Wholesale Fraud on the Rise – Are Operators Ready for $6 billion losses?

A survey by Capacity Media and Subex asked 190 0perators of all sizes, from across the world for their views on wholesale fraud. Whilst the industry tends to focus on retail and consumer issues, there are clearly threats at the wholesale level too. The fraud problem is $6.12 billion, in a market worth $170 billion.

Amongst the reasons for the rise in wholesale fraud are difficulties in prosecution and the rise of IP services – ‘increasingly penetrable’ services according to Subex, who identified Point of Sale fraud as a rising threat late last year.

Surprisingly, in the context of tighter cost control, state of the art tools for combatting this type of fraud are anything but widespread. 90 percent of the survey group use in-house tools but also see the need for automation and timely data to address the problem. This focus on margin is now helping the industry focus on fraud. The problem is made worse by the need to have more and more partners involved in delivering compelling services to customers. More partners means less resources, and even though the majority of respondents carry out due diligence on partners, ask for prepayments and/or bank guarantees, the risk is still rising.

Add to that the general economic situation, which is adding to the growth of internal fraud and solutions need to be found. Business is suffering and indirect revenues are suffering as new services are being restricted.

Subex believes, and I agree, that the industry needs to band together more so than it does at the moment. 80 percent of Tier 1 and 2 carriers have a formal fraud prevention policy in place. With 72 percent of the whole group not having a fraud prevention team, this may be a business opportunity for the larger carriers – to provide fraud protection as a service. The issue has oversight at the ‘highest level’ for 63 percent of the group, which would certainly help get things moving and there is widespread acknowledgement that training and fraud assessments would help (71 percent and 63 percent respectively).

Although the statistics can be interpreted in two ways, the fact that 75 percent do not participate in official forums also means that 25 percent do. Forums are good for sharing information and larger carriers are becoming more willing to do exactly that. Forums can also foster centralized information sharing, which improves response times and alerts carriers to new threats.

In the end, though, each operator must face the problem by itself. The 65 percent who do not have a formal fraud team and those 38 percent who leave it to Billing should form one. They should come from different parts of the organization, they should design a strategy, a policy, conduct risk assessments, measure the success of the strategy and be rewarded against it. With losses of over $6 billion, it must be worthwhile.






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About Alex Leslie 400 Articles
Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet.

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