How African Telcos lead the way in Fraud Prevention
In recent years Sub Saharan Africa has been home to several of the world’s fastest-growing economies, and the telecoms industry continues to play a significant role in the region’s economic growth, with it set to contribute $185 billion by 2024.
While the environment is challenging, with lower margins, greater regulation and fragmented infrastructure, Africa’s operators and the wider telecoms industry have proven themselves to be incredibly agile in the face of telecoms and cyber fraud.
The telco landscape in the region challenging one, at a time where operators are faced with shrinking margins, increased competition from OTT providers and demands to invest in 5G and new technologies, the ever-present threat of fraud and its impact is a problem that looms large over operators. Understanding fraud for operators in the region is about understanding the challenges they face with providing services to an incredibly diverse part of world at a time of rapid growth and development on many fronts, both technologically and socially.
Africa is the world leader in non-contracted telecommunications with 95% of mobile subscribers on prepaid services, by far the largest ratio in the world. Prepaying for mobile and data sparingly, charges are relative, and much smaller, perhaps less than 10 pence for customers to use their phone.
What this means for operators is that vast amounts of data is being generated, take MTN Nigeria for example who might face up to 8 trillion CDR’s being generated which needs to be orchestrated by other systems.
When you consider their 70 million strong subscribers this amounts to a huge environment where you process every individual transaction. In contrast an operator like AT&T in the US depend largely on their 75 million subscribers being on neatly defined monthly contracts. As far as billing and reconciliation is concerned, in Africa, it is a much more complex process. With margins being significantly slimmer it’s crucial that operators get things right to make money.
These BSS/OSS challenges that operators face inevitably filter through to other areas, and this includes risk and fraud. As with the rest of the world Africa suffers from the ever-increasing threat of telecoms network fraud, which for some developed nations has reached epidemic levels.
Innovate to prosper
Mobile money is the biggest tech invention to come out of Africa and has become a catalyst for change on the continent. An attractive diversification for mobile operators, mobile money provides almost 20% of annual revenues. Succeeding where the UN and traditional financial institutions floundered in providing financial services to an unbanked population, mobile money inevitably caught the attention of opportunistic fraudsters. Providing connectivity and SIM cards to far flung markets required mechanisms that made it easier for people to do SIM swaps, which inadvertently led to SIM Swap frauds. Hence operators had to come up with remedies to tackle the emerging fraud.
Africa’s approach to combatting fraud has always been a collaborative one, and this has seen them work closely with other industries and verticals to find solutions. The high costs from vendors delivering products and services into the region has encouraged an innovate to prosper mindset.
At a major bank in Mozambique, suffering from increasing cases of SIM Swap fraud, (where fraudsters trick or bribe a phone companies call centre staff into switching a legitimate customers SIM card to one they control), Vodacom Mozambique offered a straightforward cost-effective solution;
They would setup a system that would allow the bank to query phone records for any recent SIM swaps associated with a bank account before they could carry out a money transfer. This would mean that if a SIM swap had occurred in the last 2/3 days, the transfer could be blocked.
With victims of SIM swapping likely to be aware of it quickly due to the phone being disabled, the solution proved to be an enormous success and other banks and operators in Africa and abroad have put similar carrier-checking remedies
As African operators have played a greater role to their subscribers, as financial service providers, the necessity to secure their networks and protect subscriber’s money has driven innovation in telecoms and verticals. This has been especially so for brands selling connected and IoT enabled electronics into the continent. Faced with a consumer base almost entirely on prepaid mobile plans there was no way to load devices such as iPads with prepaid airtime or data bundles. Apple like many wrongly assumed everyone was on some sort of contract. Here a growing API industry offered a neat solution in airtime API’s that could be used to add credit to devices.
As well as ensuring that international businesses can more easily access Africa, API’s developed to carry out security checks, account validation and KYC (Know Your Customer) API’s are adding an extra layer of security to mobile money and assurances to telecoms.
Fraud as a top priority
With telecoms being such a large part of Africa’s economy, fraud is seen as serious threat at a government level. Authorities and regulators are proactive in doing everything that it takes to reduce tax losses, combat network fraud and reduce corruption.
Most recently Lesotho and Zimbabwe have implemented new telecom oversight technology to monitor national and international telecoms traffic. The technology promises to increase revenue assurance, combat fraud and enforce billing integrity across telco networks.
The system enables regulators to see, in real-time, what’s happening in the telecom sector, so that they can improve upon governance. It is seen as another example of the collaborative and proactive approach that the industry in region takes towards reducing network fraud.
Many of those working as regulators in Africa have come from the industry itself, and there’s a common goal to protect the whole ecosystem as opposed to simply focussing on competition, like regulators are in Europe and the US.
Many of the leading telco’s in Africa are listed on the South African stock exchange, corporate governance is tough and audits from external investors who do not have sight of what is happening on the ground are comprehensive and specific in terms of gauging what is happening with the operation. It is also commonplace for operators to have dedicated risk and fraud teams and the role of a Chief Risk Officer with overall responsibility of fraud prevention.
What can operators do to reduce fraud?
Fraud attacks are becoming increasingly more sophisticated especially on the borders of networks where international connection with services such as IOT platforms and cloud communications is taking place.
Being aware of what the threat landscape is and the ways that fraudsters and criminals are attacking networks is the first step for operators. Deploying a multi-layered strategy and going on the offensive is crucial for them as waiting for attacks to happen and then working to block them only proves costly.
Automation technologies are increasingly adding value to the fight against fraud, leveraging active and passive detection that deploys both test calls and messages to seek out sources of fraudulent traffic, as well as testing live traffic for anomalies and threats.
Combined with big data and machine learning automation solutions disrupt criminal activity, and they are proving to be a cost-effective solution to fraud on the wholesale industry, specifically international wholesale fraud, and effective for detecting SIM Boxes and combatting various forms of illegal bypass fraud.
The loss from network fraud in Africa and beyond still remains staggeringly high, costing the industry and customers billions of dollars a year. But Africa is proving to be resourceful and agile in the face of challenging threat landscape.
The innovative and collaborative approach the continent takes to fraud prevention, and the determination to make it a top priority should be seen as an example to be set to operators and regulators in more developed nations.