Data Analytics in the Corporate Payment Industry

Bret Hansen Vice President of Technology Services, U.S. Bancorp

Agenda
The Daily News Classifications of Complex Event Processing Maximizing Control, Compliance, Cost Savings Through Complex Event Processing Increase Business Stability & Opportunities Through Complex Event Processing U.S. Banks Complex Event Processing Case Study

THE DAILY NEWS

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- Since 1879

A former Parks and Recreation director is facing fraud charges after making unauthorized personal purchases with a corporate credit card. She charged over $67,000 of unauthorized purchases. The head of Los Angeles Countys Probation department said he has referred allegations of credit card fraud by his employees, as department officials are... Struggling to account for $79.5 million in County funding. Univ. of Maryland employee was convicted for $300,000 credit card fraud from the school over a period of two years. Ottawa bank employee charged with credit card fraud. The employee was ordering new credit cards for closed accounts.

Do you want to save your company millions of dollars a year? Do you want to keep in good standing with your shareholders and customers? Do you want to prevent your company from failing? A well defined Complex Event Processing solution can do these things and more

Two Classifications of Complex Event Processing

Computation-oriented CEP is designed to execute on-line algorithms Detection-oriented CEP is designed to detect event patterns.

Maximizing Control Through CEP

Ford writes off $1billion in unnecessary inventory because the R&D department wasnt talking to the Purchasing department A Lehman Brothers employee had a keystroke error which cost the firm $6 million in trading losses W Hotel loses $175,000 honoring 413 on-line reservations for 749 nights posted at $25 instead of $259 PacBell is fined $27 million for mishandling and error

Maximizing Control Through CEP

Maximizing Business Control Corporate Costs Corporate Policy Corporate Standards Corporate & Government Regulations

Maximizing Compliance Through CEP

Maximizing Compliance Defining Compliance Rules Reduce Risk Automated Continuous Monitoring

Maximizing Cost Savings Through CEP

High cost to manually audit transactions Labor Intensive Inefficient Error-prone
Program Size Average Transaction Size1 Total Transactions per Year

$100 MM $315 $317,460

Cost to Audit per Transaction2 Audit Sample Size Number of Audits Annually

$2.38
20% 63,492

Annual Cost of Audit per Year

$151,111

References: 1 2010 Purchasing Card Benchmark Survey Results, Palmer & Gupta 2 NAPCP Understanding the Processing Costs and Related Costs

Proactively Identifying Business Opportunities Auditing your businesss data can Identify new business partners Identify new vendors to solve problems Identify cost savings

Increase Business Stability

Automated Auditing Detect fraudulent activities real-time by associating time, people, and events together Reduce surprises Reduce cost of manual auditing Increase reliable outcome of error prone manual process

Increase Business Stability

Continuous Auditing modeling Monitoring business processes Consistent Auditing trending Ensure corporate cash positioning is strong

How to Mitigate These Issues?

1 2 3

Reign in your audit costs? Reduce your risk exposure? Grow your commercial card program?

U.S. Bank Payment Analytics

What is Payment Analytics?

Enhances auditing practices by providing 100% commercial card transaction monitoring Alert: Notifies stakeholders via email when rule violations occur Case: Allows users to track progress towards resolving an issue and violations over time Enhanced Reporting: Provides information that tracks credit card spending trends and data for forecasting purposes

How Does Payment Analytics Work?

RULES

Payment Analytics Transaction Alerts

Cases

Moving from Reactive to Proactive

$$$

Value of Action

Detects

relationships
between transactions over time

Proactive

Reactive

Event(s)

Issue(s)

Problem(s)

Loss(es)

Time
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The Brains behind Payment Analytics

Defined templates contain logical arguments (i.e., rules)
WHEN THEN statements

Client assigns parameters to the rules

WHEN a transaction meets all the conditions of the rule THEN create a response Alert: Notifies stakeholders via email when rule violations occur Case: Allows users to track progress towards resolving an issue and violations over time Enhanced Reporting: Data is updated as conditions are met

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Available Rule Templates

Unauthorized Merchant Categories Merchant Watch List Transactions Close to Single Purchase Limit Large Spend Increase over Average Spend Excessive Use of Convenience Checks Excessive Cash Withdrawals Weekend or Holiday Purchases Account Activity Exceeding Limits

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Benefits
1 2 3 4

5 6 7

Improve Compliance: Manage out-of-policy spend and detect fraudulent activities Enhance Control: Audit 100% of transactions versus a random sample Reduce Risk: Route flagged transactions to the appropriate personnel for review Increase Efficiency: Streamline the audit process with rules that are consistently and continually applied across all transactions Boost Cost Savings: Automate routine audit tasks Broaden Visibility: Record all case details in one central database Expand Revenue Share Opportunity: Realize growth incentives by identifying spend leakage

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Contact Information
If you have further questions or comments:

Bret Hansen Vice President of Technology Services, U.S. Bancorp bret.hansen@usbank.com 303-713-6529

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