Keeping up with the Cloud: Telecom Fraud Management

McKinsey estimates that the cloud will generate over a trillion dollars in value by 2030 and one of the top 10 industries set to benefit from this is telecommunications.

If you wonder where McKinsey’s “trillion-dollar prize” comes in, it is from trends like rejuvenation within IT systems that promise cost optimization and digitalization, as well as trends like innovation that help transform products, services, and the whole enterprise. A top hyperscaler estimates that only 3-4% of enterprise IT workloads currently reside on the cloud, highlighting the hidden opportunity of the cloud.

Getting to know the cloud

In IT parlance, ‘cloud’ often refers to the public cloud, the playground of titans like Amazon Web Services, Microsoft Azure, and Google Cloud Platform. In the public cloud model, telecom operators host their systems and migrate data to the public cloud infrastructure. But public clouds do report a higher incidence of security breaches and attacks; a challenge addressed through private cloud. Another novel option is the hybrid cloud, a combination of public and private clouds. These can store sensitive data and run critical workloads at maximum security while offering the scalability and cost advantages of the public cloud.

The good news is that the cloud is evolving into newer models that can be tailored to different telecom needs. As per one of the reports by Analsys Mason mentions that 5G and open networks will create “multiple cloud domains such as mobile core cloud, vRAN cloud, and network and enterprise edge clouds.” Edge cloud is where the public cloud stack runs on-premises at the Edge data center (as in the case of AWS Wavelength) without having to shift all the data to a centralized cloud server.

Cloud for telecom fraud management

Fraud management solutions include data ingestion, detection, monitoring, analyzing data, and protecting from future events. First-hand, we see transaction volumes rise from 100 million to 100+ billion per day over the past ten years. From call detailed records to internal systems, data sources are growing, creating many new ingestion mechanisms. This ‘source data explosion’ puts a heavy demand on systems to capture hot data and uncover patterns. Neither is the rule-based processes of yesteryears agile enough to handle big data.

Here are four ways by which the cloud can help telecom operators get the best from their fraud management solutions:

  1. Telecom frauds are varied and fluid, morphing with technology. Sometimes, CSPs need modern fraud management tools that require next-gen resources. For instance, subscription fraud may require deep learning algorithms and cognitive neural nets, which cannot be run on CPUs but need GPUs. Similarly, detecting International Revenue Share Fraud (IRSF) could be more effective with classifier-based algorithms like decision-trees. Cloud’s on-demand provisioning helps fraud management teams quickly scale resources to detect and thwart attacks during critical events or to retrain models for accurate prediction.
  2. Cloud helps CSPs achieve sizeable Capex savings by changing how their fraud systems operate through scalable computing based on traffic, launches, etc. For instance, telecom transactions tend to happen during business hours or weekends, peaking fraud compute requirements during these hours. Traditionally, CSPs would design their systems to handle such peak loads, leading to idle resources for the remainder of the time. Cloud eliminates the need for costly investment through its pay-as-you-go models.
  3. Tracking ROI is challenging because of the changing nature of fraud, which mandates constant upgrades and agility. SaaS fraud models cut Capex-heavy hardware and licensing costs and provide clear ROI views. Cloud also offers other IT benefits like migrating from monolithic architecture to granular microservices-based architecture that can be deployed on containers. It gives CSPs the freedom to rapidly deploy on-demand requirements and get instances up and running quickly at the click of a button.
  4. Adopters of cloud often remark how iterative, rapid, and agile innovation becomes. Cloud-native practices support continuous delivery, taking innovation out of the lab and into the real world through fast and frequent feedback loops. It facilitates DevOps to shorten system development lifecycles with high software quality. It also accelerates the delivery upgrades and latest functionalities to fraud management systems, allowing CSPs to improve monitoring.

Challenges to prepare for when using the cloud for fraud management

Securing infrastructure is a concern across all cloud environments. Some data hygiene practices to focus on are using advanced data encryption and data management tools, conducting periodic vulnerability assessments, and enabling continuous monitoring of events like security violations. The attractive hybrid cloud model supports cloud-native practices like microservices, Kubernetes, object stores, and containerization. Interoperability is key to ensuring that the cloud delivers expected value.

On another note, the ‘cost of cloud’ could very well be a double-edged sword. Indeed, on-demand provisioning allows better cost control. But without proper monitoring (like retiring instances at the end of a project), enterprises will continue to pay for unused resources. This is also true when managing the infrastructure, as there may be some cloud-native versions that are more cost-effective.

Finally, telecom fraud management systems deal with a lot of PII data, making compliance complex. When leveraging the cloud, fraud, and IT, teams must adhere to local data security laws, enforce robust protections standards, and be careful with access privileges.

Key takeaways/strategies

New technologies rarely have a one-size-fits-all model. Here are some recommendations to guide your fraud management transformation on the cloud:

  • Experiment, fail fast, and iterate – Rather than a big-bang approach, try an iterative one that clarifies the end goals but also has a mindset of testing often, failing fast, and iterating quickly.
  • Emphasize local governance – Security standards are constantly changing. Keep abreast of these to drive new efficiencies and cost-effective compliance.
  • Prioritize security and strategy – Define access privileges cautiously to minimize vulnerability. There should be no compromise on data security.
  • Follow cloud-native best practices – This promotes operational agility and maximizes ROI from cloud investments.

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