In the wake of the current COVID-19 crisis, risk, marketing, e-commerce, customer experience and care professionals face increased pressure to mitigate a host of emerging and escalating risks, while also quickly and radically transforming the digital customer experience and improving ROI. The emerging dominance of digital sales and interactions – combined with the economic impacts of the COVID-19 pandemic – have increased opportunities for increased risk. Telecom fraud losses topped $17 billion annually in 2018 according to the ITW Global Leaders Forum and are only expected to grow as both customers and fraudsters shift their habits to accommodate our new normal.
The pressure on these teams is mounting to reduce risk without creating obstacles and friction that could inhibit the acquisition or service of legitimate digital customers. In a recent webinar, 85% of participating telecom risk management professionals agreed that balancing fraud mitigation and friction in the user experience is a prominent challenge within their organizations – and that was prior to COVID-19’s rapid acceleration of consumer digital adoption. What are the challenges that risk departments face solving this problem as they attempt to collaborate more closely with their partners in marketing, e-commerce, customer experience and customer care?
Why is Telecom Fraud Prevalent?
Fraud is a growing problem in many industries, but the communications, mobile and media ecosystem is particularly attractive to cybercriminals for several reasons. First, there is the increasing number of mobile devices and communications services themselves. Criminals resell devices on the black market for amounts equal or greater to retail cost.
Second, mobile is now the key to virtually everyone’s kingdom. If you think about the number of times each day you digitally authenticate using your mobile phone, mobile seems to have replaced the plastic card as the primary source of identification and authentication. Fraudsters can easily gain access to most or all of the user’s assets once they accesses a digital device via schemes like SIM Swap or unauthorized porting of a customer’s number.
Lastly, the faceless nature of digital transactions provides fraudsters cover – whether attempting to gain access to a customer’s mobile device, test credentials on a streaming video service or place a fraudulent media campaign advertising high-demand goods that paying customers will never receive.
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While organizations often successfully detect and thwart fraudulent activities, the chance authorities physically apprehend and prosecute fraudsters is small. Cybercriminals use technology to accelerate and automate their attacks via methods like bots, artificial intelligence and robocalling at alarming rates. The communications, mobile and media ecosystem is an irresistible target for fraudsters since it presents such an array of attack opportunities.
Traditional Fraud & Risk Prevention Measures Do Not Apply in the Digital Channel
How can we measure risk more accurately and eliminating fraud more effectively without alienating legitimate prospects and customers? Too many security barriers create undesirable friction for good consumers, particularly those transacting digitally for the first time during this accelerated digital adoption. Organizations must create an elegant, intuitive and frictionless customer experience in order to thrive. Unfortunately, well-intended but overzealous security measures designed to protect consumers often result in higher digital abandonment rates.
Why do these systems fail? First, they are heavily reliant on only physical identity and ignore available digital identity intelligence. Second, organizations tend to employ fraud and risk prevention tactics after the prospects and customers enter the acquisition or sales funnels.
There are two key problems here:
- The company likely already spent money on customer acquisition costs such as email or direct marketing at this point – on a fraudster. Even if organizations address fraud and risk effectively at this point, they already wasted acquisition costs while marketing ROI diminishes.
- The funnel is now full of risky individuals mixed in with legitimate prospects and customers, so organizations now need to filter and authenticate users to separate them. This creates friction points for good customers that could result in unfavorable user experiences and abandonment.
Are you ready for some good news?
Here’s How You Can Eliminate Fraud While Enhancing the Customer Experience
1. Identify and remove risky prospects at the top of the sales funnel
Businesses can proactively identify high-risk prospects and remove them from their target lists immediately and before campaign execution. Filtering out risky prospects before they enter the sales funnel avoids wasting marketing dollars on potentially problematic individuals and exposing them to promotions they may be eager to exploit. It also reduces the intensity of security protocols and minimizes friction in the user experience for less risky customers.
Two highly effective tactics for removing low quality leads up front involve a strong partnership between risk managers and their marketing counterparts. These teams need to work together to leverage available lead integrity solutions to suppress fraudulent leads from campaigns. They should also use combinations of data and custom modeling to apply real-time risk scores to a business’s target universe before marketing to customers.
Risk or fraud score visibility also allows businesses to customize campaigns with risk-appropriate offers and messaging that further reduces potential liabilities. This is likely to become incredibly more important as we move through the current economic crisis.
2. Leverage risk data in customer look-alike models to help marketers identify top-quality prospects
Many organizations fail to realize that the risk management department can use enhanced marketing data to and generate valuable insights about their target audience. Risk departments need to understand that the fraud signals they receive may also be more up-to-date and more truly reflective of the current viability of a prospect particularly in a disrupted economy such as this.
The risk management department should lend its data to a collaborative process with marketing to create precise look-alike models and then use these models as the basis for scoring target prospects rather than marketing and risk working toward what have historically seemed to be opposing goals.
Let us recap the simple and powerful process:
- Append known predictive attributes to current customer records.
- Score the records based on an established combination of risk and marketing criteria.
- Assist marketing in expanding their prospect universe by mirroring existing customers and scoring the new prospects accordingly in a lookalike model.
Another often overlooked tactic for expanding a target list with high quality leads is to leverage risk management data available on relatives and associates of individuals targeted to expand the audience to include relatives, friends and associates who may be lookalikes or influencers.
3. Leverage passive fraud technologies throughout your consumer’s digital experience
How do we protect against fraudsters who proactively find their way to a business’s website – perhaps based on successes rapidly shared by other fraudsters on the Dark Web?
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Organizations can employ solutions that leverage passive web or app session profiling in conjunction with shared intelligence from a digital identity consortium to assess the risk of a digital identity upfront during faceless transactions. Risk teams can conduct these sessions in real-time without disrupting the initial customer experience by leveraging insight around how that identity historically behaved across the network’s ecosystem. This helps determine the appropriate amount of fraud prevention friction to apply within each transaction.
Using this type of passive yet dynamic solution allows organizations to create a more personalized risk-appropriate customer journey that looks very different for a suspected fraudster versus a good consumer. You can accurately assess the risk associated with a digital identity without asking your customers to do a thing by harnessing the power of shared digital identity intelligence. Once you understand the risk, you can allow your best, most trusted consumers to sail through a transaction unencumbered, while surgically throwing more sand in the gears of fraudsters who may be attempting an attack. This is a win-win for both marketing and risk.
Media organizations can combat fraudulent advertising that could result in reputational risk by vetting both the fraud and financial crime risk associated with a digital identity attempting to place an advertising campaign. They can do this by leveraging digital identity intelligence in the ad placement digital experience. Some of these technologies leverage multiple location signals captured within session profiling to triangulate and unmask the user’s true location by using transaction origination, even when crafty fraudsters use VPNs or other types of obfuscation technologies.
Marketing focuses on quality of leads to support sale sales, while risk teams aim to introduce ways to filter out risk, sometimes taking away those hard-won leads and sales in the process. These teams can and should shift this paradigm particularly during a time when the current COVID-19 crisis demands a new approach.
Data can bring marketing and risk together in a collaborative environment that not only removes unwanted friction, but also enhances ROI and key performance indicators of both departments.
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