The telecommunications industry is facing a crisis. As fraudsters exploit the widespread use of mobile devices, global telecoms suffered staggering losses of alone.
With more cell phones on the planet than people, these devices have become central to our lives. From banking and shopping to social media and beyond, mobile devices offer a gateway for fraudsters to target both users and telecom providers.
As International Fraud Awareness Week 2024 highlights, the telecommunications sector is under siege, and urgent action is needed to combat this growing threat.
The COVID-19 pandemic accelerated digital engagement, forcing many telco transactions online. This shift, while necessary, opened the door for a surge in fraud.
Previously, customers visited physical stores for major transactions like new contracts or upgrades. The pandemic forced these interactions online, creating vulnerabilities that fraudsters exploited.
Telco operators responded by investing heavily in security measures in line with fraud prevention best practices. However, the battle against fraud remains ongoing, as criminals continuously seek new ways to exploit weaknesses in the industry.
Telecom fraud remains a significant threat, with various tactics used to exploit vulnerabilities in networks and systems. According to the Communications Fraud Control Association (CFCA), 51% of current fraud cases fall into these categories:
In South Africa, telecom fraud . 15.5% of digital transactions were flagged as fraudulent, far surpassing the global average of 4.5%. This surge is particularly alarming given South Africa's rapidly growing telecom sector, with and mobile internet usage.
Telecom fraud in Southeast Asia has escalated into a major global concern. An estimated people are forced into labor in scam call centers, perpetuating a vicious cycle of exploitation. These criminal networks use various telecom fraud methods to infiltrate other industries, resulting in an estimated annual loss of $39 billion annually.
8.3% of all digital transactions by consumers in the Philippines last year were suspected fraudulent, 66% higher than the global digital fraud rate of 5%. For transactions where the consumer or fraudster was located in the Philippines, 2.4% of these were in the telecommunications sector.
Malware-driven fraud in Latin America surged by a staggering 113% in the past year, with Argentina and Colombia experiencing the most significant increases. Mobile devices, used in 79[3] % of these cases, are a common target for fraudsters. These criminals exploit widely used digital banking apps, bypassing security measures like two-factor authentication.
Not only do mobile service providers face direct financial losses, but their reputations also suffer from the prevalence of these fraudulent activities. Stolen device fraud and account takeover are additional challenges plaguing the region.
Identity fraud remains a significant threat to telecoms providers, enabling a wide range of fraudulent activities, from application fraud and credit “muling” to account takeovers and PBX fraud. By impersonating legitimate users, fraudsters gain unauthorised access to telecoms systems and services, resulting in substantial financial losses.
While digital onboarding has simplified customer acquisition, it has also introduced new vulnerabilities. Despite advancements in KYC (Know Your Customer) methods, including biometrics, liveness tests, and device analysis, fraudsters continue to outmaneuver security measures. Leveraging AI-powered deepfakes and sophisticated machine learning techniques, they create convincing synthetic identities and exploit system weaknesses through automated attacks.
Additionally, the availability of compromised personal information on the dark web facilitates account takeover fraud. By accessing stolen credentials, fraudsters can easily bypass knowledge-based authentication and gain control of accounts, often before devices are delivered to rightful owners.
To combat sophisticated identity fraud, telecom providers must implement robust multi-layered fraud risk management solutions. By examining the four pillars of identity, organisations can gain a more holistic understanding of a customer's authenticity:
The four pillars of identity verification must be considered collectively, in context. By analysing the interrelationships between these elements, telecoms providers can identify anomalies that may indicate fraudulent activity. While the majority of legitimate customers will exhibit consistent patterns, fraudsters often employ techniques to mask their malicious intent. By carefully examining the subtle details and connections between the four pillars, organisations can more effectively detect and prevent identity fraud.
The telecommunications industry faces a constant barrage of sophisticated fraud threats, driven by the lucrative potential of illicit activities. To protect their operations and maintain customer trust, telcos require a dedicated partner with a proven track record in fraud prevention, a partner that understands telecom industry fraud challenges. TransUnion® offers a comprehensive suite of solutions designed to safeguard your business from a wide range of fraud risks.
Don't let fraud harm your business. Partner with TransUnion and level up on trust. Help protect customers and strengthen your reputation with our telco fraud detection solutions by contacting DOKenya@transunion.com
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