SECURING THE FUTURE — INCREASING ACCEPTANCE WHILE FIGHTING FRAUDThe Mobile Payments Opportunity for Telcos

With profit margins shrinking, the “digital marketplace” model could be a real opportunity

for telcos — but the model is not without risk.

Today, every dollar of fraud represents an overall cost of $3.40 to eCommerce and digital

goods retailers, taking account of management and compensation expenses1. And mobile

channels cause particular concern, with higher average fraud costs than other channels1.

Combined with the upcoming expansion in mobile payment endpoints, this creates the

need for telcos to closely examine their fraud risks and implement a future-proof fraud

prevention strategy.

TO TAKE FULL ADVANTAGE OF THE MOBILE PAYMENTS OPPORTUNITY, TELCOS MUST RETHINK FRAUD PREVENTION STRATEGIES.

EXAMPLES OF TELCO FRAUD RISK

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“Never-paid” risk

“Never-paid” fraud — where customers order handsets on contract, relocate and stop their monthly repayments — is a challenge for telcos, yet few use fraud-detecting data such as location and buying behavior alongside credit checks to prevent “never-paids”.

Network fraud risk

Mobile payments fraud can have more significant consequences than the direct financial loss associated with the payment — a fraudulent €10 top-up over IVR2 can be used to make thousands of euros’ worth of network fraud, such as IRSF3, by calling premium-rated numbers at the cost of the operator. Telcos need to address all types of fraud, even where the initial loss may be small.

Liability risk

Processing payments for other merchants’ products in a marketplace may involve additional fraud risks. So, a fourfold growth in telco mobile payments spend could lead to a similar increase in fraud losses unless mitigating measures are taken.

Generalization risk

Fraud management strategies need to be tailored. If a telco’s main revenue loss comes from incorrectly identifying genuine transactions as fraudulent, the fraud solution needs to be tailored to address this particular concern. If the telco is seeing more fraud on its mobile channel, again, tailored rules can be applied without negatively impacting traffic on other channels.

Conversion risk

Over-enthusiastic fraud checks can slow down checkout completion — and the demand for immediate, frictionless payments can tempt merchants to bypass these checks. Better customer profiling can help to differentiate between genuine and fraudulent transactions.

New technology risk

New technologies bring new vulnerabilities. Many merchants are quick to implement a new solution and slow to protect it against risk. Shifts in the ways devices and applications are used will soon be exploited by fraudsters and must inform fraud detection measures.

$3.40 ACTUAL COST OF $1 OF FRAUD

MANAGING FRAUD ON THE MOBILE CHANNEL REQUIRES A TAILORED APPROACH.

While a relatively small percentage of online transactions (around 10%) come through the mobile channel today, this channel accounts, on average, for more than 50% of fraud costs1. Telcos need to understand the specific challenges for protecting mobile payments and implement fraud prevention strategies that recognize the unique features of the channel.

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CHALLENGES FOR FRAUD PREVENTION ON MOBILE

Mobile technology and payment options empower customers with new ways to transact and shop, putting the power of immediacy in the palm of their hands. But that same technology also presents new challenges for merchants and facilitates new ways for fraud to take place.

51% AVERAGE PERCENTAGE OF FRAUD COSTS THROUGH MOBILE CHANNEL

Consumer behaviors vary across channels. Customers may use their mobiles for different transaction types — and perhaps purchases with lower transaction values — than those made online. This needs to be reflected in the fraud prevention solutions telcos deploy.

With consumers completing transactions “on the move”, merchants can’t so readily rely on location data/IP address to identify their genuine customers.

Authentication can be more challenging as the small size of the mobile device makes it more likely that consumers will make mistakes when entering personal data. 3D Secure authentication can be more difficult on a mobile device, increasing liability for merchants enabling this channel.

Reduced authentication can lead to fraud if phones are lost or stolen (although new technologies are delivering new authentication techniques).

Fraudsters are using phone porting to get a mobile number reassigned to another device, gaining access to one-time passcodes that are increasingly used to authenticate transactions.

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BALANCING ACCEPTANCE RATES AND FRAUD PREVENTION IS KEY TO CUSTOMER EXPERIENCE.

Anyone can prevent fraud simply by declining transactions — but this doesn’t do much to promote a loyal customer base and a profitable business. The art lies in minimizing the impact of fraud while maintaining acceptance rates to deliver growth. As telcos enable more payments over the mobile channel, they need to provide a frictionless and fast checkout experience while protecting genuine customers, and their own businesses.

Fraudsters in the telco industry are fast, professional and highly organized.

They move quickly to exploit new channels and payment methods, and

operators need to review and adjust their fraud prevention strategies at a

similar pace. Here are some of the things to consider:

PROFILE CUSTOMERS

So you can recognize them regardless of the channel they are using and

tailor rules to support them

TEST AND TAILOR

Tailor fraud rules by channel, payments method, geography, and product or

service offered

SCREEN AND RE-SCREEN

Fraud screen transactions in real time, then re-screen to maximize fraud

prevention

USE YOUR DATA

Use not only what you know about your customers, but also link your

payments and network data. Consider different data types and tools

for different channels — for example, look for new ways to authenticate

customers on mobile in the absence of 3D Secure.

COLLABORATE

Fraud is an industry-wide problem and requires an industry-wide solution.

Share fraud intelligence and collaborate with other operators, banks, crime

prevention authorities and expert analysts.

Full Strategy Overview

Retrospective Screening

Fraud Trends Data Profiling

Spot Anomalies

Track KPIsEffective Rules

REAL-TIME

4 MINS–1 HOUR

1–24 HOURS

1–72 HOURS

1–10 DAYS

30 DAYS +

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Fraud solutions must work to support customer experience, partnerships and innovation

in mobile payments. High risks offer high returns, but efforts to take advantage of mobile

payments growth may become futile if risks are not fully understood and addressed, and

genuine, loyal customers are turned away by generic systems.

EFFECTIVE FRAUD MANAGEMENT IS A CRITICAL BUILDING BLOCK FOR TELCOS TO INCREASE THEIR SHARE OF MOBILE PAYMENTS.

MOBILE PAYMENTS FRAUD STRATEGIES FOR TELCOS RELY ON KEY SUCCESS FACTORS

This paper is one in a series designed to help telcos understand and evaluate the mobile payments opportunity. Visit www.aciworldwide.com/mobilepaymentsopportunity and sign up to receive your copy as each insight paper is published.

CREATE PARTNERSHIPS IN MARKETPLACE

Rich cross-industry expertise, collaboration,

ongoing analysis and reporting

OPTIMIZE CUSTOMER EXPERIENCE

Customer profiling, real-time data analysis, tailored fraud rules to

enable genuine customers

CREATE MOBILE PAYMENTS INNOVATION

Flexible fraud management system, advanced tools applied by channel and

payments method

MOBILE PAYMENT STRATEGIES

FRAUD SOLUTION SUCCESS FACTORS

Lower fraud rates Higher conversion Lower fraud losses

FRAUD SOLUTION RESULTS

TALK TO US ABOUT HOW YOU CAN INCREASE ACCEPTANCE WHILE FIGHTING FRAUD.

MOBILE PAYMENTS OFFER SIGNIFICANT OPPORTUNITY TO TELCOS, BUT INTRODUCE NEW FRAUD RISKS.

At ACI, we have been tackling fraud for leading telcos for more than 17 years. We can help you identify and address specific areas of concern to grow your business, increase conversion and protect your genuine customers while managing down fraud.

• Real-time decision

• Unlimited multi-dimensional rules

• PRISM neural modeling

• Positive profiling

• ACI Consortium database

• Underground databases and hot card files

• Device authentication and IP geolocation

• Silent rule testing

• Compliance list checking

• Case management

• Rule management

• Link analysis

• Auto analyst

• Fuzzy matching and pattern detection

• Third-party callouts and links

• Chargebacks representment

• Autopilot/click and block

• IF logic rules

• Tieback

• ACI ReDi ™ dashboards and reporting

ACI® RED SHIELD® FRAUD PREVENTION FOR MORE INFORMATION:

1 LexisNexis, True Cost of Fraud Study, 20172 Interactive Voice Response System 3 International Revenue Sharing Fraud

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© Copyright ACI Worldwide, Inc. 2018 ACI, ACI Worldwide, ACI Payment Systems, the ACI logo, ACI Universal Payments, UP, the UP logo, ReD, PAY.ON and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties’ trademarks referenced are the property of their respective owners.

Chris Curd, Head of Telco Sales - Europe chris.curd@aciworldwide.com+44 (0) 7884 262751www.aciworldwide.com/telecommunications

This report has been prepared in partnership with Red Dawn Consulting.

WE ARE A TRUSTED PARTNER TO RETAILERS, BANKS AND TELCOS

AROUND THE WORLD.

40+ YEARS INNOVATING PAYMENTS

17 YEARS SUPPORTING TELCOS