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May 22nd, 2019

New Method for Increasing Approvals with Enhanced Data Sharing

AUTHENTICATION WEBINAR SERIES

DATA ONLY FLOW

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Today’s Speakers

Director, Product Development, Mastercard

Bryan Kim Matthew Gulosh

Senior Program Manager, CardinalCommerce

Vice President, Product Management, Mastercard

Diego Szteinhendler

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q What is data only?

q What are the benefits of data only?

q Why is it important for merchants & issuers to participate?

q Why are vendors like CardinalCommerce supporting data only?

q What do you need to do to participate today?

Agenda

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Ecommerce Retail Sales Set to Double in the Next Five Years

Source: Business Insider Intelligence estimates, Ecommerce Foundation, eMarketer 2018 4

PAYMENT LANDSCAPE

136 142 146 170 199 230 260 299340

390453

515593

680

777

885

1,005

4% 4% 4% 4% 5%5% 6%

6%7%

8%9%

10%

12%

13%

15%

16%

18%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

200

400

600

800

1000

1200

1400

1600

20072008

20092010

20112012

20132014

20152016

20172018E

2019E2020E

2021E2022E

2023E

Billions ($) Percentage of total retail sales

US ECOMMERCE PAYMENTS VOLUME

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5

4

5.3

6.5 6.9 7.2

2016 2017 2018 2019 2020

ONLINE CARD FRAUD TO RISE TO USD 7.2BN BY 2020 2

98%

82%

Physical Approval rate1

Digital Approval rate1

Low Digital Approval Rates & High Online Card Fraud

DIGITAL APPROVALS

1. MASTERCARD. OCTOBER 2017 THROUGH SEPTEMBER 2018 DATA, ACROSS ALL CARD TYPES. 2018.2. LexisNexis. The 2017 True Cost of Fraud Report.

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False Declines for Payment Card Transactions

Totaled$331 billion in

20181

$331 Billion 32%

32% of Falsely DeclinedConsumers Stop

Shopping with that Retailer2

3x

False Positive Decline Rate is

Over 3 times the Rate of Existing

Card Fraud3

1.US Payment Forum, Card-Not-Present Fraud Analysis 2017 2.JAVELIN Study 2018 3.JAVELIN False Positive Study

False Declines LandscapeFALSE DECLINES

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Enhance Authorization Message with

Data Only

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What is Data Only?

DATA ONLY

Data Only is a transaction flow through which the merchant can share data with the issuer via EMV 3DS to influence approvals on Mastercard

branded transactions while guaranteeing a frictionless experience for the cardholder

Frictionless cardholder experience

Decrease online card fraud

Increase approvals

Reduce false declines

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10x more data

Merchant signals through 3DS service provider to initiate a Data Only

transaction with MSG Category=80

EMV 3DS authentication request

“Data Only” request

Merchant & Third-Party Providers

ID CHECK

Digital Transaction Insights Issuer

How does Data Only work?

DATA ONLY

Initiate all Data Only transactions with your EMV 3DS provider

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What are the benefits of Data Only?

DATA ONLY

Enhances authorization message improving decisioning, increasing approvals & reducing false declines

Reduces latency compared to a full 3DS authentication cycle

Guaranteed frictionless experience for cardholders

Leverages existing EMV 3DS implementation

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EMV 3-D Secure Full Authentication

Data Only

AlwaysFrictionlessExperience

Influence Issuer Approval Decision

No Transaction Latency

Liability Shift Real-time Mastercard Risk

Assessment

Potential for step-up

challenge

What is the difference between EMV 3DS & Data Only?

DATA ONLY

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What are the outputs of Data Only to the issuer?

DATA ONLY

Data is shared with the issuer through Digital Transaction Insights, three bytes of data placed in the authorization message from Mastercard’s Smart Authentication engine to improve the

issuer’s decisioning on that transaction

“Data Only” request Digital Transaction Insights Issuer Merchant

ID CHECK

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Code Mastercard Reason Code Description (byte 2)A Risk Event - Suspicious Account ActivityB Risk Event - Unknown Device/Account RelationshipC Risk Event - Device or Profile Information associated with fraud eventD Risk Event - Recent High Risk change to Device or Profile InformationE Risk Event – Recent change to Device or Profile InformationF Risk Event - PAN associated with fraud eventG New Account or Insufficient DataH Merchant/ Acquirer: Merchant (fraud) risk high (assessed by Mastercard)I Merchant/ Acquirer: Merchant (fraud) risk low (assessed by Mastercard)J Environment: Good/ Known IPK Cardholder: Billing address – prior history establishedL Cardholder: Email address – prior history establishedM Cardholder: Phone number – prior history establishedN Cardholder: Shipping address – prior history establishedO Cardholder: PAN behavior established high trust in the current transactionP Environment: Device knownQ Environment: Account established on DeviceR Environment: Session - Trusted/normal/ innocent sessionS More than one Cardholder category establishedT More than one Merchant/ Acquirer category establishedU More than one Environment category establishedV Co-occurring: established link between Cardholder and Merchant/ AcquirerW Co-occurring: established link between Cardholder and EnvironmentX Co-occurring: established link between Merchant/ Acquirer and EnvironmentY All three categories establishedZ Most Trusted (future use)

Reason Code from Mastercard (defined letters A to Z)

Risk Assessment from Mastercard(0-9)

Reason Code from Merchant

How can the issuer improve decisioning with this data?

DIGITAL TRANSACTION INSIGHTS

Digital Transaction Insights 3 bytes of data to issuer

HIGHER RISK

LOWER RISK

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How can you participate in Data Only?

DATA ONLY

• All merchants enabled for EMV 3DS can initiate Data Only transactions through their 3DS service provider

• Once configured for EMV 3DS, merchant must register with the Mastercard Identity Check program

Merchants

• All issuers in North America are enabled to receive Data Only insights known as Digital Transaction Insights in existing authorization message

• Mastercard has enabled +1,000 issuers globally to act on Digital Transaction Insights

Issuers

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AUTHENTICATION WEBINAR SERIES

Thank You! Please contact us for any additional information

Webinar recording & deck will be sent out to all participants

authentication@mastercard.com