Uncovering Fraud Dilemmas - cVidya in London May 2012


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Presentation on uncovering the recent dilemma that fraud departments face – today and tomorrow given by Jason Lane-Sellers, cVidya's Fraud Expert, at Arena International's Revenue Assurance, Fraud Reduction and Cost Management in Telecoms 2012 conference in London.

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Uncovering Fraud Dilemmas - cVidya in London May 2012

  1. 1. Uncovering the recent dilemmathat fraud departments face – OPERATIONAL RISK MANAGEMENTtoday and tomorrow & COMPLIANCERevenue Assurance, Fraud Reduction and CostManagement in TelecomsJason Lane-SellersFraud & RA Expert, cVidya© 2012 – PROPRIETARY AND CONFIDENTIAL INFORMATION OF CVIDYA
  2. 2. Today Top down New perspective – Dilemmas Operational Risk Expanding & fraud remit for fraud Management challenges How to become a revenue generating unit2
  3. 3. Fraud Manager’s Dilemmas How can I generate new How do I develop proactive revenue streams from approach to protect the the same tools I use to organization from future prevent losses? fraud threats and challenges? How do I protect my organization from current fraud threats to minimize revenue losses?3
  4. 4. A Shift In Approach Fraud departments are Effective : obliged to be more: Achieve more with fewer resources Support large volumes and multiple types of transactions Align activities with corporate business goals Demonstrate their activities and effectiveness within the organization Proactive: Assess risks of services & products pre-launch Top down analysis & prioritization Innovative : Stay ahead of threats and challenges Produce revenues as well as prevent losses Be prepared for upcoming technologies and products4
  5. 5. Fraud Challenges Worldwide 2011 Estimated Fraud Losses by Fraud Type (in $ USD Billions Wingrall 0.64 Theft of Content 0.64 Pre-Paid Fraud 0.64 Clip-on Fraud 0.64 Internet 0.96 Cable or Satellite 0.96 Social Engineering 1.12 Theft of Equipment 1.12 Theft of Equipment 1.28 SS7 Manipulation 1.44 Iternal/Employee Theft 1.44 Identity Take Over 1.44 Domestic Revenue Share Fraud (DRSF) 1.60 Roaming Fraud 1.76 Arbritrage 1.76 Dealer Fraud 2.08 Premium Rate Service 2.24 Credit Card Fraud 2.40 Bypass Fraud 2.88 International Revenue Share Fraud (IRSF) 3.84 Subscription Fraud 4.32 PBX 4.965
  6. 6. Understanding What the Issues Are Problems with classification Identity PABX IRSF BYPASS Sub Fraud and terminology takeover – Primary and secondary frauds Credit Card PRS Dealer Arbitrage Cable – Reason for fraud or fraud type – Understanding meaning Revenue and terminology Roaming share Internal Call Sell Internet (domestic) – Generic groupings This means that fraud issues Social SS7 of the same nature can be Clip On Wangiri Content engineering manipulation split across result gained6
  7. 7. The Traditional Fraud Department Traditional Operator Fraud Teams Operation & Investigation teams Seen as a necessity - no benefit recognition Operations – measurement focus, high volumes The Fraud of incidents and high number of personnel Department Investigations – small case loads, long timespans, legal actions, minimal recovery Simplistic process, lack of technical understanding No commercial skill sets, or process expertise
  8. 8. The Commercial Driver for Change Reduced Cost StructuresOutmoded teams can struggle and personnel reductionwith effectiveness and strategy Lack of business Increased risk taking and reduced barriers to entry understanding can reduce fraud identification and alsoIncreases impact of issues and Increasing cause conflict Customer Basefrequency – so cannot affordresource hogging operations Increasing Services and Multiple services increasinginternally product portfolios fraud types, risks and complexitiesMarketplace competitionincreases the needs for Highly competitivedepartments to contribute to the marketplacebottom line9
  9. 9. Top Down Perspective CSPs rely on Revenue Intelligence practices to ensure they remain competitive Revenue Intelligence can and must achieve more current approach is mostly reactive and lacks a high level view – Sometimes one-off consulting is used, but it is not sufficient as results are quickly outdated or does not become part of day to day operation Revenue Intelligence must be a methodological, top-down operation which has the needed information and models for operating in the most effective manner A need to base strategy on clear, solid, and visible methods that provide valid planning ahead10
  10. 10. Risk Guided Fraud Management-Top down analysis Define Business Goals (CFO) Report Define Risk Targets Exposure, Risk level, Recovery forecast Risk Mitigation Risk Assessment Evaluate Planning per LOB/Process Effectiveness Risk Guided Revenue Intelligence Define Operational Execute and Follow-up, Fix, Rules & KPIs Monitor Reclaim Operational Revenue Intelligence11
  11. 11. Fraud – A revenue generatingunit?12
  12. 12. TURNING A Lemon To Lemonade Sales and partner Increasing internal risk management positioning for Protection Fraud offering for corporate Departments Customers FMAAS - Fraud Management As A Service for Partners Service Abuse Management Behavior analysis capabilities for Marketing13
  13. 13. Areas to Consider Partner FMAAS Service Abuse Management – Provision of FMS for Partners (such as – Product protection VNO’s & Wholesale) – Margin, T&C’s & FUP’s – Spam, SMS, Bypass etc Enterprise Fraud Protection Services – Enterprise PABX Fraud Management Behavioral Analysis for Internal – Enterprise Risk Management departments – Customer profiling Sales Channel Risk Management – Anomalous groupings – Commissions & Payments – Segment behavior – Internal & external Sales teams – Location profiles14
  14. 14. Partners FMAAS and Enterprise Fraud & Risks management15
  15. 15. FMAAS More telcos have relationships and arrangements with other operators via MVNO or VNO relationships, Reselling agreements or wholesale relationships Effective fraud management is often difficult in these situations as the third party partner owns all the customer data and the third party often has a delay in receiving data or the data is limited Therefore there is an opportunity for Operators to offer fraud services to these partners to allow them to achieve effective real time management16
  16. 16. FMAAS cont’d Services offered to these third parties could include – Dedicated fraud detection schemes – Fraud Management per 3rd party » Specific rules and analysis » Specific profiling – Partner FM portals – Rule and threshold configuration & Tuning of fraud controls – Notifications (sms, email) – Management and operational Dashboards, – Crowdsourcing & Sharing of information – Hot B number Lists – Fraudster profiles & Fingerprints17
  17. 17. Enterprise Fraud Movement (or regrowth) of fraud to enterprise/corporate level, including; – Subscription & ATO fraud at the corporate/SME level – Regrowth of PABX fraud – IP service growth – IP PaBX software – Bypass/Gateway as a source – Customer Manipulation – Traffic pattern hiding – Internal Fraud in the enterprise Often the operators are blamed by the customer for not protecting them from these type of fraud18
  18. 18. The Enterprise Opportunity Provision of a Fraud Management service to customers as a differentiator including capabilities such as; – PBX protection as a service to corporate customers (PBX detection as revenue generator) PBX profiling Back-office investigation tools – New dedicated fraud detection schemes Management per customer Allowable activity programming – Corporate customer portals Notifications directly to customers (sms, email) Dashboards, Tuning of fraud controls – Smartphone malware protection App based analysis , with system integration19
  19. 19. 20
  20. 20. Sales in Telecom Sales forces are divided to several groups: – Tele-Sales & CS (over the phone) – B2B (divided to geographical areas) – Stores and online channels – Distributers, Dealers & Resellers Telecom carriers push their sales representatives towards highly aggressive targets21
  21. 21. The Permanent Dilemma How strictly are you monitoring their actions ? What is the level of freedom you provide in order to pursue “the desired signature on contracts “ ? What will be the price of constant critique ? Sales organizations often avoid asking too many questions when the contracts keep coming …22
  22. 22. Sales Channel Fraud Control Can you utilize your System for the monitoring of sales activity – Across all channels – Telesales, CS, Direct Retail – Partners, dealers, resellers – Volumetric & Patterns – Individual, function, location – Type, products, services and add-ons – Locational information analysis – Sales patterns, Application patterns – Commissions payments & calculation validation – Overpayments, abuse etc. – Usage Analysis – Non use, location validation, profiling etc. Performing such action can aid manage commission budgets and dealer payments23
  23. 23. Service Abuse
  24. 24. Service Abuse Issues Ownership – Financial – Margin erosion – Many organisation do not recognise the – Small scale large impact impacts of abuse – Arbitrage – Is one area responsible for abuse – Interconnect revenue impact management? – Resale – Different types of abuse can often be – Sales & Growth impact managed but separate groups in the – Network Opco – Component & Node overload – Fraud, networks, marketing, CS – Charging and verification – Does the Opco have FUP’s or T&C’s on issues – Service quality impact these types of plan – Opportunity loss, churn – Is the management (if any) of these – Service access impact FUP/T&C’s manual processes or – Opportunity loss in access automated – Brand – Customer experience25
  25. 25. Service Abuse – The Opportunity The fraud department is ideally placed to manage service abuse and provide value to the organization An Effective FMS/RA system can provide this capability to add value via; – Monitoring and alerting of high level abuse – Identification of margin negative services or entity – Traffic profiling and analysis – Locational, multi/single party, diversity etc. – Alerting and notifications for T&C or FUP abuse26
  26. 26. Internal Promotion27
  27. 27. Internal Promotion Fraud & RA teams could utilize their capabilities to promote their benefit internally to other departments Information analytics used for fraud and RA can provide vital data internally such as: – Profiling behavior – Defining norms per product and service – Identification of anomalous or out of norm activity segments – New product potential – Margin Analytics – Lifecycle analysis by product and services28
  28. 28. FM&RA units need to keep track and be ahead of challenges Understand your internal strengths and its potential commercial value to the organizations Increase your department’s position in the company by offering prevention services to your customers and partners Increasing the capability range and coverage of the fraud and RA teams is essential A truly intelligent, flexible system or tool set can support the process of transforming the fraud area into a profit center29
  29. 29. THANK YOU!www.cvidya.comJason.Lane-Sellers@cVidya.comwww.cVidya.com