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April 2011

Fraud & Credit Risk Software: Setting the Client Free to Innovate

Fraud & Credit Risk Software: Setting the Client Free to Innovate

“Let your indulgence set me free.“

The last line in Shakespeare’s last play, “The Tempest“

Whether you like Shakespeare or not, you’ve got to admit that Hamlet is a finer work of art than your average episode of Miami Vice.  Of course, just like today’s movie moguls, Shakespeare knew how to play to his audience.  He made sure to include enough blood, jealousy, love and bawdy dialogue in his plays to please the Joe Sixpacks of Elizabethan times.

Yet amid the common fare, Shakespeare also gave educated theater-goers some lines to think about ...

“Conscience does make cowards of us all.“ — Hamlet

“A tale told by an idiot, full of sound and fury, signifying nothing“ — Macbeth

“The toad, ugly and venomous, wears yet a precious jewel in his head.“ — As You Like It

You can bet that Shakespeare thought long and hard about what the last line of his last play should say. “Let your indulgence set me free“ is paradoxical to be sure.  I mean, when parents allow their children to live their own lives as adults, it’s the children who are freed, not the parents.  But in a larger sense, the parents are psychologically freed — from the burden of parenting.  Add it up, and it’s an artful way of saying, “Follow your dream, kid.  Don’t let me or anyone else hold you back.”

OK, let’s turn to the world of telecom software.  If you work for a telco, does your software vendor allow you the freedom to indulge yourself?  For instance, can you configure your own product?  Or do you need to wait a few months to get the software changes you needed yesterday?

Of course, some operators don’t want freedom.  They don’t have the in-house knowledge to make it work, or perhaps for budgetary reasons they prefer more vendor hand-holding or a full managed service.  Still, there are plenty of Tier 1 and Tier 2 carriers out there who would appreciate it if their software vendor loosened the reins a bit.

U.K.-based Neural Technologies is at least one B/OSS software vendor who’s taken Shakespeare’s “set me free“ advice to heart.  The firm allows its operator customers to configure its own fraud and credit risk management solutions and innovate on their own.  It’s a key reason the company has some marquis accounts such as Sprint in North America, Vimpelcom in Russia, and TurkCell in Turkey.  Here to tell us about his company’s approach is Luke Taylor, the firm’s commercial director.

Dan Baker: Luke, practically every desktop software program I’ve ever used feels restrictive in some way.  So I can imagine how frustrated a large operator must feel when they can’t customize or configure a software solution to fit their baked-in processes.

Luke Taylor: Dan, being boxed in by inflexible software is a key concern of the telecoms we serve, especially in a fast moving market like fraud and credit risk where you constantly need to keep abreast of either new threats or new service auditing techniques.

Actually we’re agnostic about what course our customers follow.  For instance, in regions like the Middle East, we have clients who prefer our managed services fraud and credit risk solutions.  Then at the high end, we allow customers to take full control of the product.  After we deploy it and configure it for their unique products and services, the customer can then design new rules, set new thresholds or introduce new data sources without input from ourselves.

Historically, most of our customers are the large Tier 1 or Tier 2 telecoms.  Most of them have either had fraud management systems before (in-house or vendor systems) and are looking to take the next step of increasing their control and not having to rely on a vendor.  At some of our accounts we have no knowledge on a day to day basis of how the customer is actually configuring our product.

How do you accomplish that from a system standpoint?

Well, our Minotaur product is essentially a framework with several components.  There’s a mediation component that allows you to mediate the data and reconcile.  Then there’s an analysis component.  And depending on the nature of deployment, some or all of the modules will be used.

With every deployment, we sit down with the customer to understand their current and future services, then plan a system to leave with them that’s set to monitor all those areas.  A deployment can take as little as three months, but some projects have been going on for two years or more because of the complexity, multiple phases and adding new capabilities.  No two deployments are the same.

Scoping the project involves a comprehensive look at services, the risks, the revenue assurance attributes they want to monitor, and what data sources will be used.  Some customers have 20-plus data streams coming in, but others only have two or three.

Luke, configuring a system on your own.  Is that something that only large telecoms worry about or is it broader?

Actually, it’s not just big carriers who care about self-configuration.  For instance, Safaricom in Kenya, a $1 billion-a-year wireless carrier and one of the most successful in Africa, is a recent Neural Technologies client.  With over 12 million users, Safaricom is also a leader in terms of mobile payments, and for that reason they were looking for a system that was broader than the vendor system they had purchased three years before.

In particular, Safaricom needed to detect money laundering and fraud in mobile payments, and this played to Neural Technologies’ strong suit because we have banks such as Bank of America as clients.  Another factor: Safaricom wanted to take greater control of their configurations so that new developments can be implemented quickly.

I’ve always known your firm as a fraud and credit risk specialist, but now I understand you’re now expanding to new areas.

Neural Technologies entered telecoms from the financial services market.  We applied neural analytics techniques in that industry, building scorecards and analytical models to predict bad debts, risks, and fraud for credit card and loan approvals.

In 1999, we moved into the telecom space because customers were coming to us from the telco side.  We initially focused on areas we knew something about — fraud especially.  But over time, customers have steadily pushed us into credit risk, collections and revenue assurance.

Neural Technologies’ strength came from analyzing the customer life cycle — examining new applicants for service, and deciding whether to offer service depending on risk profiles.  Then we monitor the individual for fraud, bad debt, etc.  And if the account goes bad, you can optimize collection processes.

Other players like cVidya, Subex, and WeDo came into the fraud software market primarily from the network side whereas Neural Technologies was initially focused on customer-driven fraud.  Today there’s a lot of cross-fertilization of these techniques.  And Neural Technologies, in particular, is exploring how we can put fraud, RA, bad debt, and credit risk under one system.

How much integration between these systems is needed, by the way?  Should carriers be investing in a unified fraud management, RA and credit risk solution today?

We definitely see synergies between fraud and credit risk.  Many of our customers have several departments interfacing to one product here.  But in revenue assurance, there’s a different mindset.  You’re looking for discrepancies in your network and different resources are required.  There are some definite benefits achieved by handling the data in a common way.  A common method for ETL (Extract Transform and Load) is quite valuable, for example.

But on the investigation side, the data needs to be handled quite differently.  Fraud must be handled in real-time, which means you’re a transaction system.  And the database needs to be stored to analyze the data quickly, but not do as much data mining on the back end.

In revenue assurance, meanwhile, you need to analyze the data any number of ways.  So the data architectures of fraud and RA ideally need to be different.

Of course, if an operator has a small enough amount of data, then the data architecture choice is not as critical.  However, as soon as you scale it up, you’ve got to deal with architecture issues.  So that’s one of the challenges we’re trying to solve: how to make the data work in both RA and fraud environments without having to completely reproduce everything.

Finally, Luke, I’m curious what areas of fraud are getting the attention of operators around the world these days?

Dan, I don’t think you can generalize on a worldwide basis.  What we’re seeing is various regional focuses.

So in the U.S., identify theft is a very big problem.  And that’s driven by wireless operators pushing for growth and the use of cell-phone subsidies and the commissions to attract new customers.  There’s a great deal of emphasis in the U.S. on pre-activation detection of fraud.

There’s certainly some technical fraud and other risks, but they are a distant second concern in North America.  In Latin America, meanwhile, bypass fraud and ways of getting around paying interconnect and toll fees are the most prevalent worry.

In Europe and AsiaPac, the prepaid base in those countries means they have different fraud and risk issues.  International revenue share fraud is still very big, especially where telecoms need to pay out money through roaming.

One area that will definitely get more attention in the years ahead is mobile payments.  It’s going to be huge because the phone will become your wallet.  And when the market goes that way, we think we’re well positioned given our experience working with banking clients.

Luke, thank you for these insights.  And by the way, well wishes to Prince William and Kate in their marriage this week.  It’s a glorious tradition and a reminder that we truly are “such stuff as dreams are made on.“

This article first appeared in Billing and OSS World.

Copyright 2011 Black Swan Telecom Journal

 

About the Expert

Luke Taylor

Luke Taylor

Luke is Chief Commercial Officer for Neural Technologies Ltd.  He joined Neural Technologies in 1997 as part of the management team and was an integral part of the group that drove the restructuring of the business in 2014.  He has worked across the globe, expanding Neural Technologies‘ presence into the Middle East and Latin America, as well as strengthening their position in the Asian and European markets.

Luke has worked within the telecoms fraud and risk industry for over 2 decades and has developed a unique insight into the industry worldwide.   Contact Luke via

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  • Converging Criminal and Technical Intelligence: Secret to Combating the Explosion in Telecom Fraud and Security Threats interview with Mark Johnson — A fraud and security expert gives a big picture talk on why industry convergence is driving the need for a broader “revenue risk intelligence.”  His prescription?  Yes, telecoms surely need to excel in technical  infrastructure such as traffic usage data, IP intrusion appliances, and physical barriers.  But just as important is the need to pair that knowledge with the real-life lessons of fighting criminals in general.
  • Gratifying Ghana: Why Listening to Operators Trumps Vendor Technology and Size interview with Ludvig Lindqvist — The value of technically excellent software is negated if the solution is not implemented right.  This article makes a strong case that vendors need to focus on first things first — get in full synch with a service provider’s business, capabilities and unique needs before you recommend or implement any software.  Topics discussed include: the benefits of retaining in-house expertise, implementation challenges in Africa, and the meaning of “thorough engagement” with the client.
  • Roaming Fraud: The Importance of Real-Time Data Exchange and Analysis interview with James Stewart — The Near Real Time Roaming Data Exchange (NRTRDE) is a GSM standard allowing operators to gain fast access to the roaming records of service providers half way around the world.  The article explains how 65 carriers are using this data to combat fraud through a service bureau.  Learn about the dangers of international roaming fraud and the value a roaming service bureau brings to the table.
  • Is the M2M Device in Your Refrigerator a Telecom Fraud Threat? interview with Simon Collins — Machine to machine (M2M) technology is being applied in hundreds of monitoring apps, such as smart metering and health diagnosis.  It’s even being used to monitor driving patterns tied to auto insurance rates.  But this article shows the serious M2M fraud and security threat that stem from the theft of the SIM/USIM device used in every M2M device.  The article discusses the RA and fraud strategies operators need to employ to manage the risks that will come from wider M2M deployments.
  • “Fraud Is a Wind that Always Blows” and Other Wisdom From a 28-Year Old Software Firm interview with Gary Beck — Here’s the amazing story of how Beck Computers was pulled out of a Tier 1 account only to be brought back in a few months later.  The article explores software vendor service and support challenges, real-time computing requirements, advanced fraud management functions, and ways to educate management on the value an FMS investment.
  • Insider Fraud: Detecting Criminal Activity in the Telecom Sales Process interview with Tal Eisner — One of the biggest problems telecoms now face is fraud done inside their offices, dealer stores and firewalls.  This type of fraud is especially dangerous because it’s performed by people fully authorized to transact for the company.  The story dicusses the major causes of insider fraud, presents a case study, and explains basic techniques that software uses to detect insider fraud.
  • Fraud & Credit Risk Software: Setting the Client Free to Innovate interview with Luke Taylor — Not every operator wants the freedom to configure its own fraud management solution, but certain providers wouldn‘t live without such a “framework” approach .  This article discusses: the reasons why operator choose this strategy as it covers many other fraud and credit software implementation issues.
  • Why Selling to Business Customers Makes You a High Risk Target for Fraud by David West — There’s a saying in the fraud business: “It’s not a question of whether you’ll be hit by fraud — only when, how bad, and from which direction.“  Citing four recent cases where operators were hit by fraud, this article explains why investing in a fraud soluiont — and keeping up-to-date — are so critical.  The article gives several examples of vulnerability points that fraudsters commonly exploit.