It is estimated that by the end of 2020 the number of global smartphone users will reach 3.5 billion with an overall value of $1.46 trillion. As is witnessed in other industries with such high levels of value, the telecommunications industry is susceptible to fraud and combatting these instances is of the utmost important for MNOs – experts believe that the industry loses approximately $17 billion on a year basis.
Mobile devices have tripled in value over the previous 10 years, which has also meant that they are viewed as increasingly lucrative for criminals and fraudsters. Ensuring that operators are attracting new customers, while focusing on telecom fraud prevention and revenue assurance, is a key consideration in eliminating the billions of dollars that the industry loses on an annual basis.
There are various ways in which theft is carried out and where mobile fraud protection needs to be focused in order to reduce and eradicate it from the industry and ecosystem.
Attracting New Customers
The demand for post pay contracts from end users to purchase the latest handsets, due to the minimal upfront costs and the ability to spread payments out over 12 – 24 months, means that it is a business model that MNOs need to retain to attract new customers in an increasingly competitive market.
However, not only is this attractive to fraudsters due to the ability to obtain a high value handset with stolen personal details, but it can also act as an obstacle for end users who do not possess high credit ratings. It is believed that the contract rejection rate of post pay contracts is 70% and this figure increases to 85% during promotions.
Evidently, while this is often a preferred business model for end users, the increase in value of devices means that more and more individuals are unable to obtain these devices, meaning that it is harder for MNOs to increase their customer base, even with promotional offers.
Non-Payment of Bills
Even once the end user has been acquired, revenue collection is a cause for concern on a global level.
Operators have reported that Post pay bill payment drop off is 15%, which has seen double figure increases during the Covid-19 pandemic. When looking on a more granular level, Mexico, Central America and Colombia report a figure somewhere in the region of 25-35%, increasing to 40% in Peru.
In Europe, instances are reported for both existing and new customers, with 2-3% of existing customers and 15% of new customers with new device contracts not maintaining payments. In South Africa, 9% of all handset sales are blacklisted each month for non-payment using a manual process – none of these monies owed are recovered.
These levels of non-payment not only impact carriers but they also have repercussions for end users as carrier subsidies of devices is less likely due to the need to recoup lost finances and increase profits.
While operators can implement carrier subsidy locks in order to commit end users to a device for the duration of a contract, these can universally be unlocked by end users and in some jurisdictions, such as Canada, Israel and Singapore, this practice is actually illegal.
Porous Supply Chains
Theft at various stages in the supply chain has a devastating impact upon MNOs, especially in the Americas where up to 15,000 devices a day in Brazil are stolen. In the USA one pallet of handsets has a street value of $1million, meaning that a lack of mobile fraud protection at various stages of the supply chain can have devastating repercussions.
In the UK it is estimated that 400,000 devices per year are reported stolen, however this is believed to be a conservative figure and it is expected to be twice this number. The African Operator Group estimates that $250 million is lost each year in devices and equipment due to theft and fraud. Theft in the supply chain in Russia means that around 12% of all stock is stolen before it even reaches the store showroom.
The increased widespread access to the internet has meant that surges in activity on the grey market have become evident which again opens up another avenue where MNOs witness losses in revenue and profits.
The GSMA estimates that over 4 million devices are trafficked yearly with the cost of bulk prepaid trafficking amounting to a substantial $900million- this equates to a loss of $225 per trafficked device.
In summary, it is evident that MNOs need to consider and invest in solutions to assist in telecom fraud prevention and revenue assurance in their quest to implement ways in which to prevent mobile fraud and revenue being lost due to the various circumstances and scenarios throughout the smartphone lifecycle.
Not only is this of benefit to MNOs but eliminating fraud will also provide benefits for end users who will be able to enjoy carrier subsidies for the latest handsets, and not be reliant on their credit rating in order to enjoy the latest device.
Trustonic’s ALPS platform is a mobile-operator solution that prevents fraud and theft, while assisting in stopping handset profile erosion, increasing telecoms’ average revenue per user by dramatically reducing fraud, theft and trafficking – contact our experts to arrange your consultation.