New Fraud Research from Dan Baker

Dan Baker, regular Commsrisk contributor and co-host of the Commsrisk podcast, has published his new 239-page report into the state of telecom fraud management solutions and strategies. In the report, he estimates 2015 revenues for fraud solutions will be almost USD600m.

Such a lengthy and thoroughly report cannot be easily summarized. Baker’s strength is that he objectively researches every aspect of fraud. He does not place disproportionate focus on subsets of fraud activity that play to the strength of particular vendors, nor does he exclude tricky or unglamorous subjects. However, here are four key takeaways from Dan’s research.

1. Credit/ID/subscription fraud is big – but the dominant suppliers will witness some disruption.

The research concludes that credit/ID/subscription fraud currently represents the bulk of fraud services revenue, and this part of the market is dominated by global data bureaus like Experian. However, disruption will occur for a few reasons, helping to reduce the scale of fraud suffered whilst also potentially reducing revenues for traditional credit-checking intelligence providers. For example, new technology like biometric checks will be rolled out, increasing control and preventing fraud at the point of sale. Meanwhile, new business models like the XOR Data Exchange will allow privacy-enabled peer-to-peer sharing of data between corporations. This will reduce the cost of gathering pertinent intelligence whilst providing a new competitive alternative to traditional data bureaus.

2. Bypass is going to get worse.

Baker looks at bypass fraud in some detail, speaking with a wide variety of suppliers who provide tools to detect bypass. Whilst much has been done to identify and disconnect simboxes, Baker believes bypass is on the rise because of the new technologies available to fraudsters. For example, more fraudsters will use SIM servers to make it much harder to detect simboxes.

At the same time, telcos need to come up with a strategy to counter rapid growth of legal but highly damaging OTT bypass.

3. Techniques to prevent International Revenue Share Fraud will force its decline.

A number of positive developments will lead to a reduction in IRSF. International wholesalers are doing more to tackle fraud as part of the service they provide to partners. Fraud services will be integrated with billing and routing services, such as those provided by Telarix. SIP invite is a technique that will increasingly block blacklisted numbers before a call can be made. Finally, good intelligence is available, such as iconectiv’s list of unallocated numbers and a new global blacklist from Yates Fraud Consulting and FRS Labs.

4. Fraudsters will adapt, and fraud managers must respond.

Baker also identifies a number of weakspots where fraudsters will raise their game, forcing fraud managers to do likewise. Mobile money is too lucrative for fraudsters to ignore, and telcos need more sophisticated anti-fraud data and procedures to mitigate the risks. At the same time, fraudsters will increasingly try to exploit insiders and dealers in order to earn criminal profits. Telcos will need to improve their efficiency when it comes to investigating staff and partners.

The report is aimed at two kinds of audience: the carriers that have to fight fraud and the vendors who sell anti-fraud tools. To get a comprehensive overview, Baker has included contributions from 13 industry experts, plus some opinion about risk management from me too.

Baker has a reputation for extensive and objective research, and his new fraud management report demonstrates why. You can judge for yourself for free, by sampling the executive summary. The complete report costs USD2,250 and can be purchased from the Technology Research Institute.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.