The financial implications of fraud within the Telecommunications industry are considerable and impact every player, including both mobile operators and end users. However, there are ways in which fraud can be reduced and even eradicated in both the medium and long-term.
The Mobile Industry Today
Instances of fraud within the industry are not a recent development. Previously there had been a reluctance to acknowledge or even openly discuss it outside of the confines of the industry due to fears that others would emulate the crimes and reap further havoc.
It is estimated that instances of fraud cost the industry $17 billion in lost revenue on an annual basis with this money being used to fund organised crime and even terrorism around the globe.
However, telecos have been taking action and investing in mobile fraud prevention by improving processes and increasing policing of the networks. Despite this, there is an urgent requirement to address device theft and fraud head on in order to enable the industry to be ready to face challenges from new avenues of fraud due to the emergence of new technologies.
What are the Issues within the Industry?
The standard business model of the Telecommunication industry in Europe leaves it particularly vulnerable to instances of fraud. Users are able to obtain a high-value device upon signing a contract that allows them to pay in instalments over the duration of 12-24 months.
This has long attracted the attention of criminals and fraudsters who take advantage of this by obtaining devices via fraudulent purposes and then reselling them on the black market for vastly reduced prices.
However, this is a financial model that is often favoured by end users who are looking to spread the cost of the device over an extended period of time, meaning that the industry is not able to divert away from this.
Instead it is imperative that the industry focuses on combatting fraud on a global basis.
However, this is not the only way in which fraudulently obtained devices are obtained. There are numerous points in the supply chain and device cycle that are exploited, and devices stolen. This includes during the shipment process, criminal break-ins in warehouses and even theft at the final point of sale.
The vast sums of money that are lost to fraud mean that the impact is not only felt by MNOs, but also end users who have the cost of fraud passed onto them via price rises and loss of carrier subsidies when buying the latest handsets.
Developing a long-term solution is important and will help to avoid long-term damage to the industry as a whole. In the meantime, there are various methods that can be utilised to reduce the amount of fraud taking place.
The implementation of kill-switches offers end users the chance to deactivate their device in the event of it being lost or stolen and therefore preventing thieves from using it. This method has proven to be immensely successful in the American state of California where it has reduced smartphone thefts by approximately 50%.
However, while it is an attractive feature for end users, for MNOs there remains a reluctance to embrace the technology due to the potential it has to negatively impact upon wider levels of revenue.
In addition to this, as mentioned previously, there is also the fact that the act of theft even occurs before the device has even been acquired and activated by the end user.
Large numbers of mobile carriers continue to lock end users onto their network in order to prevent them from being used on different mobile networks but also in order to make the handset less attractive to thieves.
While this is preferable for MNOS, it is not desired by users and most end up seeking out services to unlock the phones and using them on different networks. In addition to this, experienced hackers are also able to unlock devices themselves relatively easily by acquiring unlock codes from various sources.
More importantly for MNOs, this can be an expensive feature to implement and maintain and does not provide adequate protection for devices in the early stage of the supply chain.
A Solution For The Future For The Telecommunications Industry
Evidently, a viable and long-term solution is preferable and needs to be implemented across the industry as a whole to prevent mobile fraud and theft on such a large scale.
Incorporating preventative measures at a hardware level enables carriers to implement and embed lock and unlock technology into a device’s hardware during the manufacturing process. This also offers numerous advantages as it ensure that handsets that are illegally obtained during the transit process cannot be used and would therefore mean that fraud is being eradicated at this early stage.
It also means that stolen handsets would not be able to be reused or unlocked by an unauthorised party at each stage of the supply chain. This technology enables the key players within the industry to deliver a more customer-orientated experience for the consumer with increased levels of freedom.
This delivers a higher level of protection at different stages and protects both carriers and end users alike. Adding this lock and unlock technology into the manufacturing process helps to reduce theft in the early stages of the manufacturing and supply chain and would mean that thieves would be left with a device that has little to no resale value, ensuring that their attention is focused elsewhere.
There would also be higher levels of protection for end-users thanks to widespread adoption of the technology, as there would be the opportunity for them to remotely lock their device in the event of it being lost or stolen.
As the Internet of Things’ sphere continues to grow and evolve, there will be larger challenges for the industry to contend with – eradicating mobile fraud in the shortest time possible will enable efforts to be focused elsewhere.