In speaking with telcos around the world, fraud prevention is one of the most talked about issues in the industry today. In our digital-first society, fraud has never been easier, or more prevalent – with huge financial consequences.
Just how bad is it? Fraud costs the global telecoms industry an estimated $38.95 billion, representing 2.5% of revenues. Telcos experienced a fraud rate of 0.70% in 2023, with subscription fraud and unauthorized access being the most common types. The need for robust fraud prevention has never been clearer.
There are 30 distinct types of fraud that plague telcos, ranging from those that involve social engineering, to outright hacking, and more. At Maplewave, we specialize in the retail side of the industry, so we’ve taken a deep dive into these aspects of fraud prevention.
In this blog, we will look at 12 ways telco commerce platforms like ours can limit retail fraud in the telco industry.
Unauthorized Transactions & Returns
1. Maintain a purchase restrictions database
Prevents: Large-scale SIM card fraud and reselling.
How: By limiting how many SIM cards or other products a customer can purchase within a certain time frame, telcos can reduce their exposure to large-scale fraud. This feature limits exposure to fraud vectors, rather than preventing it outright, but it’s still a valuable tool to have in your toolbox.
2. Flag high-risk transactions
Prevents: High-risk, potentially fraudulent purchases.
How: Assess each transaction based on predefined risk criteria (e.g., purchase value, unusual purchase patterns). Transactions that exceed the risk threshold are flagged. Notifications are then sent to a risk management team or store manager for review, so they can quickly prevent the purchase from being finalized.
3. Use customer history to validate refunds
Prevents: Return fraud and false refund claims.
How: Telcos can prevent this common retail fraud by only allowing refunds if a valid receipt and transaction record exist. Time limits can also be set to control how long refunds will be accepted. These strategies all but eliminate the chance of performing an invalid refund.
4. Leverage serialized inventory tracking to authenticate returns
Prevents: Fraudulent returns and item swapping.
How: Serialized tracking is imperative in the telco industry. With this feature, telcos can ensure that the serial number of the returned device matches the one originally purchased. This prevents customers from buying a device, swapping it for a different serial number, and attempting to return it.
Identity Fraud, Impersonation & Account Access
5. Scan IDs using Optical Character Recognition (OCR)
Prevents: Identity fraud and data entry errors during account creation.
How: OCR technology automatically scrapes key information from IDs or passports, speeding up data entry and preventing incorrect data from being entered. This reduces the chances of fraudulent accounts being created with fake or manipulated information and helps ensure accuracy during customer onboarding – no typos here! It’s as easy as using the camera on a phone or tablet, then pointing it at the ID to extract the information.
6. Cross-reference IDs with third-party systems
Prevents: The use of fraudulent or stolen identities to open new accounts.
How: Discrepancies are flagged when ID information is compared against government databases or other trusted third-party systems. If the external system identifies that the ID is fake or stolen, the new account can’t be created. This tactic depends on the availability of an external database, but so long as you have access to one, this is a simple verification step that can prevent a lot of headaches.
7. Invest in hardware for holographic ID verification
Prevents: The use of counterfeit IDs.
How: Use hardware that can detect holographic security features on ID cards to verify their authenticity. This feature is particularly useful for spotting fake IDs in real-time, preventing fraudsters from opening accounts or making purchases.
8. Compare entered information with internal telco systems
Prevents: Subscription fraud and repeated account abuse by customers with unpaid debts.
How: Compare customer information against internal telco records, such as databases of customers who owe money (from the same or different line of business), or a list of banned accounts. By blocking new accounts for flagged individuals, telcos can prevent bad actors from repeatedly exploiting the system.
9. Capture and verify customer identity through photographs
Prevents: Impersonation and fraudulent account access.
How: When a customer creates a new account in a physical retail environment, the agent can take photos of them and their ID documents. These images are stored for future verification activities. When the customer returns to the store, the agent can view these images, allowing them to visually confirm whether the person in front of them matches the account holder. This strategy prevents fraudsters from pretending to be someone they’re not.
10. Implement multi-factor authentication
Prevents: Account takeover and unauthorized changes.
How: Multi-factor authentication (MFA) requires the customer to have multiple ways of verifying they are the one performing a transaction. A common strategy is to send a PIN to the customer’s phone number or email. This ensures that only the legitimate account holder can authorize changes or transactions. Without access to the customer’s personal devices or accounts, fraudsters are stopped in their tracks. This strategy works for both in-person and online transactions.
Insider Fraud
11. Audit digital contract searches and views
Prevents: Insider fraud and unauthorized access to customer information.
How: Digital contract systems are great, but they also give employees access to a wealth of customer information – names, addresses, birthdates. Leading digital contract solutions include robust audit trail features that track every search, contract view, and configuration change made in the admin system. This detailed logging makes it easy to detect suspicious behavior or unauthorized access attempts, allowing telcos to identify and stop potential internal fraud or the misuse of sensitive data.
12. Flag suspicious insider transactions and system access
Prevents: Internal fraud, data misuse, and unauthorized transaction approvals.
How: By setting thresholds for specific actions, it’s possible to monitor employees’ behaviour and send alerts to managers when there is concerning activity. This might include an agent performing an excessive number of returns, or a call centre agent repeatedly accessing sensitive data. These alerts arm managers and risk management teams with timely data so concerns can be addressed immediately.
Wrap Up
The retail side of the telecom industry is vulnerable to sophisticated fraud tactics. However, by investing in technologies and commerce platforms that include fraud prevention features, telcos can better protect their business and customers from financial loss and reputational damage.
Have you experienced fraud? What strategies have you implemented to safeguard your business?
