Ned Hayes [00:00:06] Welcome to SparkPlug, where we talk to smart people working at the intersection of business and technology. Brought to you by SnowShoe making mobile locations smarter, SparkPlug is happy to welcome Julie Ferguson, CEO of the Merchant Risk Council, and we look forward to talking about fraud prevention and online and offline scenarios, the future of retail merchant risk in the COVID environment, and how she sees the economy coming back post-COVID. So. Welcome, Julie.

Julie Ferguson [00:00:37] It’s great to be here. Thank you Ned. 

Karen Jensen [00:00:38] Hi Julie, welcome to Spark Plug. I’d like to start off by hearing a little bit about your history. What path brought you to the head of Merchant Risk Council. 

Julie Ferguson [00:00:48] I started my career early on at IBM and back in the 90s, and I saw the evolution of the internet, and so I started an e-commerce payment company. The first day we went live with online payments in 1995, the very next day we saw the first fraudulent transaction. Within two years of that, it was clear that the industry needed to get together and collaborate because all of the fraudsters were. And so a group of us formed what is known today as the Merchant Risk Council and started sharing best practices and tax tactics on how to fight fraud and what the fraudsters were up to. And the organization has grown over the past 20 years and about nine months ago, and the MRC was looking for a CEO and they actually asked me if I’d be interested and I tossed my hat in the ring and the rest is history. 

Ned Hayes [00:01:47] Well, so so what? What tactics existed back in the day when the Merchant Risk Council first started? 

Julie Ferguson [00:01:54] There weren’t any. So e-commerce fraud rates were between 1.5-3% of e-commerce sales volumes. Companies were just starting to go online, and so they would just put up a website. It was in the days when everybody was just starting to put up websites and sell stuff. And, you know, most retailers had no experience in the fact that for card not present fraud, you would be liable. And so all of a sudden there were there were reports and some of the bigger retailers 10K filing saying we had this massive fraud loss. And so it was clear that there was a huge problem. And that’s really the fraudsters had lots of tactics, but the merchants really didn’t have any ways to prevent it. 

Karen Jensen [00:02:40] Yeah. So the Merchant Risk Council has a story history could you tell us more about the mission of the team today? 

Julie Ferguson [00:02:48] Right. So really, it’s very simple, and it hasn’t wavered from the early days, it is to reduce fraud, to increase acceptance and create the best possible customer experience when somebody is checking out. 

Karen Jensen [00:03:02] So I understand the MRC started as a group of volunteers with day jobs and and their life now now as a full team, full time team. Tell us about the work you do today. 

Julie Ferguson [00:03:17] So today we’ve got a lot of different initiatives going on, so we have a bunch of programs is how we refer to it for our members. We have the mentor program where somebody can either sign up to be a mentor or mentee, and that can be just education around the fraud industry or the payments industry, or it can be a career growth. We have a online resource center that’s just absolutely full of presentations, white papers and case studies from the past six years. So if you want to know about any specific thing, you can go in there and say, Hey, tell me about account take over, for example, and you can see all the content related to your account takeover and including webinars. So it’s a quick way to become a subject matter expert. We have community calls on specific topics, so there’s one on fraud prevention, one on payments, there’s one with law enforcement agencies. We have several law enforcement agencies as members as well, and they meet on a regular basis and they have an agenda. And we talk about the latest trends in what’s going on on those different topics. We also have a webinar Wednesday, so every Wednesday we have two webinars that we offer to the industry at no cost on all kinds of different topics. Whatever’s hot and cool or new tech, emerging technologies, problems, research and we also do annual surveys. So we have the MRC Fraud Prevention Fraud Survey that comes out every other year, and we partner with Cyber Source on that. And we also have a payments survey that comes out every other year that we also partner with Cyber Source. We also have vendor reports at one of our other partners is Paladin, and you can get a list and a description of all the different vendors in our industry. So there’s there’s obviously a lot going on. I’m just kind of scratching the surface there, but we’ve got many programs for our members in addition to a lot of industry events. 

Karen Jensen [00:05:14] So circling back, you just mentioned mentors and mentees. That sounds really great. Can you tell us more about what you’ve done to to nurture women as leaders? 

Julie Ferguson [00:05:24] Yeah. So we actually have women in payments and fraud prevention group that meets on a regular basis. Earlier this year, we hosted our first full day summit for women in payments and fraud, and men are always welcome to attend as well. But it’s really to educate folks on not just the industry, but also challenges that women face. So what are the topics that was really well received is how to negotiate that next raise? Another topic is how to manage that work-life balance. You know, if you have children and busy schedules and you’re trying to work at home. And so lots of different kind of personal touch things that we work on as well. 

Ned Hayes [00:06:04] So I know you mentioned law enforcement as members of the MRC. You know, people people tell stories about the dark web and identities being stolen and stored someplace in the dark web. I am curious how involved does the MRC get with law enforcement in helping to codify rules and eventually laws that help merchants to be safer? 

Julie Ferguson [00:06:29] We really are just getting started this year in into advocacy. This was really our first year and 2020 was and we really focus more on PSD too, because it actually went into law in January. Enforcement right of that law and it it wasn’t really quite ready for prime time. So we worked with regulators to get it shifted out and educate the industry on some best practices and such. There is a long list of things our members would like us to do. And interestingly, law enforcement and changing the laws around prosecution doesn’t really rise to the top. And I think a part of the problem is, even when you go after the criminal, there’s always the fear that you’re going to arrest grandma on accident instead of a real criminal. And so retailers tend to be a little bit shy around going after the criminal. That said, if somebody is organized and there’s big cases, absolutely, then we work with we partner with law enforcement to do operations and control deliveries to go after some of the larger crimes. 

Karen Jensen [00:07:38] Have there been any changes to the risk profile during COVID? What changes have happened in retail during COVID? 

Julie Ferguson [00:07:45] So we actually refer to COVID or the pandemic is creating the Christmas boom every day, so we call it the peak season, and that’s usually, you know, right around Thanksgiving through the actual Christmas holiday. And when the pandemic hit, all merchants saw a peak happen on day one, and it never wavered. It just kept going. And so what what that means is when there’s high volumes merchants sometimes augment with staff, but really, they just tune their fraud rules to say, OK, there’s a lot more good customers making purchases. And so the things the plans and the responses that merchants had over the Christmas holidays, they just figured out, how do you scale that all year long? 

Ned Hayes [00:08:28] Really?  

Julie Ferguson [00:08:30] Yeah and in fact, there’s a phrase that’s been floating around the industry called keep the peak, right. So even after the pandemic starts to go away, how do we keep that peak? How do we keep those engaged shoppers that have gotten used to ordering online? 

Ned Hayes [00:08:42] Right? So in terms of the economy changing and coming back post-COVID, it sounds like on retailers with online retailers would prefer that it kind of stays this way. The people keep shopping in the patterns that they have today. 

Julie Ferguson [00:08:57] Yeah. So retailers make a lot more money with online sales because you have no staff, no storefront. So it is a higher profit to sell on the internet. 

Ned Hayes [00:09:09] The online retailers are profiting offline retailers, of course, have suffered. So do you see that offline real retail can do anything to to regain market share post COVID? 

Julie Ferguson [00:09:24] I think people are anxious to get out. And so once they feel safe, I think we’ll see some of the volume shift back. That said, I know a lot of people really have learned to enjoy the convenience of ordering online and having things delivered. You know what I always say? You know, what’s the mom? My mom test, right? So my mom, when I told her she could order online groceries before the pandemic, she thought I was insane. She’s like, Why would I do that? You know, I go to the grocery store and now she’s ordering online twice a week, thinks it’s the greatest thing since sliced bread. So I think that that experience has really changed a lot of people in how they how they go. But I think that the in-person experience people still miss, you know, trying on clothes is still really difficult. There are problems that were not solved by shifting to online. So trying on clothes, buying jewelry, buying art, those things are not the same as doing it in person. 

Karen Jensen [00:10:22] Spraying the perfume before you smell it. Yeah. Post-COVID, how do you see the landscape changing for fraud in retail? 

Julie Ferguson [00:10:31] I really don’t see fraud changing because of the pandemic, but every time there’s an economic downturn, fraud always goes up the line that people are willing to cross changes. And so more people are willing to do things that are illegal when they’re harder up for money. And so if we’re entering an economic downturn, which many people say we are, I do expect fraud to increase. We’ve seen fraud attempts increase. But the success of those fraud attempts has really yet to increase. So keeping a close eye on that, but I do expect fraud to climb, but it’s really tied to the economy. 

Ned Hayes [00:11:18] Got it. Well, in terms of retail, we know that online retail has a lot of systems worked out. In-person retail is in this process of moving from high touch environment into lower touches with biometrics, with card card only transactions where somebody doesn’t have to take cash from you. I’m curious if you see the landscape accelerating for changes in in-person retail. 

Julie Ferguson [00:11:47] Absolutely. And in fact, you know, a lot of stores now have the app where you can scan as you’re shopping and then you can just walk out the door. I think, you know, that’s here to stay and consumers like that. I noticed even just this past week as I was, I went to the mall for the first time and I noticed several of the retailers now say no cash, you know, credit cards only. And the touchless where you can just wave your card with RFID is now pretty much everywhere. And so I think the shift in what consumers are willing to do, it’s historically it has always been very, very difficult to change a consumer’s shopping or buying behavior. And the pandemic accelerated everything by at least five years. So everybody’s buying behaviors have changed and how they pay and how they checkout and what they’re expecting. 

Karen Jensen [00:12:42] So interesting. So it’s already changing. But can you tell us more? I’m curious about where you see retail going. What’s the future of retail? 

Julie Ferguson [00:12:55] So when you think about the future, everybody’s been talking about the omni channel for the last 10 years. But I do think that we are now starting to see consumers just expecting it and being disappointed rather than being delighted when, wow, I can buy something online and return it in person. I think now, because so many things have changed and so many retailers have adopted some of these processes when when you’re going to do the omni channel experience and you don’t get it, I think you’re disappointed. And so I think when I think about the future, I think we will see more of that, you know, scan and go. So I don’t have to stand in checkout lines, buying online, returning in person or going to a store and selecting what you want. I know an Office Depot when I was there the other day, I looked at what I wanted, but then they had me order from the kiosk and have it delivered to my house. So I think the merging, when I think about the future, the merging of the channels is certainly a part of our future. 

Ned Hayes [00:13:57] Right. And so one of the technologies that’s been used in the Internet of Things is creating a digital twin. And I’m curious if kind of omni channel will go there, where I can be in a store and visit the digital twin of that store at the same time? Or if you see that kind of convergence happening. 

Julie Ferguson [00:14:16] I don’t know if people can. The general population, you know, like the past as well, that past the mom test. Is that too complicated? Or will that be something that people expect? And you also have to look at the demographics. So right now, the majority of people who spend money are the older population. As the millennials move up and start to have more money and more spending power, then perhaps we will start to see those things. But the people who spend most of the money today, I think that technology might be just a little bit too cool. 

Ned Hayes [00:14:49] Yeah. So augmented reality and the future of retail as having everything augmented where I can see the details about something, you don’t see that happening immediately. 

Julie Ferguson [00:15:00] No, no. You know, and I’ve tried even some of the cool new whiz bang 3D virtual reality, and it’s just not the same. It’s it’s just it’s better. But the lag, the you know, the bandwidth, it’s it’s just not ready for prime time. It’s not flawless yet for everything, for mass mass adoption. 

Ned Hayes [00:15:21] Right, right. And it needs to be bomb proof. I need to be able to take my glasses off, put my glasses on and not have a lag or skip, but just be able to see the information. I need that at a glance, literally that that would be wonderful. We aren’t quite there yet with retail. 

Julie Ferguson [00:15:37] Right, right. And the consumer experience is everything right that increases your acceptance and your conversion? 

Ned Hayes [00:15:44] Right. Absolutely. 

Karen Jensen [00:15:46] So the MRC is expanding in Asia Pacific and elsewhere around the world. Can you tell us more about the expansion and what that means for your merchants? 

Julie Ferguson [00:15:57] So our merchants have been pushing us to expand beyond North America in Europe for quite a while, and we actually were able to get two very talented leaders. I’m working a half a day a week for the MRC. There are regional leaders over there and establish an MRC. We have most of our merchants are global merchants, and so they have people over there who have who face very different payment types, fraud attacks. The trends are different. The seasons are different. And so there’s really been this strong need. So we actually launched MRC Pack back in November, and we’re growing very quickly. We already have over 50 subscribers participating. We held our first in-person event because their rules are a little bit different that over here and in Singapore, it was very successful. We’re having another one in June and then another one in November. So June will be in Melbourne and then November we’ll be back in Singapore. So we there’s just a great need because there’s nothing like this over there where people can get together and collaborate and share information. And so and that’s going really, really well. Our members are also asking us to take a look at Latin America. That’s another area where there’s lots and lots of different kinds of fraud and payment technologies and trends that are happening. And so, especially Brazil, Brazil always seems to bubble to the top. And so that is the next area we’re going to be taking a look at to see, is that a place that we can go reasonably quickly? 

Ned Hayes [00:17:37] Right. But I know that in Latin America, there are also some great technical leaders. I know the co-founder of Auth0 is from Argentina, for example, and I know Argentina has some really great security leaders so that technology space may be open to helping the Merchant Risk Council prevent fraud as well. 

Julie Ferguson [00:17:57] Well, we’re always looking for partners. You know, just like we expanded into IPAC, we found two really great companies to help us expand over there. We’ll be looking for partners in Latin America as well. 

Ned Hayes [00:18:09] Great, great. How about China and Asia-Pacific more north? 

Julie Ferguson [00:18:16] Yeah. So so we’re also I’m dipping our toe in the water, so that’s probably not 2021, but 2022 for sure. We already have some members in China and India, and so we will definitely be looking to move into those countries and regions as well. 

Ned Hayes [00:18:34] Fantastic. 

Karen Jensen [00:18:36] Neat. Well, I have one last question. What’s your personal mission? What do you want to be remembered for? 

Julie Ferguson [00:18:43] Collaboration. Right, so I want I want people to think about the MRC as a community. It has always been a community. Many people refer to our events as family reunions, but collaboration and sharing. 

Ned Hayes [00:19:00] Fantastic. Well, thank you for your time today, Julie. I know I’ve really enjoyed the merchant risk events that I’ve been at. They’ve been really beneficial for me as somebody who cares about retail and making e-commerce safer. So thank. Thank you for all you’re doing and for all your members, for all they’re doing to make fraud less and to make a retail experience better. 

Julie Ferguson [00:19:22] Thank you guys for having me. It was fun. 

Karen Jensen [00:19:25] Thank you so much. 

Ned Hayes [00:19:28] Thank you, Karen. 

Karen Jensen [00:19:29] Thank you. 

Ned Hayes [00:19:30] Thanks for listening today to the SparkPlug podcast hosted by me, Ned Hayes and brought to you by SnowShoes Snow Dot S.H. for smarter mobile location. SparkPlug Plug is a wholly owned property of SnowShoe all content. Copyright 2021 SparkPlug Media.