Why fraud evolves and how to address it – back to basics
On a recent trip to a network operator in Africa, I noticed something strange. Traditionally this operator had an issue with a particular type of revenue loss from fraud, yet now this issue seemed to have disappeared. Great news, you might think? But after a little more tinkering under the bonnet it was clear that revenue loss on the network had simply moved to a different method of fraud.
This got me thinking about the nature of revenue and margin loss. A further conversation with a senior manager in another global network confirmed my view that often we think about fraud against networks in too insular a way, says Andy Gent, CEO Revector.
Revenue and margin loss
The reality is that, any revenue loss to a network is threatening. Fraudsters are business people. When one route to generate revenue is closed to them, they will look to open another. For the network, it does not matter if they are experiencing SIM Box Fraud, international bypass, OTT hijack or internal fraud: each one impact the bottom line negatively. The sooner we address the fact that fraud will change and evolve over time, the easier it is to take measures to address it.
Companies like mine create technical solutions to combat fraud and enable mobile network operators to address revenue and margin loss. But we risk getting too bogged down in the technical, at the potential expense of not addressing the bigger picture.
Operators are under increasing pressure to invest in the networks that we have all come to rely on. Many operators need to double their data capacity annually to stand still. Significant investment is needed to ensure the highest level of customer service. This will only increase as we move towards a 5G world if the industry is to fulfil the promise of that technology. Every dollar lost to fraud has the potential to impact future investment.
Yes, it is still important that at a functional level the networks understand the various frauds that are being carried out against them. But it is also important at a strategic level to demonstrate that anti-fraud management needs to address all threats to margin and revenue as well as providing a demonstrable return on investment to the network operator.
Three phases of fraud management
At its most basic there are three different phases to fraud management:
This involves conducting a thorough investigation of the threats and issues that a network faces and should encompass more than just a technical evaluation. It should also analyse marketing activities. Is the network offering free SIM cards for local calls? If so this could encourage revenue loss. Does the network partner with OTT providers that could jeopardise potential termination revenues? Are the consequences of these partnerships revenue neutral or do they offer a loophole for fraudsters?
Traditionally the approach of fraud departments and their partners was focussed on detection and this is still a critical phase. However, the fluid nature of revenue loss, which can switch in one week from one fraud to another, means that this is more than a static activity. For this reason, the most important phase is the final one.
Ongoing protection against any potential revenue and margin loss to fraudsters ensures that networks can not only ensure that they are generating all the revenues they are entitled to at any given point but on an ongoing basis. The protection phase needs to cover more than detecting one method of fraud and encompass all issues – new and old – to ensure maximum revenue and margin.
Fraud management needs to enter a new era: one where ongoing protection drives maximisation of revenues. When this takes place, the network can not only ensure that it has done its duty to shareholders and the wider community but that it has maximised the investment it can offer to deliver future networks, driving customer retention and satisfaction.
The author of this blog is Andy Gent, CEO Revector
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