The telco space is one of constant change. “Always on” consumer demand is driving exponential growth, and, although we can agree growth is good, it also creates its own set of unique problems. While fraud has always existed, the stakes are very high in this space. Carriers have and continue to invest trillions to ensure their networks are solid, their service is memorable and options diverse, but in the background, there are fraudsters scheming and consumers walking away from their financial responsibilities, leaving carriers to hold the bag.
Today’s telcos are facing unprecedented fraudulent attacks. Fraudsters are outpacing solutions and evolving their schemes daily. In this digital climate, carriers want to offer the most robust options for engagement, payment and potential sales, supporting a true omni-channel experience. Whether subscribers engage on mobile, phone, web or (more than likely) a series of each during one interaction, these various options can mean vulnerabilities for both the consumer and the carrier alike.
Statista reported in August 2019 that the average handset in North America cost $521, and—let’s be real here—if you enjoy the top-of-the-line iPhone or Samsung, you will likely pay north of $800. Keep in mind this does not include the monthly mobile bill; when you total it all up, people spend a lot of money here, rarely put their phone down and expect top tier service.
TRMA was established as a place for carriers to meet and discuss trends and best practices, banding together to help combat the challenges they face. With an estimated 2% of revenue lost to bad debt and upwards of 10% lost to fraud, you can see why this organization is important to carriers.
Having had the opportunity to attend the fall session of TRMA in Nashville this week, I got to hear firsthand both the challenges and solutions around fraud and collections, and I’m leaving with renewed optimism, information and a few new friends.
While collections are not an area that my work touches often, it was astounding to understand how vast and pervasive this area can be. Our sessions began by looking at Champion/Challenger modeling, a technique that allows you to model several strategies or campaigns against each other to see which make the greatest impact. Carriers are using this to look at their various approaches in debt collection, but also how to retain those customers given the cost is so high for customer acquisition.
In addition to the importance of business and strategy modeling was the idea that marketing and risk teams need to be more closely aligned. As you can imagine, these two groups are oftentimes in a push/pull situation. Marketing is trying to get customers to buy the latest package and risk says the consumer cannot qualify for the package…this can create an adversarial climate. Working together, creating packages and models for everyone to win is the goal. The example might be like selling a car. Not everyone will qualify for the latest, fully loaded BMW, but it behooves the entire team to find the right Ford Escape to make the customer happy and financially capable.
If the customer ultimately does get into financial trouble, the goal is to work with them in a positive way, to create a positive customer experience, even amidst a challenging situation.
Fraud is a very real problem for both consumers and carriers alike. During this TRMA session, it became clear that fraud evolves over time and we can see what might have been prevalent last year, has since died down this year. Much of the behaviors we see can be tied directly to the economy. During a slower economic time like a recession where more financial stressors are seen, the fraud strategies can change.
Most prominent fraud trends:
- First-party fraud – someone uses their own identity to carry out fraud. An example of this might be credit mulling or using your own credit to acquire goods with no intention of paying it back. Think about items that can be turned around quickly for money like handsets.
- Synthetic fraud (fake credit) – the major crime of the moment. This includes credit washing and social security theft. Credit washing is when the user claims the item on their credit report is fake, essentially removing a bad debt or washing their credit. There is a surge in the auto industry, but telco is also feeling the sting.
- Third-party fraud – while identity theft is currently down, it’s not out. It happens during economic down turns or with family fraud (stealing information from relatives’ surges).
- Account takeover or ATO – can be a hybrid of all three previously mentioned types of fraud, but in short it is when fraudsters illegally get access to a victim’s bank or online e-commerce account using bots.
One thing that everyone in the room could agree on is that having multi-factor authentication is ideal. Unfortunately, the current fraud climate requires security and finding solutions that create as little friction as possible for the customer is always a winner. Voice and behavioral biometrics allow carriers to do just that, bolsters customer security whilst providing a streamlined experience for the subscriber. If you’d like to read more about Nuance biometrics in the telecom space, please read this whitepaper, Biometrics in Telecom: Improving Customer Authentication and Fraud Prevention, done in collaboration with Fierce Wireless.
Having the opportunity to spend time with global telcos and solutions providers was a great experience full of learning, networking and information sharing. Looking forward to the next TRMA event in spring 2020.