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The Mobility of Fraud

Michael Loox, CFIDirector of Loss Prevention & Safety

Coffee Bean and Tea Leafmloox@coffeebean.com

David JohnstonSr. Director, Loss Prevention

Dunkin’ Brandsdavid.johnston@dunkinbrands.com

Understanding the Challenges of Mobile, Loyalty and Virtual Initiatives

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Objectives

• Today’s changing payment landscape• The challenges that may lie ahead• Identifying fraud in the mobile environment• Getting ahead of the curve

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The Coffee Bean & Tea Leaf® in the World Today

52 Years

27 Countries

1010 Stores

14,000 Passionate Team Members

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• 11,300 Dunkin’ Donuts restaurants in 36 countries• 7,500 Baskin-Robbins restaurants in nearly 50 countries• 1,200 Franchise owners and 50 international partners• Franchisee-reported sales of approximately $9.8 billion (2014).

Dunkin’ Brands is home to two of the world’s most recognized and loved brands:

Coffee Fact: Did you know that a single coffee tree produces only an average of 1-1.5 lbs. of roasted beans annually?

Ice Cream Fact: Baskin-Robbins is part of 2 Guinness World Records – Most cones scooped in a minute (19 - Mitch Cohen, Franchisee) and Largest Scoop of Ice Cream (8,865 lbs. in 2005)

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Changing Payment Landscape

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EMV: Friend or Foe?

• Europay, Mastercard and Visa standards to protect consumers against fraud

• Inclusion of a Chip & Pin Technology to make counterfeiting cards difficult

• Expectations is for retail industry to be compliant by October 2015

• Merchant absorbs more liability

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EMV: Friend of Foe?

• 10 Million devices require change in U.S.

• Issuers pushing for chip-enabled card distribution – hit 10/1 Liability Shift

• Card variations to exist until ?2017?

• Online fraud expected to increase– UK had upwards of 150% increase– Increase in Mobile Fraud

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How would you like to pay?

Mobile Wallets Google Wallet / Apple Pay / Visa Checkout

200+ variations across the globe*

Contactless Payments NFC / QR Codes / SMS Payments Mobile Applications (Loyalty and Private Label)

Online Payments Mobile / Advanced Ordering Applications

Gift Cards and Merchandise (CNP environment)

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The Mobility of Fraud

• Mobile Fraud– Virtual Activations, Value reloads, Ordering

• “Account Take Overs”– Mobile Accounts with Stored Value– Loyalty Accounts

• Digital Fraud Schemes– Coupons– 3rd Party Gift Card Sales

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Mobile FraudUsing stolen credit card numbers to put value on a gift card or make a purchase in an above store transaction. (Card not present environment)

Expansion into virtual card activations, online reloading can increase the potential for fraud.

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Mobile Applications FraudSchemes involving private mobile applications involving Ordering, Payment, Loyalty Programs.

“Account Takeovers” – when an outsider gains access into a customer’s account and either “leeches” or “takes over” their account.

– Pretends to be the consumer and uses value on the app for purchases

– Changes access to the account and controls value– Removes value (de-registering) and re-registers the value on

another account

Consumers think…Data Breach

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Loyalty FraudBenefits of Loyalty Programs- Economics

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Loyalty Fraud: Then & NowCosts of Loyalty Programs

• Customer abuse- multiple accounts, exploit rewards• Credit card / Gift Card fraud through app• Employee theft- more avenues and opportunities:

point shaving, gifting points, misuse of loyalty redemption codes

• Value Transfers: e-gift and loyalty points• Real Time Redemptions• No App Needed! Link to phone #

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Digital Schemes

• Digital marketing can cause greater concern with fraud

• Opens 3rd party fraud channels and affects brand and consumer loyalty

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Staying Ahead of the Curve

Be a continued learner and partner• Learn your digital environment• Understand industry trends and future

applications

• Partnerships with IT and Marketing

• Get involved in Strategic discussions

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Staying Ahead of the Curve

Understand Proactive Prevention• IT Capabilities to thwart attempts

– Forced account log-ins– “Bot” applications to automate attempts or

uncover account credentials

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Example of a Credential “Bot”

Courtesy of Krebs on Security

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Staying Ahead of the Curve

Understand Proactive Prevention• Proper controls and restrictions

– Expiration of coupons or loyalty points– Account thresholds– Strong customer password/multiple

authentication process

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Staying Ahead of the Curve• Stay current in the payment landscape• Work with cross-functional teams• Think Sales first, but understand exposure• Changes in investigative process• Be ready for constant change

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Thank you for your timeand enjoy the conference