It is a well-known fact that, every time a security threat occurs in any organization, it makes it to the media and thus causing reputation damage and loss of business. We have seen many instances of such cases in the recent past.
In fact a very recent case, which was reported in the beginning of the year was with Vermont utility. According to news reports, which later proved to be false, Burlington Electric had found malicious software on a computer that was not connected to its grid control systems. Moreover, the malicious software found on Burlington Electric Company laptop matched with those on malware found in the Democratic National Committee computers that the US government has blamed on a specific country.[i]
Though the news was later debunked to being ‘erroneous’[ii], the news was initially covered in a multitude of news outlets. The fact remains that cybersecurity attacks continue to make news, negatively attack your business and brand reputation.
Unfortunately, the ground reality is that Hacking attempts are becoming more common, and the rollout of new technologies has created further vulnerabilities. It is important that businesses safeguard themselves in order to ensure that they stay out of negative limelight. In January 2014, Target admitted that hackers used malicious software to break into its networks and access credit and debit card information directly from Target’s checkout lanes through the holiday shopping season. News of the breach drastically affected the retail giant diminishing holiday sales causing Target to eventually fire its CEO in the breach’s wake. The hackers responsible for the 2013 Target data breach that exposed payment information on 40 million customers had nothing to stop them from accessing every cash register in every Target store.[iii]
Today with the world going ‘digital’, the number of potential devices, just waiting to be hacked are increasing. Experts predict that by 2020 there will be 200 billion connected devices, which in turn could result into increased probability of devices being vulnerable to such attacks.
We are also witnessing the rise of smart cities. For Instance, Saudi Arabia is investing $70 million to build four new smart cities, while in South Africa, a $7.4 billion smart city project is already underway. By 2020, the market for smart cities is predicted to reach $1 trillion, according to Frost & Sullivan, a consulting firm.[iv]
In such a scenario, imagine the magnitude of an attack on smart cities or connected infrastructure, which has implications on citizens. The negative impact this could have on brand reputation of state governments could be devastating. But an attack is indeed, possible. Last year, Cesar Cerrudo, an Argentine security researcher and chief technology officer at IOActive Labs, demonstrated how 200,000 traffic control sensors installed in major hubs like Washington; New York; New Jersey; San Francisco; Seattle; Lyon, France; and Melbourne, Australia, were vulnerable to attack. Mr. Cerrudo showed how information coming from these sensors could be intercepted from 1,500 feet away — or even by drone — because one company had failed to encrypt its traffic.[v]
Hence, it is important today for organizations and even government bodies to ensure that they are able to safeguard themselves from cyberattacks. Such vulnerabilities have huge implications on business and can cause irreparable damage to brand reputation. Stay ahead of cyber threats and, as the headline say, don’t be in the news for the wrong reasons.
This is the 2nd part of the 3 part blog series and covers how the digital advertisement ecosystem works along with understanding how big is the problem of fraud in that ecosystem.
This 3 part blog series puts a light on relevance of Digital Advertisements in telecom space along with providing a high level understanding of it’s ecosystem and fraud risks it injects. Idea is to give readers a basic knowledge of the digital advertisement space and the inherent risks.
The 1st part of this blog series was published on Jan 21, 2016 and you can read the same here.
Part 2 – Digital Advertisement Ecosystem & the problem of fraud
Advertisement Ecosystem is divided into 9 major components, as shown in the image below:
Advertisers are ‘Brands’. Brands which are the source of promotions for a specific product, service etc. This is the entry point of money into the ecosystem – A demand feeder.
2. Ad Agency:
Ad Agencies are the entities who plans marketing & ad campaigns on behalf of the advertiser. They are, generally, also the ad creators, or outsource the creative bit to a media agency.
Ad Agency designs the ad strategy and works with publishers, ad networks and other industry participants making the demand meet the rest of the ecosystem.
Demand side platform. These are the demand side aggregation platform solution providers. They may be part of an Ad Exchange or maybe separate entities. They allow buyers of digital advertising inventory to manage multiple ad exchange and data exchange accounts through single interface.
4. Ad Exchange:
Like the stock exchanges we all are aware of, Ad Exchanges act as a advertisement digital marketplace that enables advertisers and publishers to buy and sell advertising space, often through real-time auctions/bidding.
These are the points where the demand side generally meets the supply side.
Similar to DSP, the Supply Side Platform are the aggregation platform solution providers at the supply side who enable publishers to manage their advertising impression inventory and maximize revenue from digital media.
6. Ad Network:
The Googles and InMobis of the world, Ad Networks connects advertisers to web sites that want to host advertisements. The key function of an ad network is aggregation of ad space supply from publishers and matching it with advertiser demand.
The Ad Networks are commonly known to manage most of the data exchange in the ecosystem, while earning most of the revenues.
The ad space owner. This is an entity which owns the medium (website, app, content service etc.) to deliver ads to intended end consumers/ad viewers. Commonly known as the consumer touch point.
More touch points, better touch points, better the ranking of the publisher.
The ad consumers. Customers. Us. The target entity for the whole Ad Ecosystem.
9. Data Aggregators:
The data crunchers of the ecosystem, Data Aggregators serve as the independent measurement entities for the other players in the ecosystem. Aggregators collect and compile data from individual sites to derive big picture and sell to others.
The Payout Models
There are 3 main payout models in the advertisement ecosystem:
1. Pay Per Click:
Pay per click, also called cost per click (CPC), is a payout model in which advertisers or ad network pays the publisher when the ad is clicked by the consumer. It is defined simply as the amount spent to get an advertisement clicked.
2. Pay Per Impression:
Pay per impression (CPI), or “pay per thousand impressions” (CPM), refers to the payout model where advertisers or ad networks pays a publisher each time an ad is displayed on its inventory. CPI is the cost or expense incurred for each potential consumer who views the advertisement, while CPM refers to the cost or expense incurred for every thousand potential consumers who view the advertisement(s).
3. Pay By Lead:
Cost per Lead (CPL), also known as cost per conversion, is a payout model where the advertiser pays for each specified action which the advertiser can consider as a business ‘lead’ with verified interest – for example, a form submit (e.g., contact request, newsletter sign up, registration etc.), feedback, double opt-in, sale etc.
The influencer of each payout model, which governs the actual payout while governing the quality rating of a publisher, is CTR (Click Through Rate).
Click through rate is defined as the rate of consumer taking the intended action – click, form fill, registration etc. over the advertisements being displayed to him.
In simple terms, higher the CTR of a publisher, higher is its quality rating. This when mixed with volume of ad traffic, directly influences the revenue for a publisher.
CTR also helps gauge the quality of ads itself – in terms of its creativity, contextuality & relevancy.
Role of a Telco
While traditionally Telcos have been playing a role of an advertiser, they have been slowing growing as publishers too, utilizing their web portal space for the purpose.
But, as I wrote in the first part of this blog series, Telcos are now riding on a significant ‘ad capable’ inventory being generated by their next generation product & services, specially content related.
This significant inventory at their disposal has a capability of turning Telcos into a small or mid sized Ad Network, while setting up advertisements as one of the key revenue source or service adoption enabler over the coming years.
Fraud Risk Levels in Advertisement Ecosystem
Before we move to the 3rd part in this blog series, let’s look at the existing fraud levels in the Advertisement Ecosystem.
Let me tell you, if you are all concerned about the 1-3% fraud loss levels against traditional telecom services, the fraud levels in the advertisement domain is going to give you sleepless nights.
To give you an example, one study by MediaPost reveals that, if a company has an online display ad budget of $100,000, then only $8,000 of that ad spend has the “chance” to put advertisements in front of human eyeballs.
That means, if you are paying $0.10 per impression, then the $10,000 that you will pay for 100,000 impressions will result in “chance” of only 8,000 human views—meaning that the effective Cost per Impression will actually be $1.25.
Pushes an organization’s ad investments of the track completely, isn’t it ?
Below are some industry statistics around existing levels of advertisement frauds published by the likes of SunTrust Robinson Humphreys, Ad-fraud prevention firm Pixalate & Forensiq:
Now, if a Telco’s Fraud Management team were to analyse frauds in the digital advertising domain, it will need to focus on 3 different areas:
Safeguarding your organization’s marketing investments & sales targets: It is more relevant when you see the Telco you are working for, as an advertiser or a brand.
Protecting the revenues from AD business & also safeguarding your publisher rating: This is relevant when a Telco acts as a Publisher or an Ad Network
Lastly, your own subscriber’s satisfaction & security levels: Now, this one is a bit confusing. But, to understand how advertisement frauds affect Telco’s end subscribers directly, let’s watch a short video courtesy Forensiq:
As shown in this interesting video by Forensiq, advertisement frauds not only impacts a Telco’s investments and expected revenues, but also influences customer satisfaction directly.
Recently Three, a leading telecom operator from the UK & Italy, decided to install network level ad-block solution with the below mentioned intent:
“Irrelevant and excessive mobile ads annoy customers and affect their overall network experience. We don’t believe customers should have to pay for data usage driven by mobile ads. The industry has to work together to give customers mobile ads they want and benefit from.”
If Three are successful, I can only imagine similar actions becoming widespread over the coming years or the sane players of the advertisement ecosystem gearing up to counter the problem of fraud like never before.
Clearly, there are two sides of the coin – while advertisements open up new exciting revenue avenues for Telcos, the fraud problem in the ecosystem is so widespread that it has potential to disrupt the whole revenue model built upon it.
In the next part of the blog, we will cover the most interesting bit and understand the presence of digital advertisement fraud risks in the ecosystem along with looking at a few case studies. You will not have to wait far too long, that I promise!
Look around you and you see posters, hoardings & stand-ins. Look at whatever screen you carry or face and you will see videos, popups & banners. These are “Advertisements” and they are everywhere!
I will not be going overboard when I say advertisements are the fulcrum of relationship between every business and its consumers. Organizations put significant investments into their marketing functions which in turn enables advertisements.
While earlier advertisements were statics in nature – channel run time, physical hoardings etc., they were easy to track to ensure the investments are protected. But, with the advertisements becoming digital, increasingly dynamic & internet driven – There has been an increasing need for measuring & protecting the advertiser’s or brand’s money and even the publisher’s real estate which is used for ad delivery & consumption.
Like it or not – In Telecom space, Digital Advertisements are coming to steal sleep off every fraud manager’s eyes.
From the risk perspective, the domain is complex and different from the traditional Telecom frauds, but the most important point is that advertisements from the internet space bring fraud exposure levels which are much higher than what Telco’s are used to. And containing that, will be a real challenge!
This 3 part blog will put a light on relevance of Digital Advertisements in telecom space along with providing a high level understanding of it’s ecosystem and fraud risks it injects. Idea is to give readers a basic knowledge of the digital advertisement space and the inherent risks.
This is the 1st part of the 3 part blog and covers why telecom industry is looking at Digital Advertisements as their next enabler.
Part 1 : Digital Advertisement and Telcos: A match made in heaven
When we think about internet or technology, there are 4 names which cross mind – Google, Apple, Facebook & Amazon.
What the 2 of these 4 giants, Google & Facebook, have taught us that AD revenues are a big deal when it comes to the digital world. With Apple & Amazon also planning to jump the advertisement bandwagon, the belief only gets stronger.
No surprise that Google & Facebook earn 90% of their revenues from advertisements. Also, most of the Apps, specially communication apps also have advertisements at the centre of their revenue model.
Considering this, it was just a matter of time our own Telecom industry shifts its focus on exploring the digital advertisements as one of their primary source of revenue.
The likes of Verizons, Axiatas & Singtels have already invested big in the area of advertisements.
Also, some other leading operators like Vodafone, Telefonica, Etisalat and France Telecom have also openly agreed for a bright future of advertisements in telecom industry.
Digital advertisements: Attracting attention within Telcos
If you look at telecom industry as an advertiser, you will find telcos spending 10-15% of their total yearly revenues as marketing budget, out of which 46% is only on digital advertising like website banner ads, video ads etc.
That is quite higher than any other comparable industry sector.
And if we believe certain studies conducted by industry experts like Adobe, spend on advertisements is only set to grow:
It only shows that telco industry agrees that this spending will only increase with mobile advertisements leading the pack.
What will drive this spending on Advertisements further ?
Now lets look at what are the factors which are going to drive the investments in the area of advertisements further.
If you look at the areas marked in yellow in the chart below, you will find that digital Advertisements are among the fastest growing revenue streams for Telecom Industry.
And, if you look at the elements which are marked with red circles, you will see a list of services on which telcos are currently betting big on.
These services, which include M2M, Gaming, Music, Video etc., interestingly are set to become the “enabler platforms” to drive advertising revenues further.
And not only that, these services also ensure that Telcos have sufficient advertisement inventory for them to upgrade from just an advertiser to become a big ticket publisher or a small AD Network.
This is the reason why you will find that these services have “Ad Delivery” inbuilt as a core functionality within their framework.
Digital Advertisements are key to make upcoming & exiting product & services more affordable to a Telco’s subscriber base and in turn boost adoption
Apart from this, we all are aware that content services are set to become a big ticket to monetize the large investments Telcos have been making towards infrastructure & quality of data services.
There are researches from the likes of eMarketer which indicate that content is set to make up 66% of the total traffic in Telco data pipes by the year 2017.
Driving on content services, advertisements are set to attract 100 billion dollars in next 1 year and an increase of 233% increase mobile ad spending in next couple of years.
Now, there is little doubt that advertisements are set to become one of the major source of revenues for Telcos or power that next big idea which will be a star of their upcoming annual report!
In the next part of the blog, we will understand how the digital advertisement ecosystem works along with understanding how big is the problem of fraud in that ecosystem. You will not have to wait far too long, that I promise!
“In school, we’re rewarded for having the answer, not for asking a good question”
This quote from Richard Saul Wurman rightly describes how a normal human mind, as part of it’s social development process, adapts to the guidelines of “finding the answers”, rather than exploring the possibilities of asking the “right questions”.
And this mindset also reflects in our place of work. We are humanly tailored to explore satisfaction in having answers to all the questions. And in the process of being ‘answer ready’, we tend to become left brain heavy than the right. We become target driven and focus less and less on fresh set of questions which could challenge us further to drive improvement and innovation.
Fraud Management ‘function’ is no different. Being a ‘revenue protection’ function in a large ‘organization’ it is expected to act similar to a small, but important organ in human body.
Like hormone levels of an organ, health of an FM function is also measured in terms of subjective financial targets – either monthly, quarterly or yearly. And the corrective action starts when the achievements are found to be ‘less than optimum’.
But, as an experienced doctor would say – It’s the lifestyle you need to keep in check and not hormone levels to remain healthy!
Constant self-assessing questions such as – “Am I eating right ?”, “Am I sleeping right ?”, “Am I sitting right ?”, “Am I exercising right ?” etc. go a long way in guaranteeing you a healthy life. Periodic check-ups then becomes a method to confirm your good health rather than just means to detect illness or deficiencies.
Keeping healthy is a continuous process – be it human body or fraud management. It is actually a practice, than just a function.
And to setup a continuously improving fraud practice in your organization it is essential to keep asking relevant & timely questions across the following 8 pillars of this practice:
While the questions could be an organization, risk or region specific, I personally always start with the following:
Is our FM function on a driver seat or secondary role and working as a support function ?
How should we enhance the influence of our FM function ?
How do we keep showcasing enhanced value from FM function ?
How do we extend our internal & external interfacing and make the existing interfacing stronger ?
How do we ensure fraud awareness keeps pace with the upgrading business dynamics ?
How do we enhance internal & external collaboration with FM function ?
How do we get higher return of investment from FM function ?
How to further reduce the fraud impact on the bottom line ?
How to make our fraud management practice more proactive ?
Is resource acquisition better or resource development ?
How do we safeguard ourselves from attrition ?
Is our team structure agile enough while following industry standards ?
Do we have all the required roles and are the responsibilities clearly defined ?
Are we right, under or over staffed ?
Are my processes effective and easily exercisable ?
Are my processes future ready ?
Are my processes agile enough to adapt to any changes with acceptable TAT ?
Are we adopting and implementing industry best practices ?
What parts of my processes can be automated ?
Is the Fraud Management tool adapted to my business environment ?
How do I ensure that the FM tool is fed accurate, complete and timely data ?
Are my fraud controls effective & efficient ? How do I reduce false positives ?
How do I ensure 100% automated fraud risk coverage ?
What capabilities do we need to acquire on tool front to be future ready ?
Are we ready against enormous data surge likely to be seen over next few years ? How do we benefit from it ?
Are we constantly learning from the industry in terms of fraud detection & prevention methods ?
Is there sufficient attention on upgrading to the required skill sets ?
How do we enhance resource competency & knowledge against current & future services ?
Is our team keeping pace with constant fraud mutations ?
Is our team using the tools effectively & efficiently ?
Is our team knowledgeable and comfortable with processes ?
What are the top 5 areas of learning for the whole fraud function ?
Are we aware of all the fraud risks we are exposed to ? What is our current coverage levels ?
Do we know the gaps in terms of fraud risks coverage ? How can we improve ?
What is our strategy to become compliant to fraud risks introduced by new products and services ?
Are we ready for fast converging cross industry environment and the risks it introduces ?
What is our stand on customer and partner only risks ? How relevant they are for our business ? Is our current stand obsolete ?
What is our performance management strategy ?
Do we have effective KPIs ? Are these business relevant ?
How can we improve the fraud function’s effectiveness & maturity continuously ?
What metrics should I use to measure health of the overall FM function ?
Are we conducting sufficient & periodic RCA & decision analysis ?
How do we gather accumulated wisdom & actionable intelligence for improvement ?
Each of these questions can be a healthy point of discussion within your organization.
While these may give you a first hand view of health of your current fraud practice, more importantly, it may also open doors for a much detailed open table introspective sessions, enabling you to come up with much better & effective questions.
Remember, the key to remain healthy is to keep asking the ‘right’ questions.
As Albert Einstein rightly said – “If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes.”
Signalling level risks, specially fraudulent accesses from connected SS7 networks, is one area which is making a lot of noise in the assurance and security functions of Telecom organizations today.
The focus on the matter is such that most of the industry conferences talking about the current and next gen threats have a lot of matter being presented and shared on this topic – both from the operators and vendors alike.
What is it ?
The signalling level risks generally refer to SS7 (2G/3G) and Diameter (4G) level vulnerabilities (inherent or configuration based) which exposes operators to hacks/frauds through signalling control commands specially in roaming and interconnect scenarios. The scenario becomes more risky considering a normally configured SS7 infrastructure of an operator is accessible to any other operator in this world, either directly or through certain number of hops.
Now, just consider a situation where a rogue operator exists or a group of hackers with a malicious intent have got access to SS7 signalling of any less-secure operator in this world.
The losses due to signalling risks, while are still quite speculative, are expected to run in billions every year. Artificial inflation of traffic (specially A2P & P2A SMSes), Spamming, Spoofing, Refiling, profile modification, unlawful tracking, unethical disruptive activities from competition etc. are examples of some risks which have been found to be existing NOW with an estimated 100% infection rate.
Why is it happening ?
The SS7 signalling based vulnerabilities have been existing since very long, but have become part of news headlines recently due to certain revelations made by famous ethical hackers at certain high profile security conferences.
Some industry pundits make a point, which most of my industry connections agree with, is that these risks exist mostly due to the fact that operators tend to create unreliable partnerships and configure unregulated access (like open GT access, acceptance of any signalling command etc.) which enables malicious parties to connect to operators networks and conduct fraudulent activities very easily.
There have also been discussions around existence of services exploiting these signalling level vulnerabilities being offered in the grey markets through rougue hacking communities for a price.
Can you eradicate these risks ? Ideal Solution: Operators need to sanitize their access configuration on SS7. Rethink, Reidentify, Reevaluate and Reconfigure the access levels.
But this is really difficult or maybe nearly impossible to achieve due to some practical issues on the ground, such as:
Most of the SS7 networks were configured long time back – There is an expertise issue operators are facing wrt SS7 networks now which limits their capability in terms of reconfiguration of SS7 based networks
It is a time consuming activity, which, would also lead to a lot of efforts on re-testing connectivity with all the partners, attracting a lot of investment
It may lead to reconfiguration of the signalling level configuration at the network level, and in certain instances, would require network downtime – A complete NO-NO for a lot of players out there. Situation becomes even more problematic for countries where Telecom Networks are considered a National Infrastructure.
Lastly, not every operator will take up this activity for many different reasons including the reasons like operators not participating in the awareness meetings/conferences being organized around the world or even like some rogue operators participating in malicious activities deliberately.
The problem becomes much more trickier from the fact that even one infected, unsecure or rogue operator in the world will continue to pose a threat to everyone else. And sanitizing each operator against these threats is a feat which is very unlikely to be achieved.
It is now unanimously being accepted that SS7 signal based networks are here to stay (atleast 10 years in developed markets and 20-25 in developing or lesser developed countries) and even their vulnerabilities, which are expected to grow by huge amounts considering the limelight it has received recently.
The bigger problem which has started giving sleepless nights to the fraud & security functions in operators moving towards 4G and setting up their networks over diameter protocol (provides 4G signalling framework) does not have native security standards inbuilt, but requires security mechanisms to be implemented on top, a practice always found susceptible to gaps). Also, the access methods are similar to SS7, so it exposes 4G networks to similar signalling risks as SS7.
What can be done now ?
For now, an approach of detection would be ideal until the industry identifies a way to plug these vulnerabilities around the world, which is definitely a few years away with a lot of research hours of investment.
An approach of detecting malicious signalling requests in your network still has few complexities to manage:
High false positive rates – A lot of signalling requests appearing to be malicious come out as configuration issues from the partners. Hence, domain expertise is essential to filter out ‘needle from the haystack’.
Sheer size of signalling data to be analyzed – big data support is required.
Skill set – This activity will surely require a knowledge upscaling and may be difficult for the traditional teams like fraud and risk management to absorb. Even teams like security, with less focus on fraud domain know how, is expected to find it difficult to add this activity in their set of responsibilities.
I feel industry partnerships with vendors, possessing both the domain knowledge, right skill set and technology built on big data platform is the way to go.
These partnerships, considering no-one has a complete answer to this rampant problem of signalling vulnerabilities as of now, need to be built on solid vendor capabilities, while being both liberal and experimental to give room for exploration.
Operators and global industry forums continue to wrestle with the question of whether or not to merge their fraud and security teams/work-groups to cope better with criminals who are breaking in through IP-based networks in order to derive profit for themselves (or their causes), or just to wreak havoc and disruption on their “enemies”. Fraudsters are not just partaking in the traditional crimes of bypass fraud, roaming, Dial Through, AIT/PRS, Call Selling fraud etc., but also the exciting new stuff…. Phishing, malware, spoofing, DDoS, Trojans etc.
One can be forgiven for thinking that fostering closer links between fraud and security domains is breaking new ground in terms of responding to the threats posed by 4G/LTE, NextGen, the continued growth of e/m-commerce and the proliferation of data passing over networks. I guess it is a sign of my advancing years that I can’t help feeling that we have been here before…
15 years ago, when I was prepping for an interview for my first job in the fraud management arena, I was listening open-mouthed as a fraud expert was explaining to me the finer points of PBX Hacking. Thinking back, two things were very clear:-
The Operator in the UK already had a merged fraud and security group (which they later separated out, then subsequently re-merged again, by the way).
The main advice to combat PBX Hacking was prevention, not detection… and that meant security prevention. The operator was keen to tell its business customers that they needed to physically lock away their PBX equipment, protect their passwords, switch off unnecessary/vulnerable services such as DISA/Voicemail, carry out security awareness training for switchboard operators, support staff, suppliers, use barring at switch or extension level, keep PBX call logging records to see hacking attempts before they succeed, shred old copies of internal directories, vet their security/cleaning staff, etc. etc. The FMS only stepped in when all the prevention activities failed and the PBX was breached. By the time that happened, operators were already losing money directly, if they were responsible for the switch, or indirectly if their customers were liable. Customers may have been unwittingly facilitating the fraud by their lack of security awareness etc. but even so, if a small business – used to paying perhaps $1000 a month for calls, suddenly gets a bill for $20000, they are going to fight it, refuse to pay it or be unable to pay it. The indirect cost to the operator of customer complaints, disputes, potential court cases, damage to the brand, bad publicity, negotiated settlements, debt write-off and churn etc. can cost far more than the original bill. It was a lose/lose situation… unless you were the fraudster.
These days, with the emergence of 4G/LTE, IP-based Networks, perpetrators are still committing the same underlying crime for the same motives as before, but now they are breaking in through a host of different entry points, wearing better disguises, carrying bigger SWAG bags and using faster getaway vehicles. In truth, many operators are struggling to keep up with the high number and seemingly unpredictable nature of these attacks.
Security teams are traditionally very good at preventing access to networks, but they are not perfect. The pace at which network elements, components, interfaces and transactions are increasing is making it impossible for all the preventative measures to be in-situ from day one. Not to mention the surfeit of off-the shelf tools that fraudsters can use to break in to more and more lucrative areas of daily commerce.
In practice, Prevention alone cannot succeed. Detection, Analysis and Response are also essential elements of the fraud management cycle.
So, my point is this…. security and fraud teams cannot operate in silos. Security teams must continue to try and prevent malicious intrusion as much as possible. That requires taking in a lot of real-time data from the access points, identifying the nature of the content and the data patterns and quickly blocking anything that looks dubious. But when the intruder gets in (and they do in their numbers), that is when the fraud team can also play their part.
Whilst the security team controls corporate IT networks, how well can they police the mobile workers and the homeworkers, the tablet users, the App Store/Android Users etc.? And if you think that profiling subscribers was difficult historically, how much harder is it when you can’t even define what a subscriber is, let alone track their behaviour. In the new world, the relationship between account holder, subscriber and product/service is not always obvious. Also, the billing relationships for transactions can be mind-boggling. Couple this with the speed at which these transactions are taking place and the value of services and content being passed across a proliferation of bearers, and you have a minefield to negotiate.
This is where a good Fraud Management System can supplement an operator’s security tools. An FMS must now be equipped to take in much larger volumes of data than before, in many different forms and process it much quicker. Any reputable FMS vendor will now be offering solutions with large scale, flexible data handling tools (including probe / deep packet inspection events), internal/sales partner audit logs/feeds, inline service/transaction monitoring, exhaustive rules engines (real-time, in-line and statistical), subscriber grouping & profiling features, reference data including Hotlists/Blacklists, fraud and device “fingerprinting” capabilities, ID verification, alarm prioritisation and established, flexible workflows, with a range of analytics tools and visualisation features. All these components – in the hands of an experienced and well-managed fraud operations outfit – will help to choke fraudsters and drive them out to look for easier targets.
So, in summary, don’t let the security guys take all the strain at the prevention stage. Share the data, share the knowledge and spread the load to the fraud team for a more comprehensive response.
To get more information about Subex Fraud products please click here.
Subex, in collaboration with Capacity magazine, had conducted a survey on Wholesale Fraud Management which was responded by 195 diverse participants from the wholesale industry including senior executives, fraud practitioners and experts from some of the world’s largest carriers.
Survey participants’ regional distribution can be seen in the map below:
Participants’ profile in terms of revenue can be seen in the chart below:
The results which were published on 13-Mar-2013 turned out to be quite staggering and an eye opener!
The survey has revealed that carriers lose around 3.6% of their revenue to fraud, which if the Wholesale Carrier market is estimated to be around $ 170 Billion, translates to monetary figure of $6.12 billion per year!
Considering there is a tremendous pressure on wholesale carriers due to increased competition leading to price wars and eroded margins, losses of such high magnitude create a substantial impact on their bottom line.
The problem doesn’t end here. Majority of the participants (82%) have also agreed that the menace of fraud has been on the rise over the recent years and continues to grow! Clearly, the impacts are going to be higher with time if carriers do not up their ante against fraud now.
The report also touches and provides interesting findings over the following areas:
Size of the problem including prevalent fraud types in the industry currently
What factors are fueling the fraud growth
Direct and indirect impacts of fraud on carriers
Readiness of the carriers in combating and containing frauds
Being a global provider of Fraud Management solutions & services and leveraging on it’s domain expertise, Subex has also provided its views and opinions over the findings which can help carriers in understand this complex and constantly increasing problem of fraud better and take appropriate measures in order to protect themselves.
You can get hold of your own copy of this interesting report here.
Fraudsters in telecom have always been attracted towards conducting cross border (international) frauds. Reasons such as lack of any country’s jurisdiction, anonymity, cross country non-cooperation and to top it inter operator & inter carrier competition have always provided the much exploited environment to conduct frauds.
Let us start with some industry recognized fraud loss statistics posted by CFCA. The top 4 fraud loss categories reported by CFCA in 2011 were:
$4.96 Billion (USD) – Compromised PBX/Voicemail Systems
$4.32 Billion (USD) – Subscription/Identity Theft
$3.84 Billion (USD) – International Revenue Share Fraud
$2.88 Billion (USD) – By-Pass Fraud
Considering a well accepted fact in telecom that “Subscription/Identity Theft” fuels other fraud types such as IRSF, all fraud types in the list somewhat end up generating (mostly) international traffic. Domestic traffic involvement in these frauds is found to be minimal.
Whenever an international fraud is identified by an operator at the source of traffic generation, it is generally followed by blocking the traffic to that destination as a preventive action. As an additional step, which is quite rare, a legal action is also carried out against some local goons involved in generation of the traffic identified as fraudulent. But, as we all know, the actual masterminds and the owners of the destinations identified as fraudulent remain free to explore another way of generating traffic to these destinations through any other operator, located anywhere in this world.
To make situation worse, a retail operator, sometimes is not even able to identify the root cause of the suspect spike or pattern seen to some of the non-risky or non-hot numbers/destinations as the traffic might be generated by exploiting certain arbitrage, FAS or other rogue interconnect revenue generation scenarios occurring down in the call transmission. Result, the operators give it a pass all because they do not detect any direct impact to their revenues.
But, what if the wholesale carriers, who carry traffic to these destinations also join this unending fight against fraud, with a goal of not even notifying and protecting their direct customers to avoid contractual disputes, but with a higher goal of sharing their intelligence with all of their customers, suppliers and standard fraud forums, whenever a potential fraud case is identified.
Let us see how a wholesale carrier is better placed than a retail operator in identifying and protecting against the overall fraud chain which flourish on inflation of traffic to cross border (international) destinations:
Wholesale operator sits in the middle of fraud source and fraudulent destinations which provide it a capability of having a holistic bird’s eye view over the fraudulent traffic from different customers (originations) to different suppliers (terminations) and can pin point the exact destination or number series which is receiving fraudulent traffic.
Carrier can block the traffic to that destination or a specific number series within that destination, thereby not only protecting one customer to which the traffic belonged to, but all of them who may push a similar traffic anytime in future.
Post blocking, the wholesale carriers are also capable of pressurizing the suppliers (other carriers or operators) to take action on the fraudulent parties or number series involved in the fraud racket by stopping the payments or the whole traffic to that supplier rather than individual series. Sharing information and risks against a rogue supplier in the wholesale market can also help avoid supplier to switch the partnership with other carrier.
A wholesale carriers is also better placed than retail operators in identifying any specific suspect international traffic for fraud and fraud proofing the entire customer/supplier base through feedback. Intelligence collected through any fraud case identified over any customer traffic can be seamlessly passed on to all customers and suppliers in order to protect them from similar threat. This will specially empower the customers who are retail operators by helping them stop or reduce generation of fraudulent traffic at the source itself.
The following figures will help understand how the intelligence flow will help fight cross border telecom frauds:
Presence of a fraud identification and analysis mechanism in the wholesale carrier hands will also help the carrier meet the “anti fraud” clauses present in modern RFP requirements posted by the potential customers and will also help develops confidence to get into anti fraud amendments and best efforts based loss repayment contracts with the customers/suppliers, thereby earning more customers.
Said that, the approach will only be successful when there is enough participation from the wholesale carriers around the world, who because of the current telecom scenario, are also suffering from diminishing margins and dropping profits due to the cut throat competition.
This approach requires investment in order to empower the carriers with fraud analysis capability, which is not going to be made by medium and small players until and unless there is a huge value add shown to them or there is a direct pressure from majority of the customers and suppliers to act against frauds. And this can only happen when all the parties involved are determined for a fraud free environment and are able to create an environment of seamless intelligence sharing.
History tells us that safety and security are afterthoughts. From the Gold Rush at the end of the 19th century to the technology Gold Rush at the end of the 20th, the rush for riches was so great that the idea of security was thrown to the wind. Revenue assurance only came to the Mobile table once the rush for customers had subsided and the focus moved from top line revenue to bottom line margin.
It is happening again. As the rush for market share of the payments market heats up, companies large and small are inventing new ways of transferring funds – paying people – easily. This aim for easy to use, attractive products creates a potential nightmare for consumers; easy is seldom secure. The whole concept of mobile wallets, while attractive, means that when someone steals your phone, they steal your wallet too – worse, you can’t phone for help! It is not just NFC that is at ‘fault’ here, although it is an obvious example. If you have your credit card or bank details stored in a mobile phone you have a monetary instrument and that is attractive to Bad Guys.
The potential of NFC is enormous. It will enrich and enable the whole shopping/living experience of millions of people and will create opportunities for operators and third parties that we can only imagine. It is the difference between shopping in a warehouse and walking the aisles of Macy’s or Harrods.
For a moment, though, let us step to the Dark Side. As you walk into the store, your phone lets the store system to pick up your details as you walk inside its co-ordinate boundaries. Google have quietly patented a face recognition technology that enhances this ability. No records exist, until a transaction takes place, but when you walk through the door into the store, you have opened the door into your phone. This means that your phone, and therefore your wallet, can be cloned. A Disgruntled Shop Assistant could potentially steal your details or there may be a Bad Guy in the store with you, and it is possible for him to clone your phone while simply standing close to you.
Another threat is the excellent concept of the QR code or NFC tag. Again, they are easy to produce – three clicks and the means to produce are in front of you. Point your phone at a QR code or NFC tag and it is possible, easy in fact, for someone to take control of what happens next. They could have designed the code so that you are re-directed to a site that is fizzing with malware, that can empty your phone of all its information, sends this to a clearing house and on to other Bad Guys. The very ‘connectedness’ of the ubiquitous mobile device could potentially be harnessed to launch Distributed Denial of Service attacks of unprecedented scale. Unlike having your ‘wallet’ stolen it is likely that you will not even know that it has happened. And this gives the Bad Guys a real head start. You will not know when it happened, who did it, and, frankly by the time the authorities are involved the ‘who, when and where’ will be entirely academic
As with the new acknowledgement that people need educating about online security, it is time that we take a very serious look at the security of new technologies that are making payments easier. There need to be standards and accountability, as there are in the credit card industry. If your credit card is stolen the liability lies with the credit card company – as long as you report its loss in a timely manner. Not so, yet, with the phone company – or if so, accountability is patchy at best. If your phone is stolen and you receive a huge phone bill as a result of someone else’s online shopping spree, the phone company has no liability and it is their discretion alone that will let you off or not.
There are some ideas emerging. Many of them revolve around a second stage authentication and one of the most promising is that when you use your phone to pay, a photo of you will appear on the terminal in the store. This works fine as long as a) there is a photo of you on your phone and b) your kids have not borrowed your phone!
As with any Gold Rush that can create riches and a better life for consumers, security is likely to remain an afterthought. But in this connected world, where one person can steal the identities of 100 million others, this is no longer acceptable. There are too many people, too much money at risk. We need to have security built in.
Over the years Fraud Management teams have been more reactive in nature and Frauds were usually detected once the event has occurred and the losses are incurred. With the revenues from the traditional services such as Voice & SMS crumbling down and operators looking for newer avenues to sell products and services, it is essential that the wafer thin margins are well protected. This has also forced the Fraud Management teams to be more proactive in nature.
One of the key focuses of being proactive is to prevent Fraudsters from entering the network. Fraud protection at point of sales stage has got an increased focus in the recent years. CFCA Fraud survey report of 2011 estimates global Point of Sale fraud at almost $5.5 billion. One other startling fact reveals that UK Mobile Operators lose £136M annually to fraudulent transactions at Point of Sales.
Some of the traditional challenges at Point of Sale include Subscription Fraud and loss due to Handsets being bundled to subscriptions. However with 4G and data heavy environments coming into play there would be more products, services and content sold over various sales channels such as Web Stores and Retail Centers.
To meet such requirements Fraud Management systems have evolved from being just Near Real Time systems to Real Time Inline systems which can integrate to various Sales Channels. On receiving the orders the system evaluates various order attributes such as Location, Subscriber demographics, Type of order, Type of Retailer and evaluates whether the order is genuine or not.
If an order is found suspicious, the request can be routed through various workflows within the system such as generating an alert for analyst approval or declining the order directly. Fraud Management system should be flexible enough to add new rules and workflows as the
new products are launched by the product teams. Behavioral profiling can be also used to track and monitor suspicious behavior patterns on the orders that have been placed.
Benefits of proactive and inline fraud management is unchallenged. Banking & Payments industry has been practicing these for a long time. By configuring and fine tuning the rules over a period of time it would be possible to detect and prevent majority of Fraud events. One of the recent implementations of Inline Fraud Management for Subscriber Acquisition helped save the operator nearly 2 Million $ in losses and it was observed that Fraud Hit ratio was about 60%. It was also noted that the Fraud Hit over the weekends where as high as 100%. However care has to be taken during such an implementation that only confirmed fraudulent orders are directly rejected by the system as any rejection of genuine orders can give a direct blow to Customer Experience.