According to the CFCA, telecommunications fraud increased 12% in 2023, equating to a $38.95bn lost over the course of the year.
Telecom fraud surveys in the past few years have typically highlighted the estimated financial losses incurred by telecom service providers and their customers, all occasioned by fraud scams. No matter what way we interpret the statistics and figures contained in these surveys, what is certain is that fraud remains a major debilitating facet of the telecommunications industry.
Although the market is becoming increasingly populated with specialist solution vendors selling novel techniques to detect the myriad fraud types plaguing telecom operators today, all this modern technology has done little to stifle the creativeness of the highly organized fraudster. And although operators, trade associations, representative bodies, regulators, and law enforcement agencies have become more enterprising in their attempts to cooperate and hunt down organized criminals in the sector, none so far have made any major strides in deterring fraudulent activity around the world. Such industry-wide cooperation initiatives have at the very most succeeded in containing certain fraud types but not altogether eliminating them.
Against this backdrop, the irony is that the very organizations that are being targeted by fraudsters – telecom service providers – are the ones scaling back on fraud prevention activities of late. Dwindling operational budgets have led to cost reductions, staff reductions, diluted reporting lines, and a general lack of investment in keeping systems and processes up-to date and relevant to the needs of the business.
So, it begs the question: how does a business reconcile fraud mitigation expenditure with top-line growth?
The survival instinct is pushing businesses to embrace a leaner operating model
As budgets and resources are being stripped away in the name of gross profit margin growth, the response of telecom service providers should be to make smarter technology choices, paying particular respect to artificial intelligence and automation. The risk management function is no different to any other from an IT perspective, and a move towards further systems automation would have the effect of reducing the reliance on often outmoded and labour-intensive back-office processes, such as poring over spreadsheets to detect billing errors.
As the argument goes, such a move towards outsourcing non-critical tasks would help the fraud teams that are (still) in place to focus on what they do best: applying their knowledge, skills and intuition to the more complex remit of solving fraud and revenue assurance issues through thorough deeper analytical and investigative work – a truly human prerequisite.
Companies have an array of specialist fraud management vendors to choose from, but when budgets are slashed, the “luxury” or nice-to-have components of many toolsets on the market become superfluous. The focus should be on getting more value, “more bang for one’s buck” from the fraud tool vendor, where product “usefulness” becomes a key selection criterion.
From a risk management perspective, protecting the business from financial losses is the raison d’être of the fraud team. The choice in favour of leaner and more efficient risk management tools to either complement existing systems or to simply plug specific risk gaps within the organization, should greatly simplify the decision-making process for senior management.
For instance, a ‘pay as you grow’ model if well-conceived should bring peace of mind to a CFO or Finance Director, as value can be measured at each stage of product or service delivery, making the business case and spending justification a lot more straightforward. The numbers don’t lie!
Computer software and fraud detection algorithms have come so far today that the opportunity to outsource the fraud management function to a specialist third-party provider should now be second nature to fraud managers and their senior management
A good example might be a control point in a customer’s network which fully automates the monitoring and reconciliation of roaming traffic. By identifying any discrepancies in the roaming data file flow, costly billing errors can be avoided, and roaming partners in breach of their SLAs can be held to account. This degree of automation not only keeps the integrity of the roaming billing process in check, but frees up resources for, as mentioned above, letting humans do what they do best.
In conclusion, we know that there are multiple options available to providers – from making smarter technology choices to outsourcing some or all of their day-to-day operations – that will enable them to maintain fraud prevention capabilities without impacting their top line growth.
It will be interesting to see how the year unfolds and which operators stay ahead of the game.
*Click here to read the CFCA article