The telecoms industry has a collective responsibility to combat telecoms fraud, with its monetary damages currently estimated to be more than double that of credit card fraud. Not only can fraud put considerable strain on relationships across the supply chain, it can ruin customer confidence, increase churn and result in bad debt.
One of the big issues with fraud is that everyone wants to hear about incidents and how to prevent them happening again, but equally no-one wants to talk about it publicly through fear of scaring off customers!
Tony Martino, Managing Director of Tollring, says that education and awareness are imperative to encourage collaboration across the supply chain, so everyone plays their part in the fight against fraud.
Who is vulnerable?
The most common occurrence of fraud is on the PABX – equipment is either left vulnerable to a penetration attack due to passwords being left to ‘admin’, or they are accessed physically.
Cloud-based telephone networks and SIP trunking platforms are more open to fraudsters, who are continually evolving their techniques to make detection and prevention more difficult. For example, a recent trend is for fraudsters to go undetected by taking smaller more frequent ‘pickpocket’ hits on customers’ systems that don’t trigger alarms or hit credit caps.
Unfortunately, the cloud has prompted a reduction in the good business practice of credit checking. Credit checks are standard practice when a large capital outlay is involved, but the nature of cloud pay-monthly services has meant that credit checks have become less common, yet this is potentially offering customers an open-ended credit facility and payday for fraudsters. Due diligence at the start of a relationship is therefore just good business practice.
Who is responsible for the cost of fraud?
Traditionally, the customer was ultimately responsible for ensuring their premises-based PBX telephone system was secure and they largely took responsibility for the cost of fraudulent activities and bad debts. However, with cloud telephony, the customer now expects resellers and service providers to protect them from fraud. In fact, if a provider cannot guarantee fraud protection, the customer may be unwilling to buy from them.
Tragically for smaller resellers, the cost of fraud can destroy their business. The income these resellers gain from cloud telephony can come in the form of small breadcrumb payments over time and they will be badly hit if a smash and grab mega fraud takes place over a weekend. If fraud happens, someone expects to be paid quickly and it will be difficult to get the customer to share in the costs.
The only way to stop existing and the next type of fraud, and to reduce the cost of fraudulent activity, is by taking a more proactive approach as opposed to waiting for it to happen.
The role of analytics against fraud
A marvellous by-product of cloud telephony is the wealth of analytics and big data that it generates. In addition to being able to see what is happening on a network relating to the performance of features or functions, this huge intelligence can be used to predict, detect and prevent fraud in real-time across both hosted voice and SIP trunking platforms.
The answer is to take major steps against fraud through intelligent analysis. Every single call and call type needs to be monitored by a fraud and credit management solution, with every call passing through a rigorous process including:
• Real-time checks against a risk register
• Compliance with fraud rules and blacklisted destinations
• Historical trend analysis and behavioural pattern monitoring
• Scalable credit management through multi-tier spend limits
The real-time element is essential since it delivers the capability to ‘stop an active call and block further activity’ in real-time. Alerts and notifications can be triggered and sent to all parties including the customer when rules and thresholds are approached and eventually breached so that different actions can be initiated depending on the severity of the breach. The key to a future-proof solution is self-learning functionality, predictive analytics and dynamic updates.
Fraud losses can substantially increase operating costs and cause revenue leakage, so it is vital to invest in systems that truly protect online revenue flows and profit margins. Not least, preventing fraud is necessary to protect brand reputation, since end customers tend to avoid firms that have suffered data breaches.
Top tips for the channel when considering fraud:
• Offer fraud as a value-add service, use it as a strong differentiator
• Perform due diligence on new customers, including credit checks (to reduce churn and bad debt)
• Understand your customers’ estate fully to be able to advise on security in line with their company policy
• Work closely with customers on security, to encourage shared responsibility
• Proactively manage customers’ credit and spend limits as an ongoing service
• Understand the options available and aim to ‘lock it down’
• Share the responsibility of education: everyone needs to play their part in the fight against fraud