The increased demand for smartphones around the globe means that the total number of total users is estimated to reach a staggering 3.5 billion by the end of 2020. It is believed the industry will then be worth $1.46 trillion – unfortunately, the mobile industry is susceptible to fraud, and working collaboratively to reduce and prevent instances of fraud is of great importance to mobile network operators.
Conservative estimates indicate that the industry loses approximately $17 billion each year and this figure does not look as though it will be reduced any time soon. The doe has mentioned that the capabilities of mobile handsets have increased over the previous decade, so too has their value, meaning that they are now more attractive than ever to fraudsters looking to find new avenues of revenue.
Increasing Customer Base
There are numerous challenges involved for MNOs in acquiring new, long-term customers and it needs to be a core focus of their business strategy. However, the wider implications of fraud are an even greater and immediate challenge that must be addressed and combatting these will also have a positive impact upon bringing in new customers and generating revenue.
While it is essential that operators are increasing their customer base to generate greater profits, preventing mobile fraud from occurring is of the utmost importance and will also have a strong impact on revenue generation.
There is a strong demand from consumers for post pay mobile contracts and this demand will continue for the foreseeable future. This model enables users to spread payments over a longer period of time, usually 12-24 months, and is one that MNOs are compelled to keep in order to appease customer preferences.
This payment model has its negatives considerations for MNOs as it is susceptible to fraud as it allows individuals to obtain a valuable device with low upfront costs – fraudsters are even able to use illegally acquired personal details to obtain the handset. Unfortunately, the model also excludes those who do not possess a high credit rating; mobile device contract rejection is estimated to be approximately 70%, with this figure increasing to 85% during promotions and sales.
This causes problems for operators who are unable to grow their customer base due to end users not being able to obtain the devices and is one of the many wider impacts that fraud has upon the industry.
Non-payment of Bills
Even if a user is acquired, issues are often seen in terms of revenue collection on a global scale. Post pay bill drop is believed to be around 15%, which has doubled in 2020 due to the ongoing COVID-19 pandemic and the economic uncertainly which looks set to persist for the foreseeable future.
Looking at this on a granular level, in Central America the figure is estimated to be around 30%, of course this is unsustainable in the long-term and is an issue that requires immediate attention and collaboration from MNOs.
In Europe there are instances of this occurring in terms of both new and existing customers, with 2-3% of current customers and 15% of new customers struggling with regular payments.
This has repercussions for end users who do keep up with payments, as well as the MNOs who are forced to recoup losses and pass the costs on.
There are options for operators to work towards reducing instances of fraud, including carrier subsidy locks so that users are committed to a device and network for the duration of a contract. However, these can still be unlocked by end-users and in some countries, such as Singapore, Israel and Canada, the practice is illegal and cannot be implemented.
Porous Supply Chains
Theft and fraud at various stages in the supply chain have a devastating impact on MNOs, especially in the Americas where up to 15,000 devices in Brazil are stolen. In the USA, a pallet of handsets is believed to have an estimated street value of $1 million; failure to ensure that robust mobile fraud protection is evident at different stages of the supply chain can have devastating repercussions.
There are estimated to be around 400,000 devices stolen in the United Kingdom each year, and this is actually a conservative estimate as it is believed that most instances of theft are not reported. The African Operator Group has estimated that $250 million is lost yearly due to devices and equipment being stolen by criminals. In Russia, theft in the supply chain means that around 12% of all stock is stolen before it even reaches the point of sale.
The widespread adoption of the internet around the globe, including in developing countries, has led to increases in the grey market. This has opened up another avenue where MNOs see considerable losses in revenue and profits.
The GSMA estimates that approximately 4 million devices are trafficked on a global basis. This means that the cost of bulk prepaid trafficking is believed to be in the region of $900 million, a loss of $225 per trafficked handset.
It is of great importance that operators consider and invest considerable resources in innovative solutions to assist in preventing mobile fraud in order to achieve eradication. This has clear benefits for both MNOs and end-users who will once again enjoy carrier subsidies for the latest devices and not be reliant on a strong credit rating to purchase the latest handsets.