PULSE Launches Revamped ATM & Debit Card Safety Awareness

Home , Curve (payment card), Laser (debit card), PIN (debit card)

MARCH / APRIL 2009

All debit all the time SM pulsationsThe Debit News MagazineSM

Prepare. Protect. Prevent. PULSE Launches Revamped ATM & Debit Card Safety Awareness Campaign

TM and debit card safety, financial fraud and identity theft steps to protect themselves,” said Jim Cichy, PULSE vice president, have been hot topics in the financial services industry in fraud management. “PULSE can help participants help their A recent years. Some experts suggest that the precarious state cardholders.” of the economy may lead to an increase in criminal activity. Those This year, PULSE has revamped its ATM & Debit Card Safety who are otherwise upstanding individuals may become desperate Awareness Campaign. Consumer materials have undergone a when faced with harsh financial difficulties. major facelift with bold new colors and graphics. Tried-and-true While it is important to keep these issues top of mind year tips are reinforced by new techniques for protection against the round, PULSE has designated June as ATM & Debit Card Safety latest advances in the fraud arena. Awareness Month. “Perpetrators have developed new technologies that are so “It’s a good time to analyze current safety precautions and obscure they are virtually impossible to detect,” said Cichy. rejuvenate programs as needed. Now more than ever, cardholders “Awareness and early detection are critical to minimizing losses need to be aware of current and possible future threats, and take should an incident occur.” (continued on page 7) PULSE to Pilot Internet PIN Debit

ULSE is partnering with technology provider Acculynk to test consumer use of PIN debit for Web-based shopping. The pilot test will involve selected PULSE merchants and financial institution participants and is slated to begin in the second quarter of 2009. PAcculynk’s PaySecure™ technology enables consumers to use their debit cards with a PIN to pay for online purchases. The goal of the pilot test is to assess consumer acceptance of the new payment method. (continued on page 10)

Stored Value Mobile Banking and Top 10 Emerging Cards as Mobile Payments Fraud Risks Budgeting Tool Page 8 Page 11 Page 5 VIEW FROM THE TOP

Dear PULSE Participant,

TM and debit cards represent one of the most secure forms of payment available. Yet, financial services providers, merchants and consumers must remain vigilant A in order to protect against fraudsters whose technology and techniques are increasingly sophisticated. While PULSE promotes debit security throughout the year, we designate June as ATM & Debit Card Safety Awareness month. We feel it is important for financial institutions and cardholders alike to be aware of simple tips that can dramatically reduce the risk of financial fraud or other losses involving card use. In early June, PULSE will release a series of ATM and debit card safety guidelines Dave Schneider for consumers to the national media. We also have made a variety of safety and security materials readily available to your financial institution, including statement inserts, card protectors and electronic brochures. Another weapon PULSE offers participants in the fight against debit fraud is the “We feel it is important DebitProtect® service. This proven neural network fraud detection system alerts the card issuer when a suspicious transaction occurs, thereby enabling the issuer to inves- for financial institutions tigate the transaction and, if appropriate, block the card. Financial institutions using DebitProtect have confirmed that the service has helped them to significantly reduce and cardholders alike to the impact of fraud on both issuers and cardholders. We offer the core DebitProtect service at no charge to PULSE participants. If you have not signed up for DebitProtect, be aware of simple tips I urge you to do so. In recent years, consumers have shown that they are increasingly comfortable that can dramatically using debit in general, and PIN debit in particular, across many different merchant categories, from gas stations to grocery stores, high-end specialty retailers and even reduce the risk of full-service restaurants. PIN debit offers consumers several distinct benefits, including convenience, cash back at many locations and significantly lower fraud risk. Financial financial fraud or other institutions, too, benefit from lower fraud losses and fewer chargebacks with PIN debit, as well as from PULSE’s highly competitive PIN debit interchange rates. losses involving card Consumers’ continued use of both PIN and signature debit depends on the financial service industry’s continued success in fighting card fraud. Please join me in making use.” ATM & Debit Card Safety Awareness month a success by encouraging your institution’s cardholders to review the security tips provided in PULSE’s statement inserts, card protectors and brochures, as well as at www.pulsenetwork.com/debitsafety. Thanks for your continued support of PULSE.

Sincerely,

Dave Schneider President

All debit all the time SM 2 PROFESSIONAL DEVELOPMENT

PULSE ACADEMY UPDATE

he 2009 PULSE Academy series June: 21st Century ATM Twitter to inform consumers about is well under way, providing Management debit cards and understand their prefer- T network participants with This presentation will address ences and concerns. This session will multiple opportunities for continued emerging ATM technologies that can show how financial institutions can use professional development. Following help participants maximize the reach social media to reach account holders. sessions in January, February and April and profitability of their current ATM on customer segmentation, the outlook programs. ATM fraud and prevention The dates for both events will be for debit and debit card fraud preven- techniques also will be addressed. announced at a later time. For further tion, summer sessions will address information on PULSE’s professional subjects at the heart of participants’ July: Social Media 101 development program or to access any debit card programs. Reaching account holders is easy session on-demand, simply visit with social media toola. Learn how www.pulsenetwork.com and select the www.DebitFacts.org uses Facebook and “Development & Training” Quick Link.

PULSE Promotes 2009 ATM & Debit Card Safety Awareness Campaign

ULSE recently sent out an e-flyer and mailer promoting the 2009 ATM & Debit Card Safety Awareness Campaign. These marketing Ppieces described the updated materials available for distribution to consumers. To order new statement inserts (see page 7 for samples), card protectors, deposit envelopes and Web brochures, please visit www.pulsenetwork.com/debitsafety or call 800-420-2122.

3 p u l s e n e t w o r k . c o m Louisiana Bankers Form Anti-Fraud Task Force

n response to growing concern among common concerns, practices and solutions LBA has set up a Web page with links to Louisiana financial institutions over the for reducing fraud, from both a response product and service providers and informa- Ieffects of payments fraud, the Louisiana perspective, when a loss occurs, and a tion resources to help banks manage fraud Bankers Association (LBA) has assembled prevention perspective. risks. The organization also offers semi- an Anti-Fraud Task Force. “The task force started out small but nars on risk management issues. “In 2007, we started getting feedback has grown to 95 participating banks,” said “It’s a tough challenge. It’s like peeling from our banks about growing fraud Boneno. “Discussion topics include what an onion – there are a lot of layers,” said losses,” said David Boneno, LBA general they’re seeing in the area of fraud, and Boneno. “Since we launched this group, the counsel and the organization’s point person what practices they’ve initiated that have bankers have become more aware of what’s for the task force. “We thought it would be helped. They have also guided us on pos- going on out there, and we’ve also reached helpful for banks to come together and act sible legislation that we have pursued.” out to retailers, restaurant owners and as a sounding board for one another on The task force recommended that a other groups.” these issues.” uniform fraud incident report form be Louisiana-based banks that are inter- The task force is composed of represen- developed for reporting financial crimes. ested in appointing a representative to the tatives of banks and savings institutions, The group got input from law enforcement, task force should contact Ali Smith at as well as other professionals. The group and the form is being distributed for state- 225-387-3282 or [email protected]. meets quarterly to share information about wide use by financial institutions. DebitFacts.org Shop Wisely with Debit

ULSE’s debit information resource, • Set aside an amount you think www.DebitFacts.org, offers consum- you can spend. Pers advice on planning for major • Make a list of potential gifts purchases from personal finance expert or expenditures for each Carol Akright. person or occasion. “Nothing erodes your extra cash more • Put in the prices and add up your Most importantly, she reminds consum- than impulse buying – especially when total. ers to guard their information carefully, the TV ads, catalog glossy pages and front- • Shop early and look for bargains. whether they are using cash, checks, debit of-the-aisle displays grab your attention,” or credit cards. says Akright, a Certified Financial Planner “Debit card transactions are not only DebitFacts.org was launched last year and author of Funding Your Dreams convenient, but with online banking, PIN as the centerpiece of PULSE’s Consumer Generation to Generation. “As a financial debit transactions are recorded nearly Debit Awareness Campaign, with the goal planner, I ask my clients to tell me their instantaneously and let you see every night of informing consumers about the uses and budget in advance. We plan first, then where your balance stands,” Akright tells benefits of debit. PULSE participants are spend.” site visitors. “Debit card transactions let encouraged to utilize the site as an infor- Akright urges consumers to track fixed, you track your finances daily and assess mation resource for their account holders. variable and discretionary expenses, and how you’re doing with your annual To view the full article, visit the site and to develop a 2009 spending plan for gifts allocation.” click on the “Exclusive Expert Article” link and other expenses that fall into the third at lower left. category. Her advice is to:

All debit all the time SM 4 PULSE PRODUCT FOCUS Stored Value Cards Offer Budget Vacation Reality

side from gift cards, which dominate the prepaid space, stored value cards A traditionally have been considered a method of providing checkless banking to individuals without traditional checking accounts. But in today’s belt-tightening economy, stored value cards provide a convenient method of setting aside a pre- determined amount for a particular expense, such as a family vacation. Prepaid vacation cards offer more than a chance to keep the family budget on track. They are convenient, being widely accepted at merchants across the country and around the world. Since many issuers offer “zero liability” protection, the cards also can protect against fraudulent activity due to a lost or stolen card. As an added boost to cardholder peace of mind, lost or stolen cards can be quickly replaced with the remaining prepaid value. Consumers conventionally terminal. Users can check the card balance use credit cards for travel, but or transaction history at any time by phone one big advantage to using a or Internet. stored value card instead is no For more information about the PULSE bill at the end of the month. Access Family Card, visit the PULSE Web When using a stored value site: www.pulsenetwork.com/pulseaccess. vacation card, the purchaser loads a balance onto the card and then uses it for purchases. Because the money is drawn directly from the loaded balance, there is growth for 2008. With consumers trying to no bill to pay. Consumers decide on their stay ahead of debt, and prepaid cards still budget ahead of time, and the prepaid card accounting for a small fraction of overall helps them stick to it. card usage, the potential for stored value Financial institutions can grow rev- card growth is significant. enues with stored value cards. The PULSE offers a flexible, affordable Mercator Advisory Group estimated that stored value card that can be used for ® $38.7 billion was loaded onto network- vacations. The PULSE Access Family branded prepaid cards in 2007. The Center Card can be used to purchase gas, travel for Financial Services Innovation’s tickets, food and lodging, and can be research on prepaid cards, published reloaded. Activation is easy through the earlier this year, showed that 70 percent PULSE-provided, institution-branded Web of banking executives surveyed believed site or voice response unit. The activated that industry growth for prepaid cards in card can be used to make purchases or to 2009 would be at or greater than the get cash at any ATM or PIN-supported POS

5 p u l s e n e t w o r k . c o m PULSE Speaker Program New Topics for 2009

ULSE’s goal of providing education Debit in the New Age of Frugality must connect directly with consumers and research for the financial Why is debit card use more vital now than on their terms and build long-lasting P community closely aligns with the ever before to consumers, and how can relationships. objectives of bank associations and credit financial institutions continue to empha- union leagues. With this in mind, the net- size debit use among their cardholders? Who’s Your Chief Payments Officer? work has refreshed its Speaker Program The increasing importance of electronic for 2009 with new topics to help bank Maintaining Consumer Confidence in payment products and delivery channels associations and credit union leagues Payments through Fraud Protection has created the demand for a new role within financial institutions: Chief deliver valuable debit-related information Hackers are turning up the heat on stealing Payments Officer. to their participants. money from your cardholders. Learn what The PULSE Speaker Program offers you can do to thwart these criminals. “These new and updated topics were the services of knowledgeable PULSE staff developed in response to current events members to present timely information Tracking Consumer Payment and financial institutions’ interests,” said on a variety of electronic payments and Preferences and the Impact on Denise Stigge, PULSE vice president, industry topics: Your Institution PULSE discusses the latest trends in the association relations. “Because of our close relationship with bank associations New Payment Technologies – Is the marketplace for making purchases and Future Near? paying bills, and the additional revenue and credit union leagues, we offer this What are market potential and adoption opportunity created for financial exceptional service to them at no cost.” barriers for new payments technologies, institutions. Associations and leagues that are inter- and how will they impact the future of ested in scheduling a PULSE speaker to electronic payments? Connecting with Consumers in a present any of these topics should contact Dynamic Marketplace PULSE’s Association Relations department Trends in Debit To keep existing account holders and at 800-420-2122. The fourth edition of PULSE’s Debit Issuer acquire new ones, financial institutions Study – to be released in May – will provide insights into the current state of the debit card industry, as well as issuers’ outlook for debit in 2009 and beyond.

All debit all the time 6 7 Debit Prepare. Protect. Prevent. (continued from page 1) A new section in the Identity Theft, at their fingertips. Stock up on new Fraud & You brochure titled “Signs You resources and be ready to help your May Be a Victim” describes several warn- cardholders shield themselves from Facts ing signs that should alert cardholders that fraudsters. there might have been unauthorized access .org or use of their accounts and/or identity, and Prevent to investigate further. As fraudsters The best defense is a good offense. become more savvy in their operations, it Taking steps to prevent financial fraud is essential that cardholders stay ahead in or identity theft before it happens will the fight against identity theft and fraud. build consumer confidence and bolster financial security. PULSE’s Web site Prepare hosts an updated consumer section for PULSE encourages financial institu- easy access to information and tips. tions to take a closer look at the current Cardholders and financial institutions safety programs they offer. Does your orga- also can visit www.DebitFacts.org for nization have up-to-date research on the more information on current fraud latest fraud trends? Do the materials pro- trends and safety tools. It is vital that vided reflect accurate tips for protection financial institutions and their staff against new scams? Is the entire staff stay current on fraud trends, technol- familiar with the information, and are they ogy and prevention strategies. Then go The “Go To” actively educating cardholders about ways one step further and arm cardholders Site for All to protect themselves? An in-depth analy- with the education and tools needed to sis may reveal a need for a refresher course protect themselves. Things Debit and a new library of materials. “ATM and debit card safety should never be taken lightly. The possibility Help your cardholders put Protect of increased threat due to the current debit to work for their Cardholders rely on their financial economic climate warrants additional bottom line at institutions and other service providers attention,” said Cichy. www.DebitFacts.org. to guide them in the proper care and use For assistance revitalizing your safety program and to purchase new • Learn about tracking of their cards and accounts. PULSE offers daily finances statement inserts that double as in-lobby low-cost statement inserts, brochures, brochures readily available for pickup, card protectors and deposit envelopes • Read expert advice and can be used by employees as tools in for distribution, call 800-420-2122 or visit the PULSE Web site today at • Take advantage of debit educating consumers. Other materials benefits include deposit envelopes and handy card www.pulsenetwork.com/debitsafety. protectors that put top-priority information • Learn about the latest safety measures • Plan for the future IDENTITY THEFT, & YOU Fraud and identitypayments will strike millions of Americans FRAUD theft related to electronic REPORT VIOLATIONS this year. Financial stress due to an uncertain economy may lead to even more f you think you may be the victim of any form of fraudulent activity. It is vital that Here’s you recognize what youthe various need types to know. of fraud and ﬁ nancial fraud or identity theft, notify the proper I authorities immediately. learn how to protect yourself. Report all phishing attacks to: FBI: To obtain an icon that can be www.fbi.gov Prepare. Protect. Prevent. Internet Crime Complaint Center: www.ic3.com placed on your Web site as a Federal Trade Commission: Forward all potentially fraudulent e-mail to [email protected]. link to www.DebitFacts.org, Report violations of your personal information and debit or credit card theft to your account providers immediately. You should also notify the three major credit bureaus: visit www.pulsenetwork.com/ Experian 888-397-3742 Equifax 800-525-6285 TransUnion 800-680-7289 debitsafety. Visit www.DebitFacts.org for more information.

obile banking and mobile payments Danforth, PULSE vice president, product Still, progress is being made. The indus- have been discussed at numerous development. “For PULSE’s part, we try reached agreement late in 2008 on the Mindustry conferences in recent believe mobile banking will continue to standards for SIM (subscriber identity years. Financial services companies, grow, and we are actively working to pro- module) cards, a technology that will likely technology vendors, consumers and vide this service to our participants.” become the front-runner for mobile telecommunications providers all are In the past year, PULSE has been evalu- payments. anxiously awaiting broader adoption of ating a variety of solutions to identify the Internationally, mobile payments seem both technologies. one that would best fit participants’ needs, to be ahead of the curve compared to the and is preparing for a pilot study of a U.S. Telstra, National Australia Bank and Mobile Banking PULSE mobile banking solution. More Visa reported results that “exceeded expec- As recently as six months ago, the information will be provided in the pages tations” from a recent three-month trial of number of consumers actively using their of PULSATIONS as it becomes available. mobile contactless payments in Australia. mobile phones to access account informa- In the trial, consumers used their mobile tion was expected to reach 20 million by Mobile Payments phone to purchase goods and services by 2010, according to the Online Resources The 2008 Debit Issuer Study noted waving it over a participating merchant’s white paper, The Mobile Banking Era – that, while the use of cell phones as pay- reader. Additionally, the Bill & Melinda 2009 Outlook. But the economy has been ment devices holds interest for almost Gates Foundation recently provided grant tough on everyone, as well as on technol- every financial institution, the solutions are money to work with mobile operators, All debit all the time ogy, and now many analysts believe 2012, still in the development stages. First financial institutions, government organi- or even 2013, is a more likely scenario for Annapolis Consulting estimates that fewer zations and technology companies to widespread adoption. than 2 percent of mobile device owners encourage the expansion of mobile finan- “PULSE views mobile banking as a actually use them for mobile payments. cial services for the world’s unbanked poor. valuable customer service resource for One problem has been the lack of standard- While it remains to be seen whether participants that can ease the burden on ization among carriers and applications. mobile payments are the future of elec- phone service representatives, attract new But a greater problem may be determining tronic transactions, observers throughout account holders and help current ones how to build revenue into what consumers the industry will be closely watching manage their accounts,” said George expect to be a free service. developments in this area.

Discover ® Card Goes Mobile iscover Card has launched a mobile “Whether by telephone, Internet or now version of its DiscoverCard.com Web mobile phone, Discover Card is committed Dsite, enabling cardmembers to man- to providing cardmembers with the ser- age their credit card accounts directly vices they need at the time, place and from their mobile phone’s browser. The site method they choose,” said Sarah Alter, vice offers a simplified version of the account president of e-business and new markets at summary and includes these functions: Discover Financial Services. • Make a payment Discover.com Mobile can be accessed • View recent transactions by visiting m.discover.com from any mobile • View recent and pending payments device that supports web browsing. To • View rewards activity learn more, visit www.discover.com/ • Enroll in 5% Cashback Bonus® mobile. program

All debit all the time 8 DNMDEBIT NEWS MINUTE From Cash Machine to Sales Channel

Bank Takes Personalized Cards Engender Loyalty st Cardline Advantage of 21 Consumers are more likely to use customized payment cards when making purchases or payments, according to Century ATMs Adam Elgar, president of Serverside Group LLC. Elgar says the time invested by an individual to create a custom card In today’s economy, past payment behavior and match that design that they like causes them to use with one of eight special offers, such as the card significantly more often than customer service and automobile loans, home equity lines of standard-issue cards. Zions Bancorp has credit and high-interest certificates of reported a 15 to 20 percent uplift in card retention are more deposit. It is used on roughly 200 of the use with owners of customized cards. bank’s ATMs. important than ever to The marketing pitches appear on the financial institutions. ATM screen while the user is waiting for Checks Remain Fraud Target the machine to dispense cash. The Digital Transactions machine then prints a reference number Check-related fraud remains by far the on the receipts of cardholders who most common type of payment fraud irst Tennessee Bank, a subsidiary express an interest in the offer. The cus- reported by corporate financial officers, of First Horizon National Corp., is tomer can then take the receipt to any according to the Association for F using its ATM network not only to First Tennessee branch to discuss the Financial Professionals. Sixty percent dispense cash and collect deposits, but as offer further with bank personnel. of the organizations that sustained losses a strategic, targeted marketing channel Windland says the ATM has proven identified checks as the payment method through which it directly communicates to be an effective and inexpensive mar- most responsible for them, followed by with existing and prospective customers. keting tool. credit and debit cards at 20 percent. First Tennessee’s ATM-based marketing “We see response rates of two to five “Thieves continue to target the weakest program was profiled in the December 18, percent on these offers, compared to one- link, which is paper checks,” said Nasreen 2008, issue of ATM & Debit News. The half to one percent with mass mailings,” Quibria, the AFP’s director of payments. bank operates more than 500 ATMs in said Windland. “It’s also cheaper, costing Tennessee, and these machines process just 10 cents per contact, compared to 42 approximately 2 million ATM transactions cents for a stamp alone with direct mail.” New Mexico Banks per month. First Tennessee even makes offers to Help Unemployed “Each month, we have roughly 2 million non-account holders, says Windland, who ICBA Newswatch Today opportunities to communicate with con- notes that individuals who regularly use The Independent Community Bankers sumers and potentially make a sale,” said his bank’s ATMs are offered CDs and Association of New Mexico has entered Patricia Windland, vice president and other products that might be the start of a into an agreement under which its manager of ATM installations for First deeper relationship. She believes the tool member banks will waive “foreign” ATM Tennessee. has been a great way for First Tennessee fees when the state’s Unemployment This untapped potential led the bank to to differentiate itself from the competition. Insurance Prepaid Debit Cards are used deploy Diebold’s Campaign Office market- “Our results speak for themselves,” to withdraw cash at ATMs. Bank of ing software, which operates on a she said. America issues the pre-paid debit cards Windows-based platform. The software to New Mexico unemployment insurance enables First Tennessee to identify claimants. Other fees may still apply. individual cardholders, analyze their

9 w w w . p u l s e - e f t . c o m PULSE to Pilot Internet PIN Debit (continued from page 1)

“Internet-based PIN debit has tremen- “In addition to reducing fraud losses The PIN itself is not captured on the dous potential value for consumers, who and chargebacks associated with online consumer’s PC, nor is it transmitted over enjoy the convenience of debit cards,” said purchases, Internet PIN debit is predicted the Internet. Instead, Acculynk captures Judith McGuire, PULSE senior vice to increase online debit purchase transac- and encrypts data associated with the PIN president, product management. “We also tions,” said Acculynk President Nandan entry process, then transmits the encrypted expect this new payment option to provide Sheth. “These incremental transactions data in a separate message from the mes- significant value to both merchants and will come from consumers who have PIN- sage used for the card number. This makes card issuers.” only debit cards, individuals who are it extremely difficult for fraudsters to cap- currently hesitant to use signature debit ture any information that could be used to How it Works online, and consumers who are inclined to compromise a consumer’s debit card or Acculynk’s PIN-pad technology inte- use alternative Internet payment methods.” account. In addition, producing a counter- grates directly into the merchant checkout Acculynk’s Internet PIN debit service feit card would be virtually impossible process, providing a seamless experience utilizes many advanced security features, because the magnetic stripe data is not for online shoppers. The consumer will be including a graphical, scrambling PIN pad captured during the online transaction. aware of the PIN entry option only if his or for the secure entry of PIN data. The PIN “PULSE believes that Internet PIN debit her card is enabled for PIN debit. The con- pad numbers appear on the purchaser’s could provide significant security and other sumer will have the choice of entering their computer monitor in random order, and the benefits to cardholders, e-commerce mer- PIN or completing the purchase as a signa- numbers re-scramble each time the card- chants and financial institutions,” said ture debit transaction, similar to the holder clicks on a digit of his or her PIN McGuire. “Our pilot program will help us point-of-sale environment. using the mouse. determine whether this product delivers a favorable cardholder experience.” p Cash No Longer King

rowth in debit and credit card “Of those who have reduced their cash cite reasons such as security, lack of fees, payments has eroded check pay- use, 97 percent are shifting to credit, debit their inability to remember a PIN and, in Gments in the U.S. and is now affect- or gift/prepaid cards instead,” said Ajay some cases, rewards. ing consumers’ use of cash. According to Nagarkatte, managing director of BAI The study was co-sponsored by PULSE. additional findings from the 2008 Study of Research. For more information, contact Chris Allen Consumer Payment Preferences, released Among debit cardholders, 45 percent with Hitachi Consulting at 617-753-9250 or by BAI and Hitachi Consulting in February, say they prefer PIN, while 35 percent prefer BAI’s Nagarkatte at 312-683-2486. 41 percent of consumers say they use cash signature and 20 percent have no prefer- less often today than they did two years ence. Those who prefer PIN debit consider ago. it more secure, faster and easier to use. Combined, signature and PIN debit Consumers preferring signature debit accounted for 37 percent of in-store payments in the 2008 study, compared to just 21 percent in 2005. Credit card in-store DEBIT payments increased from 19 percent to 22 ATM / Debit Card percent over the period, while gift/prepaid DEBIT card usage has stayed steady at 4 percent. ATM / Debit Card In contrast, cash and checks now account for 29 percent and 8 percent of in-store payments, respectively, compared to 39 percent and 18 percent in 2005. 0000 1234 5678 0000 0000 1234 5678 0000 M A BROWN M A BROWN

All debit all the time SM 10 Top 10 Biggest Emerging Fraud Risks

A range of highly publicized data security breaches significantly impacted the financial services industry in 2008. What does the future hold in store? Here are the Top 10 ways hackers, phishers and other criminal types will be looking to commit fraud in 2009.

10. Insider Threat 5. Check Image Fraud Given today’s economic conditions, people are going to be more Online check images provide criminals with the victim’s account tempted to steal inside data. Proper monitoring of all employ- number, signature, address and phone number. Using this ees, vendors and contractors with a “separation of duties” plan information, the criminals can either make counterfeit checks, will minimize insider theft, but a determined insider is one of or create online payment accounts. Financial institutions will the hardest types to stop. likely be liable for all losses since the consumer did not divulge the information. 9. The Phone Makes a Comeback With online security continuing to improve, many fraudsters 4. The Evolution of Phishing will turn to the phone – specifically, to call centers and voice According to Terry Gudaitis, Ph.D., cyber intelligence director response technology – where authentication procedures are at Cyveillance, a growing threat is SMS phishing or “Smishing.” generally less stringent. These customer access channels need This involves text messages sent over cell phones. These industrial-strength security. attacks will create credibility issues and will impact financial institutions with mobile banking services, especially as custom- 8. “Drive-by” Attacks Deliver ers become more reliant and trusting of their mobile phones. “Drive-by attacks that surreptitiously deliver keylogging Trojans to customers’ computers are becoming identity thieves’ weapon 3. “Laser-Guided” Precision Strikes of choice,” according to Tom Wills, Javelin Strategy & Research Mike Rothman, senior vice president of Security Strategy at senior analyst. Machines are infected when users visit bogus eIQnetworks, sees “laser-guided” strikes aimed at getting financial institution sites to which they have been directed by consumers to divulge personal information as the next front phishing e-mails, or when legitimate sites are hacked. line. “They will use data already collected from previous attacks … to build their attacks,” he said. Examples include online 7. Low ‘n’ Slow Attacks applications for credit or business loans. Victims will not realize The recent breach of a grocery chain is the most famous they have fallen prey until it is too late. example of a “low ‘n’ slow” attack. The attackers gathered information on 4.2 million customers over a three-month period, 2. Check Fraud then conducted more than 1,800 cases of fraud before authori- The area of check fraud is also becoming much more sophisti- ties were alerted. These criminals realize that, in many cases, cated, and the underlying technology hasn’t kept pace with data is evaluated in a two- or three-day period, not over weeks fraudsters. Experts believe there won’t be a solution for paper or months. Financial institutions avoid such attacks by check fraud until the check itself can be authenticated via a evaluating data daily, weekly, monthly and yearly. chip or code. 6. “Zero Day” Attacks 1. ATM Fraud A zero day attack hits the target in a sudden and catastrophic According to Paul Kocher, president and chief scientist of way, rather than building over time, as in a large-scale bank Cryptography Research Institute, the number one area where network attack, for example. This attack strategy does not give financial institutions will see fraud growth over the next financial institutions time to develop a response or stop the year is ATMs. “This is because the ATM delivers the goods to attacks from occurring. These attacks may be much more consumers immediately, which is exactly what the fraudsters devastating than traditional attacks that allow time to solve want – the cash, rather than a large-ticket item they have to them before anything too serious happens. then fence or resell.”

Article provided by BankInfoSecurity.com, provider of information security and risk management education, training and news for the financial industry.

11 p u l s e n e t w o r k . c o m PRESORTED FIRST CLASS U.S. POSTAGE 1301 McKinney, Suite 2500 PAID Houston, TX 77010 HOUSTON, TX PERMIT NO. 173 Return Service Requested

PULSATIONS is produced bi-monthly by PULSE. Please send information for the newsletter to: Anne Rhodes, PULSATIONS Editor PULSE 1301 McKinney, Suite 2500 Houston, TX 77010 [email protected] PULSATIONS can be viewed on the PULSE Web site at www.pulsenetwork.com/PULSATIONS.

IN CLOSING

Mentoring Through Service JA Worldwide™ is the world’s largest PULSE and Discover Financial Services organization dedicated to inspiring and believe in being good corporate citizens, preparing young people to succeed in a particularly in the communities where global economy. Through a dedicated vol- employees live and work. In April, PULSE unteer network, JA provides educational volunteers served as role models and programs that focus on business, citizen- mentors by teaching important business ship, economics, entrepreneurship, ethics, topics to local students. character, financial literacy and career Through a partnership with Junior development. Achievement (JA), employees participated Discover has partnered with JA since in “A Day with JA” and presented the 2005, providing funding and employee organization’s educational programs at volunteers at schools across the country. a Houston elementary school.

Seconds with... Judith McGuire Senior Vice President, Product Management

Winning Payments Products In this issue of PULSATIONS, network ers who don’t have access to signature cardholders enjoy the convenience and participants can read about two products debit or credit, or don’t want to use them security of direct bill payment, financial PULSE is preparing to pilot: Internet PIN online. It’s a win-win-win proposition. institutions receive interchange revenue, debit and mobile banking. When consider- The mobile banking product we are and billers get dependable, online authori- ing potential new products, PULSE looks testing also benefits consumers, providing zation and settlement at a low cost for technologies that expand PIN network the speed and convenience of account compared to other card-based payments. utility in a way that benefits debit card alerts via text message. For issuers, the PULSE will continue to review product issuers, merchants and consumers alike. product will be inexpensive, while poten- developments, with an eye toward offering In fact, I believe that payment products tially increasing customer retention by technologies that do more than just benefit have to benefit all of the major stakehold- providing a service that account holders us as a network. In order to make the ers they touch in order to be successful. find valuable. grade, these technologies will have to have We believe Internet PIN debit will do PULSE has always adhered to this advantages for all parties involved. just that: reduce disputes – and thus costs philosophy on payments products. PINless – for issuers and merchants, and provide debit, introduced in 1997, has universal an additional payment option for cardhold- value. With this alternative to ACH,

All debit all the time SM p u l s e n e t w o r k . c o m