Wholesale carriers lost $6.12 billion to Fraud in 2012

Mar 14, 2013,

London, UK – The results of the first ever in-depth global survey to understand the impact of fraud on the wholesale carrier industry has been published today by Subex Ltd, a leading global provider of Business Support Systems (BSS) for Communications Service Providers (CSPs), in collaboration with Capacity Media, a leading voice on the wholesale telecommunications market and carrier-to-carrier business.

Wholesale Carrier market is estimated to be around $170 Billion and the survey results indicate that carriers are estimated to have lost US$6.12 billion to fraud last year alone, raising the question is fraud an issue carriers can any longer afford to ignore?

The comprehensive survey was based on detailed responses from 195 participants from some of the world’s largest carriers from across North America, Europe, South America, Asia-Pacific, the Middle East and Africa. It highlights some of the key problems facing carriers today as a result of fraud and identifies the various types of fraud that are presently plaguing the industry. The report also reflects on some of the key reasons behind the increase in fraud in the global carrier market over the last two to three years.

Some of the key findings included:

  • Wholesale carriers lost an estimated $6.12 billion to fraud in 2012
  • Over 82% of respondents believe the number of cases of fraud has increased in the wholesale market in recent years
  • Large tier 1 and tier 2 carriers are reporting higher financial losses due to fraud,  with 35% and 40% of them respectively losing more than 2% of revenue
  • 77% participants agree that the impact of fraud on revenue margins and quality of service has heightened focus on fraud

The report identifies the most prevalent different types of fraud in the wholesale carrier market, with False Answer Fraud being the highest at 55.71%. A large volume of fraud is related to immediate partners, which includes New Operators – Credit Risk (51.4%), False Disputes (30.7%), Blending HQ Routes (31.4%), Long Firm (7.1%). This indicates carriers will perhaps benefit from more stringent due diligence both during partner on-boarding as well as on an ongoing basis. The survey also shows that internal fraud is on the rise, with approximately 13% of carriers reporting losses due to internal fraud.

The survey reveals that the industry is opening its eyes to the growing issue of fraud, with 77% of respondents reporting that pressure on margins has resulted in an overall increase in awareness or focus on fraud.

There is still much work to be done, however, and only 35% of wholesale carriers have dedicated fraud management teams, with an even lower 25% of wholesale carriers collaborating via dedicated fraud forums. While nearly 80% of wholesale carriers use in-house developed tools for fraud detection, more than two thirds of them report a lack of automation and timely availability of data as hindering their fight against fraud.

Subex’s ROC® Fraud Management solution is built to help CSPs move towards proactive fraud prevention, reducing fraud run time, augmenting internal controls and continuous fraud management process improvement. It boasts several wholesale carrier industry specific features and capabilities.

Vinod Kumar, Chief Operating Officer, Subex Ltd said, “Sitting on the fence is no more an option else carriers will see fraud continue unabated and eat into margins which are already under pressure. The aim of this report is to increase awareness within carriers and help them prepare in their fight against fraud”.

“Fraud is a serious threat that is impacting telecoms operators today. We felt that it was important for us to increase awareness about possible fraudulent threats that will affect telco’s revenue and services. Through this survey, Subex has done an excellent job in raising awareness of fraud in the sector, as well as exploring new ideas to help combat the issue,” says Alex Hawkes, Editor, Capacity Media.

Mar, 14, 2013