With every week bringing the latest and greatest smartphone offering, the mobile marketplace continues to explode. And those who make their living as fraudsters couldn’t be happier.
According to a survey of telecommunications fraud and security experts, estimated global fraud loss in the industry for 2013 amounted to $46.3 billion, a 15% rise from 2011. The primary reason for the increase was fraudulent activity targeting the wireless industry through new ways of stealing identities, devices and network access.
Indeed, sophisticated and expensive do-everything devices stolen for the robust black market are not the only targets of ne’er-do-wells. Increasingly, wireless carrier network infrastructure is being compromised by thieves, who – under the guise of subscribers whose identities they have stolen – use or sell this free access to accounts and services, often for further illegal activities.
The problem isn’t new. For years, the industry has wrestled with numerous nefarious schemes that negatively impact profit margins, legitimate account holders and corporate reputations. Their impact, however, is increasing precipitous, driven by the heightened use of mobile devices as the world’s primary communication and transactional tools. Fortunately, technology is keeping pace with ever-clever fraudsters, with recent innovations designed to prevent schemes before they happen, or before they spread to other devices, accounts or carriers.
Biometrics and big data vs. big crime
By applying advanced analytics, information and security experts are devising new identity verification and big data tools to deter fraud. In essence, these tools are preventing fraud before it happens, using a broad range of data elements during an account applicant’s or purchaser’s identity verification process.
Biometrics, which refers to various measurements of some aspect of the body, are at the forefront of many of these authentication solutions for government, health care, enterprise and commercial organizations, including wireless carriers. From voice recognition to onscreen fingerprinting and facial recognition to retina scanning, biometrics technologies can verify that a person matches their identity in milliseconds.
By using a simple check, a company can determine in less than 10 seconds if a person matches the presented identity.
One increasingly commonplace technique is biometric voice recognition, which uses mathematics and digital signal processing to measure and detect physiological aspects of a vocal tract, such as lips and glottis, as well as behavioral aspects of speech, such as pitch and cadence. Another is biometric facial recognition, which is digitally compared to a file photo. More sophisticated users are combining two or more biometrics techniques, further decreasing the likelihood of false positive results that can quickly kill goodwill with a legitimate customer.
Successful biometric-enhanced authentication programs offer numerous benefits to wireless and other telecommunications carriers, specifically:
• Reduced charge-offs. Wireless companies rely on online channels to help drive large numbers of new activations, or purchases of more devices and accessories. However, e-commerce activity is the most susceptible to fraud – and thus one of the most germane uses of biometrics. And it works. One Equifax telecommunications client using a similar, proprietary technique reduced its charge-offs by $7 million annually.
• Lower fraud rates. Naturally, reduced charge-offs beget lower fraud rates, as fraudsters will be less likely to pursue illegal activity at a carrier with a reputation for deterring it. In an industry with a fraud rate of an estimated 2.09%, even fractional reductions translate into millions of dollars in charge-off and operational savings.
• Operational efficiencies. Companies that embrace biometrics and other fraud-prevention techniques are reducing the number of “manual” authentication checks, as much of this advanced analytics work is automated. That can reduce account opening times as well as the number of online shoppers who abandon purchases if an outdated account verification process is lengthy or produces a false-positive finding.
• Fewer “friction” instances. While knowledge-based authentication techniques have been accepted by consumers as one of the necessary evils of doing business, no one is happy when a delay occurs or an application is erroneously denied due to a false positive. With less than 1% of consumers engaged in fraudulent activity, biometrics can better pinpoint the potential universe of “bad guys,” thus reducing friction among the unduly bothered “good guys.”
What’s next?
For all of its attributes, biometrics is useless if the consumer doesn’t authorize biometrics-generated information to be created and stored. Consumers must be willing to submit to some measure of testing, a current roadblock given their lack of knowledge about biometrics and understandable concern about broadly revealing personal information.
The more willing consumers are to provide companies “personal” identifiers they perceive to be non-invasive, such as retina scans or fingerprints, the less likely it is that they will have to resort to random, oft-invasive and imprecise verification techniques that suffer high false-positive rates.
As biometric measures grow in acceptance, they seem certain to bolster bottom lines and reputations of wireless and other telco carriers. Especially when blended with other risk-based, progressive authentication approaches, biometrics should reduce the incidences of fraud, leading to operational efficiencies and more satisfactory experiences for “good guy” customers.
Editor’s Note: In an attempt to broaden our interaction with our readers we have created this Reader Forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but we maintain some editorial control to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: [email protected].
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