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Telecoms fraud: It’s getting worse and it’s time to act

One way of measuring progress in life is to see a proliferation of solutions emerge that address a real-world problem.

In the telecoms industry, seeing this happen (it does happen frequently) might lead you to conclude that the market’s general direction of travel was good. The sophistication and capability of networks and services is increasing exponentially. Progress in supporting and enabling applications is being revolutionised (think Big Data, AI, and crypto technologies among others).

That’s the good news. But the news isn’t all good. The growing issue of telecoms fraud, an obvious example of a major problem for the industry, tells a different story. Far from getting better, where security is concerned things are arguably getting worse.

It’s a big, big problem

In recent years, fraud in the telco industry has increased by 28% [1]. According to the CFCA, last year (201) 2.2% of the industry’s total revenue, around $40n USD, was lost to scams [2]. Given the availability of advanced methods and tools specifically designed to combat the problem, this seems counterintuitive. One obvious conclusion is that not enough is being done to combat fraud. Another is that for security and fraud prevention technology providers, there’s a significant opportunity out there.

It should also be a source of concern to CSPs that fraud impacts more than simply the bottom line.  Bill shock, customer churn, loss of trust, and reputational damage all result directly or indirectly from the problem. Given that winning back lost trust is often even harder than recovering financial losses, it’s a surprise that many telcos aren’t investing more aggressively in measures that combat fraud.

The problem is widespread and not easy to categorise.  Telco fraud comes in a variety of flavours, including International Revenue Sharing, Interconnect Bypass, Arbitrage, PBX Hacking, Traffic Pumping, Subscription Fraud, Account Takeover, SIM Jacking, Wangiri fraud, and Phishing.  Each has its own characteristics and none can be ignored.

Not just voice

Voice isn’t the only source of the problem either. SMS fraud is a rapidly growing problem too. According to Statista [3], SMS spam globally increased by around 36% last year. In the UK, the telecoms regulator OFCOM [4] states that more than 82% of mobile users claim to have received a suspicious message. That’s 44.6 million adults in the UK of whom half are receiving an SMS spam message at least once every week. Of those, OFCOM says around 2% of recipients follow the scammers’ instructions and fall for the resulting fraud. That’s around a million consumers at risk if the scam attempt is successful.

And the evidence doesn’t stop there.  According to The Harris Poll [5], in the year up to June 2021, American consumers alone lost $29.8 billion to scam calls. The FTC [6] states “the phone is still the top way that scammers are reaching us — both through phone calls and text messages. In fact, there was a sharp increase in the number of reports saying that scammers contacted them by text message.”

The Cost of doing nothing is expensive

The CFCA [7] estimates that among major carriers, AT&T’s $171.8 billion annual revenue in 2020 likely means a potential revenue loss of $3.1 billion to fraud. Telefonica Group’s $49.2 billion annual revenue in the same period equates to a possible loss of $915 million to fraudsters. For Vodafone Group, the potential fraud loss is $930 million. These estimates should mean that for mobile network operators, failing to take measures to combat fraud isn’t a viable option.

For vendors of anti-fraud and security technologies, many of whom we’ve worked with at eCS, the realities outlined in this blog offer significant opportunities. Real solutions are required to counter a very real, and rapidly growing telco industry problem. If you’d like to learn more about how eCS’ experience can help you take your solutions to market, please get in touch.

[1] https://transnexus.com/blog/2021/cfca-fraud-loss-survey-report

[2] https://cfca.org/slug/2021-fraud-loss-survey/

[3] https://www.statista.com/statistics/1270424/daily-spam-volume-global/

[4] https://www.ofcom.org.uk/news-centre/2021/45-million-people-targeted-by-scams

[5] https://theharrispoll.com/

[6] https://consumer.ftc.gov/consumer-alerts/2021/02/top-frauds-2020

[7] https://cfca.org/putting-telecom-fraud-loss-into-perspective/

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