In today’s increasingly connected world which features an ever-growing number of mobile users, MNOs are under mounting pressure to deliver secure, high quality services to vast numbers of people.
There are many obstacles along the way for MNOs as they navigate competition, new security threats, rising customer demand. With many plates to keep spinning, it’s a tough task for MNOs to protect profits, stay ahead of the game and keep customers happy. This is particularly the case when it comes to ID fraud. We must ask the question: who is currently winning the battle when it comes to ID fraud versus MNOs? Unfortunately, the current climate favors ID fraud, given the latest figures. It’s not totally one-sided as steps have been taken to remedy the situation, but there’s still much work to be done. Here’s why it’s so important MNOs take further action now to turn the tide and combat ID fraud head on:
Revenue risks
It’s hard to find something more damaging to businesses than revenue stream damage, and this is where ID fraud can make a large negative impact. The total cost of identity fraud stands at a staggering €40 billion – a figure that can’t be ignored. In fact, fraudulent payments alone can represent up to 10% of an MNO’s bottom line. Furthermore, this number and percentage of bottom line can go undetected – often it can take months to discover fraudulent account activity.
Regulation
Strong fraud regulation is clearly essential. According to the GSMA, over 90 countries now require secure registration for prepaid SIM cards. This of course is a key necessity in the battle against fraud and is enforced strictly, especially when it comes to financial services on mobile. KYC (Know Your Customer) regulations must be met by MNOs. Any failure to do so result in heavy fines. It’s just one more reason why MNOs need to take meaningful steps towards protecting their customers (and by extension, their revenue). If they don’t, they’ll learn the hard way about how manual checks are painfully inadequate for detecting forgeries (it’s a seemingly impossible task for staff) and how SIM swap fraud results in money vanishing from accounts without customers (or MNOs) noticing.
Reputation
Reputation matters, perhaps more than most businesses realize. It’s an important factor from both a customer and a business-to-business perspective. ID fraud is capable of damaging a MNOs reputation in a variety of ways, particularly regarding customer trust. MNOs need to act quickly in the event of fraud to offset any reputational damage they sustain by offering compensation and incentive payments to customers to stay (again, this can be costly). This is crucial when you consider how ID fraud victims are highly likely to abandon networks they no longer trust with the responsibility of keeping them secure. In addition, there are many other costs can spring up off the back of this. For example, advertising campaigns to restore trust with a customer base, investors and partners will be required, and of course will impact profits further.
As we can see, there is much work to be done in this battle. But what can be done?
Essentially, it comes down to understanding the business models of fraudsters which rely on manual verifications, which are often inaccurate. Fraudsters use these to buy subsidized phones and all the services that MNOs can offer – it then takes time (too much time) before the fraud is discovered. It’s clear there is a need for automated ID verification solutions in order to fight fraud at the early stages. An example of how this would work can be seen below.
It’s also crucial MNOs fully acknowledge the risks and costs, the types of fraud in play right now, and stay informed about all the solutions at they could use to help protect themselves and their customers. To make things easier, we’ve built a new easy-to-read infographic that lays out the key points to consider. You can also view our video below which outlines why fighting identity fraud should be a priority for MNOs.
In the coming months, we’ll be discussing the topic of fighting identity fraud and subscription fraud in more detail, so keep an eye out for further information from us as we’ll take a deeper dive into the solutions available, including biometric verification, to help all MNOs win the battle against ID fraud.
What do you think are the biggest risks for MNOs? Will the tide turn against identity fraud in telecommunications soon? Let us know your thoughts by tweeting to us at @GemaltoMobile with the hashtag: #KnowYourCustomerNOW or leave a comment below. And for further information on why fighting identity fraud is critical for MNOs, see our new web page.
