Operators naturally don’t like to talk about it, but fraud remains a significant problem for them.
Figures are hard to come by – Juniper Research has yet to update its 2011 reportwhich claimed the global mobile industry lost more than €43.5 billion as a result of fraud.
According to Rui Pavia, CEO of fraud management and revenue assurance (FM/RA) vendor WeDo Technologies, it is “impossible to quantify” the amount of fraud that is happening due to a lack of data and the varying degrees of maturity that operators have.
But all are in agreement that things are changing and changing fast.
Danielle Gulinatti, VP of Fraud Management and Revenue Assurance at Telecom Italia, says the operator decided to take a different path three years ago.
“The focus is now on prevention… fighting fraud was worthless,” he tells European Communications. “For every €1 we invested in prevention we got €70 of benefit.”
The key focus has been on improving controls and introducing new ones. For example, Gulinatti says there is a big correlation between where customers live and fraud risk factors associated with their neighbours.
Telecom Italia is using national census data to better understand where fraud might occur.
The amount of subscriber fraud is “significant”, Gulinatti says. However, the aim of the fraud is no longer traffic related but focused on the device.
As a result, Telecom Italia has focused on tighter control at the point of sale, for example by requiring customers to provide increased amounts of documentation.
TI has “an army” of people working on FM and RA cases that Gulinatti says number “several thousand” a month.
Overall, the exec says the operator has saved €1.5 million through better controls.
But there are still limitations – stolen phones can only be blocked on a country-by-country basis so once a device leaves Italy Telecom Italia has no control over it.
Gulinatti was speaking at WeDo Technologies' Worldwide User Group meeting in Porto last week.
The keynote speaker was former T-Mobile US CIO and Cricket CTO Robert Strickland.
He outlined how a two-year FM/RA programme at Cricket – which has just been acquired by AT&AT – that identified $40.5 million [€29.7 million] of potential leakage required a huge cultural shift.
However, he warned that a new approach around the nexus of IT, engineering and marketing is required as the number of connected devices grows.
“The internet of things will revolutionise business… we have a big [FM/RA] problem but it’s going to get worse.”
According to WeDo’s Pavia, the addition of external data is this year’s headline trend in FM/RA, following on from 4G LTE in the past 12 months.
While this opens up new revenue stream possibilities, it also increases the need to find ways to predict evolving leakages.
The problem for operators, he warns, is that existing legacy systems – which the industry still battles with – are getting more outdated more quickly.
Gulinatti agrees with Strickland’s prognosis, particularly around the growing importance of marketing.
He says that “every single offer” the marketing team comes up with has to go through the FM/RA team.
But although his managers “analyse and raise their hands” when they sense a potential issue, he admits its powers are limited: “We don’t have the power to block new offers.”
Nevertheless, he says progress is being made between these two very different departments.
“There was a clear difference at the beginning as the level of trust wasn’t there but now we have solid evidence [about what does and does not cause fraud] and the marketing team is much more cautious now.”
While internal teams maybe working together more successfully, Pavia warns that the M&A trend that European telcos are embarking on will not solve any FM/RA problems.
“Industry consolidation is a natural point for leakage… it will be a huge problem,” the CEO predicts.
Interestingly, TI’s Gulinatti is looking at doing something rather different.
He thinks he can sell the operator’s FM/RA expertise to other industries as a consulting-style service.
“We have a prototype that we are trialling now and intend to go to market in a few months,” he says. “Why should we only be looked at as a cost centre?”