Some Thoughts on Fraud Management Systems

As we continue to look for areas where we can help our customers meet their operational needs, one area we seem to be getting a lot of solicitation from our customers about is fraud management.  Now, at first blush you may wonder why they would be coming to us to discuss fraud since we are an interconnect voice management platform. That is a good question, one we ask ourselves all the time. Carriers are asking anyone they think can help them address fraud. It’s not that fraud is a bigger problem now than it was in the past, rather, voice fraud has declined when compared to the 1990s. However, that doesn’t mean when it does occur its impact is any less painful. In fact, because margins are razor thin on both the retail and wholesale sides of the business, there is very little a carrier can cover and still maintain profitability, so carriers have a real risk/need in the fraud area. They need a solution that will provide them the necessary capabilities to identify, stop, and report on potential fraud. The prevailing solutions usually have a lot of statistic mumbo-jumbo that highlight why they are better at identifying fraud and why they should be valued solutions that garner high prices. Unfortunately, that’s not where carriers mindsets are in terms of price to value ratios for these fraud solutions.

Carriers need a fraud management system, but they don’t want to pay a lot for them because they don’t know how bad the fraud will be, or how often it will happen given the current marketplace. This isn’t the 1990s. U.S domestic per minute rates are approaching sub-atomic pricing points. While, yes, there are some high priced international destinations, carriers recognize there is fraud and that having a fraud management system would be an advantage. 

But, what is the cost/benefit equation for the price these solution providers are proposing? The cost of some of these fraud solutions seem higher than the entire fraud exposure for a given company. Bottom line is fraud solution providers need to change their pricing model. They need one that treats it more like insurance and less like mission critical capabilities. One that doesn’t have a hurdle rate above $100k. Carriers only have so many dollars to allocate to infrastructure, and even less to allocate to OSS & BSS Systems. That means fraud management systems can’t occupy too much of the OSS & BSS spend.  

Fraud management systems are valuable tools to prevent, mitigate and eliminate fraud. But they only become mission critical when massive fraud occurs. As soon as the solution providers realize that their pricing models should change, then they will notice significant customer acquisition.