In our Vendor Spotlight at MAC 2016, Jose Caldera, IdentityMind VP of Marketing & Product, presented a collection of use cases and examples of how IdentityMind clients are applying our platform for merchant risk, fraud prevention, anti-money laundering, and terrorist financing prevention. The session provided a great introduction to the benefits of our platform, and we've provided a synopsis of it here for those who missed the session, or were curious for more information.

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IdentityMind Global™ ©2016 All Rights Reserved
Risk Beyond Acquiring
The Importance of Merchant Risk Across FinTech

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About IdentityMind
IdentityMind Global’s core technology, Electronic DNA™
(eDNA™), builds digital identities for both consumers and
business and evaluates their reputation. Two fundamental
aspects make this technology a superior solution to
prevent account origination fraud:
1. It describes and recognizes an identity based on its
digital attributes, which are dynamically validated and
constantly updated in real-time as more transactions
are evaluated, making sure the information is always
relevant.
2. It associates the identity's digital attributes with an
aggregated reputation value based on financial
transactions behavior.
© IdentityMind Global 2016

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AGENDA
• Quick Overview of IDM’s view on Merchant Risk
• Merchant Risk in FinTech: 3 Use Cases
Use Case #1 Merchant Sentinel: An alternative strategy to De-Risk.
Use Case #2 Payment Service Provider managing risk portfolio.
Use Case #3 An alternative currency goes into payments.
• Conclusions
© IdentityMind Global 2016

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IDM Takes on Merchant Risk
• Take Control: Underwriting and Monitoring
o Lots of effort before opening an account and lots of effort while
account is operational
• Merchant Sentinel: Collaborative
o Compliance collaboration framework for high-risk merchants and
Processing Banks/Payment Service Providers
• OnBoard for Businesses
o The intersection between BSA compliance and account origination
protection for immediate decisioning
© IdentityMind Global 2016

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Use Case #1:
Merchant Sentinel
An Alternative Strategy to “De-Risk”
CLICK HERE TO LEARN MORE
© IdentityMind Global 2016

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High-Risk Industries
Regulatory penalties are increasing year
over year
Increasing enforcement actions
● $12 Billion BSA/AML penalties since 2011
● Operation Choke Point
● De-risking response
Many businesses affected
● “High Risk” includes legitimate businesses
● Significant opportunities for banks the have the right
platform for risk mitigation and monitoring
High Risk Industries by Market Size
Multi-Level Marketing
$32 Billion
Money Transfer Networks
$25 Billion
PayDay Loans
$46 Billion
Online Gaming
$37.6 Billion
© IdentityMind Global 2016

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Use Case #1
Customer: A Top 40 Bank in the United States
Support for new Risk Category:
Bank servicing digital currencies exchanges with potential
serious implications for money laundering and criminal activity
What was needed:
A monitoring program that offer:
1. KYCC data – consumer transactions
2. Transaction Monitoring for suspicious activity
3. Reporting verification
4. Aggregated consumer data across portfolio
© IdentityMind Global 2016

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Deployment
Virtual Currency
Firms
3) Transaction info in real time via API
2) KYC, Fraud Prevention, AML & Risk
Monitoring Services
Bank
© IdentityMind Global 2016

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Use Case #1 - Results
Results:
● Additional Business by achieving peace of mind through adequate transparency
● Confident coverage without operational impact based on automated alerts on
suspicious activities.
● Reduction of time for sanctions screening analysis based on detailed user
visibility which focus research and minimizes false positives
● Quickly identify common user activity across merchant portfolio, otherwise too
time consuming to even attempt
“IdentityMind saves us an immense amount of time and
effort in identifying end users with activity across our
merchant portfolio”
Bank’s BSA Compliance Officer
© IdentityMind Global 2016

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Use Case #2:
PSP Managing
Risk Portfolio
Aggregated and centralized fraud
prevention
© IdentityMind Global 2016

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Payment Fraud
Driving Factors
● EMV rollout in U.S. will shift fraud
- Fraud reduction: UK had 70% decline in 8 years
- Increase CNP fraud: Already 45% of fraud in U.S.
● Emerging Technology
- Mobile Payments: 1.3x more fraud than computers
- Near Field Communication (NFC): Apple Pay,
Samsung Pay
● Cross-border fraud
- 25% increase in cross-border fraud from 2013 to
2014
- 47% of fraudulent transactions on U.K. credit cards
took place in the US
The U.S. has 51% of the world’s
card fraud ($7.1B) but only 24% of
the world’s card volume
Direct Debits
1.3%
eWallet
0.8%
Merchant Fraud Loss
Credit/Debit Cards
0.5%
Bank Transfers
0.1%

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Use Case #2
Customer: European Payment Service Provider
Take Fraud Prevention Operations
PSP operates with clients in Europe but most consumers from
the US.
• Growing fraud rates across portfolio.
• Clients going international with lack of cross border
payments risk expertise
• Fraud tools cobbled together
What was needed:
A platform that could offer centralized fraud prevention for
diverse set of requirements.
Leverage similarities across merchant base
© IdentityMind Global 2016

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Use Case #2: Deployment
Merchants PSPs
Payment
Processors
Transaction
Processing
Transaction
Anti-Fraud
Merchant
Application
Underwriting
© IdentityMind Global 2016

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Use Case #2 - Results
Results:
● Operational within one month
● Aggregated chargeback rate drop by
75%
● Cost savings by consolidating tools into
single platform
● Cost savings by reducing operational
cost
● Growing merchant portfolio
© IdentityMind Global 2016

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Use Case #3:
Alternative Currency
goes into
Payments
Aggregated and centralized fraud
prevention
© IdentityMind Global 2016

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Alternative Currencies
To the Moon!
Payments are
growing rapidly,
especially outside
the United States.
How Bitcoin Activity Stacks Up Against
Other Payment Networks
Average daily transaction volume (in millions of U.S. Dollars)
$400M
$200M
$300M
$100M
$397M
$397M
$289M
$216M
http://letstalkpayments.com/visa-mastercard-face-increasing-threat-local-networks-crypto-currencies/
Users By Location
International US
Virtual Currencies
● Bitcoin
● Ripple
● Digital Gold Currency
● Linden Dollars

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Use Case #3
Customer: Canadian provider of alternative currency
backed by Gold
Turning Currency into Payment Options at
Merchants
Starts onboarding merchants to accept their currency
as a form of payment
• Translate acquiring practices however not as strict.
Liability is quite different.
• Heavy scrutiny for Money Laundering
• Small merchants – Fraud prevention
What was needed:
A platform that can offer business onboarding with
heavy focus on money laundering.
© IdentityMind Global 2016

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Use Case #3: Deployment
Merchants
Onboarding
Payments In
Alternative Currency
Alternative Currency Processor
Alternative Currency Digital Wallet
Transaction Monitoring
• Money Laundering Suspicious Activity
• Merchant Fraud:
• Avg ticket deviation
• Collusion clients/merchants
• Collusion merchants/merchants
• Volume Analysis
• Consumer Fraud
• Funding wallet
• Account Fraud
Business
KYM, KYMA
Consumer
KYC, KYCC
Onboarding
Consumers
© IdentityMind Global 2016

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Use Case #3 - Results
Results:
● Integrated staged onboarding for
merchants in real-time
● Merchant’s adoption of alternative
currency is slow
© IdentityMind Global 2016

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Conclusions
• FinTech is moving fast. Merchant Risk practices common on the
acquiring world are being selectively adopted.
• Self inflicted “De-Risking” is leaving a very profitable opportunity
for acquirers with deep monitoring practices.
• Online onboarding is real time and less concerned about
Financial Risk
• KYCC is being pushed from the banks downstream given AML
regulations
• Financial terrorism will continue to drive extended visibility
across portfolio actions.
© IdentityMind Global 2016

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Learn More
For more case studies and in-
depth content related to
onboarding and acquiring risk,
CLICK HERE
© IdentityMind Global 2016