Fraud is now at a record high in the UK. According to KPMG’s annual Fraud Barometer, it has hit a 10-year high with cases involving a total of £1bn reaching the courts. With the mobile business peculiarly vulnerable, Paul McManus looks at what can be done to improve the situation …
According to CFCA, the global telecoms industry fraud's association, in 2005 mobile phone companies were suffering more than $60 million in lost revenues annually through fraud (ca 5% of total revenues). This represented an increase of 52% since 2003.
More recent research conducted by International Data Corporation indicates that as much as 50% of bad debt among European telecoms companies is a direct result of fraudulent activities.
With fraud in the mobile industry now viewed as a major risk by everyone associated with it - including consumers - the industry is looking for robust solutions.
Knowing exactly who companies are dealing with at any given time will dramatically reduce the opportunity for fraud. Fraudsters using fake ID easily pass credit reference checks, so a robust identity check is required before undertaking the credit check.
The challenge for the mobile operators: how to carry out ID checks on such a large-scale, in a non-invasive way and quickly at point-of-sale.
While consumers generally understand the need to prove their identity and accept that it is partly to protect them, most are frustrated by having to repeat the same information and produce documents such as passports and driving licences on a regular basis.
Consumers are used to shopping, banking and gambling online with instant service delivery. A mobile business that makes them undergo a lengthy verification process risks losing them to another operator that can do it in seconds.
"How to carry out ID checks on a large-scale, in a non-invasive way, and quickly at point-of-sale …"
The solution lies in automating the whole customer sign-up process, including the identity checking elements. Using a robust online verification service such as that provided through GB Group’s ID3 technology and web-based applications such as URU, searches are conducted instantaneously and return accurate results on the individual in seconds. This results in a much better customer experience and far more robust protection against fraud.
The same technology can also prove the age of a customer very quickly, so can be used to combat youngsters accessing age-restricted mobile products.
Just 18 months ago 02, in line with all other mobile operators, was facing the growing issue of balancing a sophisticated customer retention strategy with the need to manage and reduce fraud levels across the business, all the while maintaining a positive experience for all new customers...
The standard method of verifying customers at that point was to ask for documentation such as a driving licence or utility bill – and back this up with a credit or debit card. With the majority of its new customers coming through retail stores around the country, this meant it had to rely on staff being able to spot fraudulent or invalid documentation and act on instinct.
In 2005, GB Group started to develop a bespoke solution for O2 to help it manage new accounts and verify customer details in an instant, straight-through process. ID3 technology is now an integral part of 02’s customer offering, helping to process nearly 20,000 new customer accounts every week across all channels to provide consistency in the application processing, regardless of where the company interacts with the customer.
Since bringing ID3 technology into its customer application process, 02 has seen disconnection levels fall by more than 40% - a significant saving to the business.
On top of this, the data collected from all new O2 customers through the identity checking process can be used as a bedrock for marketing and to help focus retention campaigns to ensure that their most valuable customers don’t find better propositions elsewhere.
Maintaining records of fraudulent accounts can help to prevent further fraud. Apart from avoiding repeat attacks from the same fraudsters, by analysing how the fraud was committed in the first place operators can put in place predictive technology to determine when and where similar behaviour may occur, thereby avoiding recurrences.
Finally, the industry is also starting to share information on fraud and known fraudsters. This approach is working well within other sectors including financial services. This has to continue and grow – it is only by checking customer details against the broadest possible range of data sources, that the mobile industry as a whole will reap the full benefits of the technologies available. immensely.
Paul McManus is head of fraud prevention for mobile at GB Group, Europe’s fastest growing identity management company. Helping the mobile industry to combat fraud at point-of-sale and online, the company works with major businesses including O2. GB Group also verifies customer ages for mobile content.