News rocked the wireless world
this week when the big four wireless
carriers agreed to share phone data to prevent stolen phones from being
used with other carriers. As those on the inside are well aware, its a highly
competitive market and getting any carrier to share any information with
another is monumental. Flip phones 10 years ago morphed into todays Smartphones
that literally rule our lives, which reflect that value in cost. Having spent a
chunk of my career in wireless, including working with the first Blackberry (I
miss the 957), and later working for and with the industrys largest cellular
insurance providers, Ive witnessed firsthand the rise in fraud surrounding
cellular and the lucrative black market thats emerged. Insurance companies
have pushed carriers for years to share data and create blacklists for stolen
or fraudulently acquired phones. The insurance carriers have incentive to
prevent fraudulent claims, but the same economic drivers dont apply to
carriers.
Carriers heavily subsidize the
price of a device and recoup their cost in monthly fees. Lets be honest, the
most profitable customer a carrier can have is an unsubsidized phone from
another carrier and a long-term contract. Profit margins skyrocket when youre
not subsidizing the latest gadget by $400.
Mysteriously missing from the consortium news are the tier 2 providers,
like Cricket and Metro PCS. The few remaining tier 2 providers cater to prepaid
and subprime customers, who may be more likely to buy a black market device. And
what about international carriers? The consortium fails to address the entire
problem.
Coincidentally weve been recently
working with a Sprint wireless agent to help prevent fraud
at the point of sale. This agent runs a small business with 18 stores in one
state. In a normal sale with a new customer he purchases Smartphones from the
carrier for $700, sells one to the customer for the subsidized price (say $300
for our example), then is cut a check back from the carrier for $400 (carrier
subsidy) when the client pays the first bill. Hes having a rash of people
using fake IDs to establish the account and never pay for service, and then selling
the phone on the black-market for more than the subsidized price. Sprint will
blacklist the phone, but other carriers will gladly accept service while our
agent client is out $400. Weve given him a cheap and effective tool with KBA
to verify and authenticate his customers while preventing fraud and chargebacks.
While the consortium is a great tool to help eliminate fraud from stolen
devices, we believe Identity
Verification is the answer to prevent fraud at the POS.
[Contributed by Jeff Davis, President & CEO]
