift-giving or of their locations. helping FIs provide value-added
gift-receiving.” services by integrating with Acquiring and keeping
To make it even easier for their online banking website or customers has gotten harder,
Not only can digital gift cards merchants to reward their mobile app allowing customers so First Data continuously
be delivered more quickly to customers, First Data’s to purchase gift cards. innovates to deliver solutions
elicit an instant response, they technology delivers a seamless that help keep customers’
are also more cost-effective. experience across all devices – “FIs are moving tender off the attention. If the growing
“When delivery is purely so, if the consumer receives an debit or credit card, and also question among consumers,
digital, merchants can move offer at home on their tablet, it delighting their customers in a particularly Millennials, is
much more nimbly to set up will automatically connect to new way,” he explains. There “what’s in it for me?”, branded
promotions,” says Morea. “If our their car dashboard and then are also plans to soon use currency seems to be one of the
clients want to run a promotion directly to their smartphone gift cards to settle up with or best answers.
with branded artwork and when they hop out. When they regain the trust of disgruntled
animation and put it on a walk in to redeem the offer, it’s customers. “If a bank has a “Ultimately, if merchants are
mobile device or the web, we right there in their hands. remit of a nominal amount, not engaging in ways that help
can do it in weeks, rather than rather than writing a check consumers feel appreciated
the months it would take to set “We’ve seen great traction to the consumer – which is and save time and money,”
up in a brick-and-mortar store.” with Starbucks,” Morea says. costly – they might send a said Morea, “they probably
“I think that experience is one branded card for $15. It’s cost- aren’t going to catch the
“What’s really driving the that is beginning to take hold efficient and fast, the bank gets interest of Millennials or any
rewards revolution is the for other companies as well. a payable off their books, and other generation making up
technology First Data® It’s becoming the norm to everyone’s happy because the their customer base today or
developed that connects gift connect stored value or consumer gets their money.” in the future.”
card programs to loyalty branded currency to loyalty
programs and facilitates an and then engage with The next step, says Morea,
in-app mobile experience customers through push is expanding the value of
where users can track their notifications or the mobile app.” branded currency globally.
Gift cards have always create incremental sales, and balances and manage their As the world becomes more
held a special place in bring in new customers. Today, earned points.” Morea points And, reports show that digital and connected, the
our hearts. They make gift cards are the newest form out that brands including merchants can thank opportunity for brands to break
excellent stocking stuffers, of branded currency, able to Starbucks®, Chick-fil-A®, and Millennials, at least in part, into international markets
they save us in last-minute influence purchasing decisions PetSmart™ have all integrated for the branded currency is growing. And with scale
gift situations, and they’re the by equipping customers with the technology into their apps. revolution. According to First that includes a footprint in 55
perfect addition to our brother’s incremental spending power. Data’s 2017 Prepaid Consumer countries, First Data® can help
birthday card when we have no Basically, once a customer Insights Study, this group of them do it. In This Article:
idea what to give him. In the world of “branded uploads their digital or ‘eGift’ 21- to 36-year olds account
currency,” coupons, gift card into the app and starts for the sharpest rise in gift In the coming years, the #GiftCards
But gifting is only a small part cards, and loyalty points using it to make purchases, card purchasing.2 Plus, they’re company hopes to begin #Gyft
of the evolving gift card story. have become as valuable to their spending is tracked, less focused on purchasing engaging more with global #Millennials
They have become powerful merchants, and to consumers, and their loyalty points are gift cards simply as gifts. sales teams and merchant- #Reward
tools for persuasion – able to as cash itself.1 While they’ve automatically credited. Since Morea says Millennials are acquiring businesses to help #Recognize
build brand loyalty, drive down been around for years, the the merchant can see and self-purchasing gift cards them derive the same benefits
shopping cart abandonment, growth of digital and mobile
Stephanie Gilman Christopher Sanna
12 First Data | Connected | Volume 3 FirstData.com/Connected 13
Cover Story
Right now, in Silicon Valley and start-up incubators in New York, Amsterdam,
Tokyo and a hundred of other cities around the globe, business leaders are
cracking open corporate DNA and rearranging the code. This isn’t the laissez-faire
evolution of MBA textbooks. This is human intervention – designed to change the
consumer experience and conquer natural selection. This is innovation.
Building the New Retail Frontier
Brad Rhoads Christopher Sanna
14 First Data | Connected | Volume 3 FirstData.com/Connected 15
An influx of It’s become a game of one-upmanship on “That’s the goal. Retailers – both offline
and online – now want to control last-
With the help of First Data®, Domino’s
also built a Baby Registry12, the natural
For those who want to try DIY, Lowe’s®
partnered with Porch, an innovative 24/7
resources, a global scale, with superpowers burning
through limitless resources working to
mile delivery to consumers,” Chris Abele
explains. As the Director of Corporate
Strategy at First Data®, he stays connected
successor to Domino’s Wedding Registry,13
that lets friends send pizza and pizza-
themed gifts to new parents
support service that connects customers
with experts who can help with home
improvement projects. Customers can
money and survive by becoming the first, the best,
with evolving commerce trends. “This is
what consumers want. They want it today,
within hours. They want it at their door,
and newlyweds.
The last-mile delivery concept also
hire contractors directly through the site,16
request personal, guided instructions on
installations and assemblies, or chat to get
manpower is the biggest, and the strongest.
Along the way, the rulers of retail have evolved into tech giants offering
and they are willing to pay for it.”
So, whether consumers are purchasing
transformed Millennial-favorite IKEA®.
The “assemble-it-yourself” furniture
maker bought the innovative start-up
quick advice and ideas.
Lowe’s was also the first retailer to
energizing the goods and services far outside of their traditional verticals. And, they’re
delivering them, along with a string of innovative user experiences
all zeroed in on the same objective – creating a fortress inside their
through big retailers, or getting restaurant
food delivered to their door using
experience-minded mobile apps, like
TaskRabbit, which allows users to submit
requests for services they need, like dog-
walking or housesitting, and then wait for
use virtual reality (VR) to run home
improvement clinics.17 It offers the
Holoroom How To experience, providing
creation of customer’s homes.
What at first seemed like a natural extension of a business model
GrubHub, Uber EATS, and DoorDash®,
First Data® is designing the technology
that’s keeping the payment process not
pre-screened taskers to bid on the job.
Now, assembling IKEA furniture is a top
TaskRabbit service.14
on-demand DIY clinics to customers. They
also jumped in the augmented reality
(AR) game. Following in the footsteps of
new, innovative is revealing itself as a tactical fistfight. Google jumped in first with
Google Express, which allows customers to order nonperishable
groceries from partner stores and receive them in just a few days. The
only easy and seamless but also behind the
curtain and out of view. Abele says, “The
more nuts and bolts activities like payments
Amazon’s AR View,18 they launched the
Envisioned app last October. Both use AR
to generate sales by allowing customers
technologies innovation? You can do it from any connected device, just by saying,
“Hey Google!”1
are blended into the overall consumer
experience, the better.” Of course, home
food delivery isn’t a novel idea. Pizza shops
This is what the
consumers want.
to digitally place a piece of furniture inside
their home to see how it looks before
purchasing it.19 “In the last year, we’ve
at a pace we Next, one of Google’s partners, Walmart®, decided it would be better
to bring perishable and nonperishable groceries to your door in hours
have boosted sales for decades with
doorstep delivery. The 30-minutes-or-less They want it today,
seen AR evolve to be much more than a
way to chase virtual monsters in Pokemon
instead of days.2 And, it found an easy way to make it happen by model evolved into online ordering and
within hours. Go,” says Seth Perlman. As First Data’s
haven’t seen tapping into the expanding matrix of Uber drivers, rather than creating
a fleet of its own.3
mobile apps now used by every major
pizza chain. They want it at their
Global Head of Strategy, he and his team
keep on top of new technologies that are
reshaping commerce. “It could prove to
since the And then, there’s Amazon. It bought an entire enterprise, Whole Foods®, But Domino’s realized early-on that door, and they are be a powerful tool to remove uncertainty
which already accepted the most online grocery orders.4 It linked those innovation was its path to differentiation. It
willing to pay for it. and doubt about a potential purchase.
orders to the Alexa/Echo universe, and sped them to your house in famously transformed into a tech company Especially for categories such as apparel
Space Age under an hour,5 and shipping is free for Prime Members6 (Hint: half of
Whole Foods® shoppers were already Prime Members).7 For good
measure, it added Amazon Meal Kit, to give customers the option of
(that happens to make pizza). For starters,
it was the first pizza chain to take orders
over smart speakers like Amazon Echo and
Chris Abele
Director | Corporate Strategy | First Data
and home goods, where it can be hard to
make a buying decision based only on a
two-dimensional thumbnail image.”
and Cold War having items bundled into ready-to-prepare dishes, pulling hungry
shoppers away from meal-kit delivery innovator Blue Apron.8
Google Home, as well as Apple Watches,
Facebook and Twitter (remember the pizza
emoji tweet)?10 And now, even its app is
With IKEA encroaching on its turf, Amazon
created Amazon Home Services, to offer
customers a new and simple way to buy
Technological advancements are also
impacting the way people give gifts. What
arms race of making headlines with a “no-click” feature
that orders for you in just 10 seconds.11
and schedule professional services such
as furniture assembly, house cleaning,
and appliance repair directly on Amazon.
started as simple paper gift certificates has
evolved into instant and engaging digital
experiences. With help from First Data®,
the 1960s. com.15 It also allows Amazon to sell home
improvement products like flooring,
carpeting, and drywall to customers who
Walmart® is using unique app technology to
offer reloadable eGift cards like Basic Blue,
which once purchased can be reloaded not
aren’t comfortable with the do-it-yourself only by the owner, but also by friends and
(DIY) concept. family as a “gift” for new occasions.20
16 First Data | Connected | Volume 3 FirstData.com/Connected 17And, Walmart Pay isn’t just a mobile wallet,
B o n u s S p e c i a l S e c t i o n
it also stores receipts and purchase
histories. Users can also reload their own
cards for easy checkout at the store.
“In addition to last-mile delivery and
service, another trend shaping the
evolution of retail right now is consumer
brands going directly to market,” says
Abele. “Big brands like Tide® are selling
UNLOCKING
over their own websites and making deals
to sell to consumers on Amazon.”
After striking a direct-to-consumer deal last
summer, Nike® became a top-selling brand
on Amazon. “We are looking to improve the
MERCHANT
Nike consumer experience on Amazon by
elevating the way the brand is presented INNOVATION
USING
and increasing the quality of product
storytelling,” Nike’s CEO Mark Parker told
investors during a conference call.21
Parker says Nike® also plans to begin selling
on Instagram,22 a platform the company
MACHINE
already dominates in terms of followers.
Nike’s tone-perfect use of emotive and LEARNING
FOR FRAUD
aspirational imagery captures the spirit of
Instagram, generating loyalty and brand
recognition.23 It will likely use Instagram’s In some Nordstrom stores, customers
Shopping-Tags feature to turn those can go to a special Lancôme counter
followers into buyers, allowing Instagram where their skin tone is analyzed with a
users to simply click on Nike’s posts to get technology called Le Teint Particulier. It
information and links to the product.24 precisely matches base colors, which are
then mixed on the spot from thousands
Social media and mobile-focused marketing of pigments to create the perfect makeup
are keys to selling direct-to-consumer foundation shade for each customer.26
products. Innovative user experiences
draw customers in and keep them satisfied. “The next retail frontier,” says Perlman,
Take, for example, Gatorade’s GX Platform, “will be the delivery of a consistent,
which uses a patch on athletes’ skin to personalized experience to every
monitor sweat output and electrolyte consumer regardless of where they are or
loss. It uses the data to recommend a what device they’re holding.” He says that
personalized formula for Gatorade’s First Data® is working with retailers of all
“fuel bottle,” which, in-turn, records how sizes to provide the payments capabilities
much Gatorade the player has taken in, and robust analytics they need for the next
helping them stay hydrated.25 era of commerce.
Think about it, the technologies that In This Article:
emerged during the Space Age are still
with us, affecting how we live, work,
and interact with our world. This new #ThinkFast
explosion of technology delivering #DriveChange
commerce innovations that are changing #Collaborate
everything about how we shop and pay, will #InvestInlearning
undoubtedly have a long-lasting effect on #Strategy
retail sales and the consumer experience.
18 First Data | Connected | Volume 3 FirstData.com/Connected 19
© 2018 First Data Corporation. All Rights Reserved.B o n u s S p e c i a l S e c t i o n
Chapter 01
INTRODUCTION MERCHANTS ARE EVOLVING THEIR BUSINESS MODELS
The world of Fraud results in: Shopping is about to get interesting.
eCommerce » Losing money to chargebacks and If merchants have learned one thing in
spending time disputing them.
lost $60 billion » Declining legitimate customers due the past few years, it is customers are
in fraud in 2017. 1 to poor fraud controls.
» Losing stolen goods and the money
clamoring for continuous innovation.
And beneath this spent on shipping.
» Bottlenecking order fulfillment with
massive figure manual reviews.
THEY’RE of surveyed shoppers last year told
there’s a world of » The threat of being labeled a
“high risk” merchant.
SHOPPING
ONLINE.
51% Deloitte that they planned to do more
holiday shopping online than in stores.2
additional pains.
While fraud teams focus on fighting waves of
new fraud, innovation teams on the other side
of the organization are focused on creating
THEY’RE BUYING $2.6 billion
new revenue streams, and keeping up with WITH THEIR The biggest shopping day last year was not Black Friday,
changing customer expectations. PHONES. but Cyber Monday – and a third of the $6.6 billion
consumers spent that day was via mobile phones.3
As the decade nears its close, merchants
are trying to solve for risk and business
opportunity at the same time, and they’re
building bridges across their organizations to
have big conversations. In this ebook, we’ll try
THEY’RE USING
NEW PAYMENT
$500 billion
The volume of payments via wearables is
to move the conversation forward. METHODS. expected to exceed $500 billion by 2020.4
Read on to discover:
» The most pressing trends in business and THEY’RE LEANING ON The North Face spent one year training the AI algorithm
VIRTUAL SHOPPING behind its “Expert Personal Shopper” so it could make
fraud that are shaping the future of retail.
ASSISTANTS. 365 recommendations about clothing for consumers.5
» Success stories of customers who have
innovated their fraud detection systems
with Fraud Detect®, a comprehensive
fraud detection solution utilizing a machine Now that Amazon’s 20-year patent on 1-click
learning platform. AND THEY’RE payments has expired, merchants are looking for
» Actions merchants can take now to be BUYING THINGS
WITH ONE CLICK.
40% ways to capitalize on fast payments. Shopify Pay
found that increasing checkout speeds by 40% led to
proactive in a changing world.
an 18% higher conversion rate for returning shoppers.6
20 First Data | Connected | Bonus: Special Section © 2018 First Data Corporation. All Rights Reserved. © 2018 First Data Corporation. All Rights Reserved. Unlocking Merchant Innovation Using Machine Learning For Fraud 21B o n u s S p e c i a l S e c t i o n
Email selling Cross-channel shopping IoT is here to stay
Merchants Twenty years after Amazon “Omnichannel” has gone from The Internet of Things has
patented 1-click orders, and a differentiator to a given in just gone from a buzzword to a
have to get two years after social media a couple years. Merchants are Commerce reality. For example,
companies like Pinterest searching for ways to integrate Brita Water is connected to
creative introduced instant “buy” all their channels to provide Amazon’s Dash Button and
buttons, merchants are seamless movement between orders new filters automatically
to remain looking for the next trend in them. According to Google, 65% when they’re needed. And
instant payments. of people shopping online will HP might be resuscitating its
competitive. begin a purchase with one device lagging printer business in part
For example, the startup Rebel but complete it within another.8 thanks to Instant Ink, which
is trying to turn email into a monitors printer ink levels and
merchant-owned channel by Merchants aren’t just integrating sends customers new cartridges
THE LATEST enabling customers to make digital channels, but physical before they run out.11
purchases from inside their channels too. For example,
INNOVATIONS IN emails, rather than having to Commerce newcomers like
click through to a web browser. Bonobos and MM. LaFleur are
COMMERCE ARE Making it easier for customers to expanding their online presence
complete purchases can create into showrooms, so users can
EXCITING FOR a great customer experience use physical stores as part of
and increase revenue. their buying journeys.
CUSTOMERS, BUT
Voice-based shopping Wallets
THEY ALSO BRING Thanks to voice selling, In-store mobile payment
Amazon’s Alexa could create volume is anticipated to grow
ON UNIQUE AND $10 billion in revenue by 2020.7 from $75 billion in 2016 to $503
And now that Target and billion in 2020.9 Mobile wallets
NEW CHALLENGES Walmart have partnered with accounted for almost a third
Google to allow voice shopping of Starbucks transactions last
WHEN IT COMES TO through Google Assistant, voice year!10 Wallets can improve the
computing has become an merchant-customer relationship
FIGHTING FRAUD. important new revenue platform by providing an easier way
– but only for a select few of to pay and a new avenue for
the most giant merchants. personalized promotions. For
example, Starbucks “cracked
Small and mid-sized merchants the code” of wallets by offering
might be shut out of the voice irresistible enticements through
platform for now, but they can its mobile app, like the capability
optimize their SEO for voice so of ordering coffee ahead of time
they show up on searches over to skip the line in the store.
voice assistants.
22 First Data | Connected | Bonus: Special Section © 2018 First Data Corporation. All Rights Reserved. © 2018 First Data Corporation. All Rights Reserved. Unlocking Merchant Innovation Using Machine Learning For Fraud 23B o n u s S p e c i a l S e c t i o n
Chapter 02
FRAUDSTERS ARE EVOLVING THEIR BUSINESS MODELS TOO FRAUD TYPES FRAUD TECHNIQUES
Triangulation fraud Bot attacks
Merchant fraud used to be simpler: someone waiting in line at the Here’s how this works: a fraudster sells legitimate products Fraudsters create customized bots, often with the help
Fraudsters return counter with an item they stole. Today, merchant fraud is
over an auction account, like eBay, and a customer buys the
product. The fraudster receives the money, then orders the
of "build your own bot" websites, that use programming
scripts to choose products at merchants and try to buy
part of a teeming, underground economy of coordinated financial
are using
same item from a legitimate retailer, pays for it with a stolen them with a velocity that's not humanly possible, using
card, and ships the item to the buyer. The fraudster gets stolen credit card information. Feedzai has discovered bots
crime. Fraudsters are leveraging every tool at their disposal to steal
the money, the customer gets the product, and the retailer that can add to carts five times faster than humans, and
from merchants. They’re using advanced technology and leveraging
advanced
sees a normal-looking order. It's only when the chargeback bots can be programmed to open fraudulent accounts as
the complexity of the payments ecosystem itself. comes a few months later from the victim of the stolen well.12 These bot attacks are concentrated on items that are
credit card that the retailer discovers the scam. on sale, have just launched, or are particularly easy to sell.
technology. Perhaps the most important tool that fraudsters leverage is
Sleeper fraud Address malformation fraud
adaptation. The signature characteristic of today’s financial
crime is that it’s always evolving. Here’s a look at the most pressing This is a kind of first-party fraud, when criminals open When a fraud system detects and blocks a fraudulent
accounts in bad faith using their own identities or creating address, fraudsters will outsmart the fraud controls with
fraud types and techniques, many of which didn’t even exist a fictitious ones. In sleeper fraud, criminals will try to simulate a “malformed address.” They’ll write the address in such
decade ago. normal profiles for months or even years to fool fraud a way that the system can’t detect (e.g. “R0ad” instead
controls. They may even create fake social media accounts of “road”), but in a way that the human delivering the
associated with these fictitious identities to increase the air package will still be able to recognize.
of legitimacy. Then they'll switch their behavior to fraud in
an instant.
THE NEW ECOSYSTEM OF FRAUD Chargeback fraud Prefix phone pattern fraud
Here a customer will intentionally request a chargeback Fraudsters will “spoof” local area codes in order to
on a legitimate purchase. The customer might say the item look legitimate. They’ll imitate local merchants and fool
Bot wasn't delivered, the item isn't as advertised, the item unwitting customers into giving their personal information.
Reshipper attacks was returned without a refund being processed, or they Fraudsters use this same technique to impersonate the IRS
fraud don't remember making the purchase. In friendly fraud, and scare people into betraying their own credentials over
customers will make disputes like these, but because they the phone.
Address
HARD TO DETECT
genuinely are mistaken about the purchase, or possibly
malformation because someone in their family made the order without
fraud telling them.
Offline
fraud Reshipper fraud Synthetic ID fraud
Triangulation This criminal enterprise is run by an operator who recruits Identity thieves create new identities using a combination
fraud unwitting “reshipping mules” through work-at-home job of real and fabricated information. For example, many
scams. They’re promised thousands of dollars a month just will use the social security numbers of children to evade
Buy online pick Synthetic to receive and reship packages. The operator sells access to discovery. Fraudsters will also fabricate entirely fictitious
up in store fraud ID fraud his mules to card thieves, who use stolen card information information. They’ll nurture these identities to appear
to purchase products from merchants, ship them to the legitimate, for example, by creating fake social media
mule’s address, and have them reshipped. The card thieves accounts. And they’ll use these identities to steal lines of
sell the goods on the black market, and the operator credit, open fake accounts, and steal goods.
receives a cut.
SIMPLE TO DETECT
Prefix phone Buy online pick up in store fraud Offline fraud
pattern fraud
Sleeper fraud Fraudsters will select this option at online checkout, How can it be possible to see a charge you don’t recognize
and then call the merchant asking to have it shipped to when the card was in your possession the whole time?
them after all. This is a way for fraudsters to bypass fraud Fraudsters can easily buy a small device that clones your
screens, because merchants consider in-store pickup card in a moment. They’ll clone your card into a copy that
orders less risky. Fraudsters also like committing this kind looks just like the real thing, and use it at points of sale to
Chargeback of cross-channel fraud because they count on merchants steal from your line of credit or your debit account.
fraud keeping separate, siloed systems for internal and online
purchases. For example, an in-store employee may not
see that a customer bought 20 of the same item with 20
different identities.
EXISTING EMERGING
24 First Data | Connected | Bonus: Special Section © 2018 First Data Corporation. All Rights Reserved. © 2018 First Data Corporation. All Rights Reserved. Unlocking Merchant Innovation Using Machine Learning For Fraud 25B o n u s S p e c i a l S e c t i o n
At Feedzai, the fraud analyst Joel Carvalhais
Key data A closer look analyzed the evolution of a fraud ring that
attacked a large commerce client with account
breaches and at the evolving takeovers (ATO). ATO fraud is growing rapidly,
1 BILLION
costing $2.3 billion in 2016 alone.16 When Aite
credential dumps tactics of ATO asked financial institutions to name their biggest
fraud investment priority, their top answer was:
that are fueling ACCOUNTS COMPROMISED fraudsters. retail ATO.17
Yahoo! data breaches
all this fraud. of 2013 and 201413 Feedzai’s analysis demonstrates this ring of ATO
fraudsters evolved their tactics in three stages in
order to evade detection.
AS CYBERCRIME HAS
EVOLVED INTO BIG BUSINESS,
DATA BREACHES ARE
100 MILLION STAGE
Fraudsters used stolen credentials from the Yahoo! and
LinkedIn data breaches to take over customers’ PayPal
1
INCREASING IN BOTH SIZE
ACCOUNTS COMPROMISED accounts to steal their card information. Then they used the
Linkedin data breach same stolen credentials to log into the merchant. Fraudsters
AND IMPACT, DISRUPTING
targeted a whitelist of “good customer” accounts that were
of 201214
auto-approved for orders. They ordered goods under these
ORGANIZATIONS AND LOWERING
customers account and sent them to reshipper addresses.
CONSUMER CONFIDENCE.
STAGE
2
Fraudsters tried to appear legitimate by changing
the billing address field to match the shipping
address of reshippers.
1.4 BILLION
STOLEN CREDENTIALS
discovered by the security STAGE
3
Fraudsters began to modify every major
firm 4iQ in 201715 account field, like username and email
address, in order to appear even more
legitimate and outsmart the merchant’s rules.
26 First Data | Connected | Bonus: Special Section © 2018 First Data Corporation. All Rights Reserved. © 2018 First Data Corporation. All Rights Reserved. Unlocking Merchant Innovation Using Machine Learning For Fraud 27You can also read
