Stop the Fraud, Stop the Churn

As service quality falters, your customers leave. It’s that simple. And the more they leave, the less you grow. 

Reducing churn is a common goal for all telcos, and while there are many issues to address here, fraud is the elephant in the room.

What is Churn Management in Telecommunications?

Reducing churn in telecommunications requires many things:

  • Improving service quality and customer support
  • Timely dispute resolution
  • Strengthening your brand reputation
  • Building trust in your subscribers

But it’s challenging for a telco to accomplish this while fraud attacks persist on its network. 

Fraud erodes call quality, violates user privacy, leads to dropped calls, country-wide blockages and more. 

The fraud can come from anywhere, often via a corrupt carrier in the call chain or a spam caller targeting subscribers. Operators lose trust in one another, customer dispute tickets pile up, brand loyalty deteriorates and customer churn rises. 

Any churn reduction strategy that doesn’t account for fraud will face major long-term challenges. By eliminating fraud, we can confidently reduce churn in the long run.

Costs of Reputational Loss and Customer Churn

In most telecom industries, it costs hundreds of dollars to acquire a new customer, from promotion to onboarding. 

As your reputation erodes and your subscribers leave, you lose both the future revenue from that customer as well as the costs of acquiring them in the first place. 

And over time, the churn compounds the revenue telcos already lose to telecom fraud on a daily basis. 

Such losses reach billions of dollars each year. In 2019, total telecom revenue lost to fraud was $28.3 bln and has been steadily growing. In 2021, that figure climbed to $39.89 bln. 

How Can We Stop the Fraud?

Mitigating fraud is essential to protecting yourself from such losses. But effectively mitigating fraud requires a unique approach. 

By taking a new approach to fraud detection and prevention, call validation technology is allowing telcos around the world to exit the cycle of attack-adjust-repeat that many of telcos have been in for decades. 

In other words, traditional fraud management systems rely on a reactive approach to fraud mitigation, using methods that have limited detection ranges. When a fraud attack hits, the damage is done. Operators adjust the settings of their fraud management system to better prepare themselves for similar future attacks. However, the fraud never stops evolving to evade our detection techniques. 

However, AB Handshake’s proposed call validation technology can stop fraud with 100% accuracy and zero false positives, offering a long term solution for churn reduction in telecommunications.

But to understand and trust such a solution, we first need to understand the mechanism behind the attacks we face. What kind of threat are you up against each day? How do these fraud schemes hurt your reputation and lead to churn? 

Telecom Fraud – From revenue loss to churn

Different fraud schemes impact carriers and subscribers in different ways. Here are some examples.

Interconnect Bypass – Poor call quality

SIM Box fraud is one of the most common forms of Interconnect Bypass fraud. Here, a fraudulent carrier in the transit paths illegally connects received international traffic via prepaid SIM cards and disguises it as low-rate (on network) traffic to inflate their profit margins.

For example, a corrupt carrier receives an international call from the previous carrier on the call chain and collects a fee for transiting the international call. The corrupt carreir routes it through a SIM Box, passes it on to the terminating operator as local, on-network traffic and pays the respective (low) on-network fee, thus inflating their profit margins. 

This undermines revenues of any subsequent carrier in the call chain and, in some cases, allows the fraudulent carrier to avoid government tax surcharges.

However, calls that are rerouted via a SIM box lose quality. They take longer to connect, may be rejected, and often drop, leading to caller frustration and immense churn. 

Other fraud schemes, like Wangiri and Spam calls, target users directly in their wallets and drive subscribers away. 

Wangiri – Eroding brand loyalty

Wangiri targets both enterprises and subscribers. And in both cases, carriers bear major costs, particularly in the form of churn. 

The aim of a Wangiri attack is to generate calls from consumers or enterprises to premium rate numbers. They accomplish this by triggering callbacks from unassuming subscribers (individuals or companies).

In a traditional Wangiri attack, they make one-ring calls to subscribers to lure them into calling back, out of curiosity. Often, the fraudsters spoof the CLI to make the missed call look like it’s from a local number. 

If the curious subscriber calls back, they inevitably reach a recording of some sort and hang up after realizing something isn’t right. 

At the end of the month, they see a shocking charge on their phone bill from a destination they never called. Unknowingly, when they dialed that missed call, they reached a premium rate destination and were charged accordingly. 

Thousands of subscribers can fall victim to Wangiri fraud in a day. Out of frustration, subscribers file disputes with their carriers. While these are clear cases of Wangiri attacks, the carriers lack the means to confirm exactly what happened and who was responsible. Customer dispute tickets pile up and carriers face a dilemma – either foot the bill or face churn. 

Spam Calls, Short Stopping, Call Stretching and More

In a Short Stopping attack, callers simply never connect to their intended destination. They dial a number, only to be rerouted to another strange recording at a premium rate number, which is reflected by the shocking charge on their monthly phone bill. 

As they struggle to stop these attacks, carriers sometimes take the desperate measure of blocking entire number ranges of high-rate destinations altogether. Terminating operators in these destinations lose revenue as traffic volumes drop. Callers to these destinations become increasingly frustrated as their calls won’t connect. Eventually, they turn to other carriers. 

Call Stretching works similarly, though it adds a sensitive element to the issue: a fraudulent carrier simply cuts the B-side from the conversation mid-call, rerouting the A-side to a premium rate destination and connecting the caller to a recording of their previous conversation. In doing so, they extend the charged duration of the call and pocket the profits. 

Because Call Stretching occurs in the middle of legitimate calls, traditional fraud management systems struggle to detect it. Transit carriers lose revenue. Callers face poor service quality and have the unpleasant experience of realizing their privacy was violated – a critical issue when data privacy around the world is of utmost importance. Eventually, subscribers may turn to another service provider. 

In the case of Robocalls and Spam Calls, users are duped into purchasing phony services or transferring funds to a fraudster’s account. Subscribers lose faith in their service provider to stop the calls, and simply move on. 

Stopping Telecom Fraud With a Fraud Management System

While fraud’s impact on churn is no secret, many telcos still struggle to effectively mitigate fraud with a traditional fraud management system (FMS).

There are two fundamental issues.

Firstly, such systems rely on inefficient manual detection methods and outdated threshold-based rules. While they can stop some fraud, they have limited detection capabilities and fail to accurately detect all attacks. 

Additionally, they can’t stop fraud in real-time, before the damage is done. Instead, they provide feedback after an attack occurs. Operators then update their system settings to prevent similar future attacks, but fraudsters’ tactics evolve and remain steps ahead of any solution. A game of cat-and-mouse ensues while losses persist. 

Secondly, these systems offer very little insight into the events of the call chain. The A and B operators aren’t aligned on the true A and B numbers and call start and end events. This makes it difficult to pinpoint where the fraud occurred and who is responsible for it. 

A lack of communication between operators and increased isolation prevails, further enabling the fraudsters to operate undetected. As a result, distrust between international carriers has become another major problem. 

By giving operators a means to communicate with each other in real time about the call events on a call before it connects, we create transparency along the entire transit route.   

We reverse the isolation and create an environment for detecting and blocking fraud before it hits. We stop the fraud and we stop the churn.

This is how AB Handshake’s proposed call validation technology works. 

Stop the Fraud, Stop the Churn – Call validation technology

Call validation is an anti-fraud technology based on the simple but impenetrable principle of cross-validating the call details of each call in real time before it connects. Any discrepancy in the call details indicates fraud and the call is blocked before it can do any harm. 

This solution guarantees 100% accurate detection and blocking of all voice fraud with zero false positives.

Here’s how it works

  1. When a subscriber initiates an inbound or outbound call on a network covered by the AB Handshake solution, the details of the call are immediately delivered to a call registry. 
  2. The call registry then simultaneously sends a validation request to the terminating network, which always reaches there before the actual call. 
  3. The system cross-validates the call details from both registries. 

Any discrepancy indicates fraud. The call is automatically alerted as fraud or blocked before it connects.

Example: Call Validation’s Response to Short Stopping

In the case of short stopping, the originating operator sends a validation request to the intended terminating operator of the call. Since the call was rerouted mid-transit, the originating operator receives a response that the call never reached the terminating network. The call is flagged and blocked before it connects.

Call validation is a foolproof approach to mitigating telecom fraud. All traffic exchanged between operators using the ‘handshake’  is guaranteed to be 100% free of all telecom fraud. And with zero false positives, operators rest assured they’re only blocking the fraud – nothing more and nothing less. 

A Fraud Free Community

There is an inherent incentive to join the call validation community – to avoid exchanging traffic with operators whose traffic cannot be validated. As new members join, a greater share of traffic around the world is validated, strengthening the ecosystem. As the volume of secure traffic grows, the volume of unsecured traffic around the world shrinks, eventually leaving the fraudsters with nowhere to turn. 

If adopted on a global scale, call validation technology can eliminate telecom fraud worldwide, allowing telcos to secure their reputations and bring customer churn levels back within reach. 

This technology is compatible with the default network system of any operator located anywhere in the world. Integration takes one week and its costs can be scaled on a pay-as-you-grow basis. 

In other words, call validation is an affordable means of eliminating telecom fraud on any network in any location in the world, for good. 

A Global Solution, Once and For All

Today, call validation tech validates live traffic to every country in the world and more operators are actively onboarding this technology into their systems. 

By implementing call validation technology, carriers are again building trust between one other. Subscribers are again starting to trust their carriers (can you imagine a world free of robocalls?). 

Carriers are reducing churn in the long run, once and for all.

Disclaimer: The views and opinions expressed in this article/press release are those of the authors and do not necessarily reflect the approved policy or position of the GSMA or its subsidiaries.

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