Telecom Providers: Using Solvency Checks to Prevent Bad Debt and Fight Subscription Fraud

by Miguel Lopes
Header Photo: Andreas Steidlinger - GettyImages

Telecommunication is at the heart of everyday life in the 21st century and consumers are becoming increasingly reliant on the devices and services it enables. Today, consumers are enjoying the benefits of having instant and easy access to all sorts of services and products, no matter where they are. Telecommunication Providers enable remarkable convenience to consumers and businesses, from ordering to payment for services and products, both digital as well as physical. We can get our favorite meal delivered to the door, watch the latest movies, access and use our bank accounts from our couches and easily hail a taxi and pay for it.

However, convenience comes with risks. Crime syndicates, fraudsters and abusers are eager to explore the opportunity to gain, and telecommunication providers are in the tough position of being either victims or enablers, or both. Moreover, as the post-paid subscriber base grows, driven by the development of bundled products and services, Telecommunication Providers can also be held accountable, at least ethically, for providing products and services to vulnerable people that may lead to hardship and, consequently, social stigma.

Conduct Risk Assessment on Current Processes

A crucial step toward minimizing risks is to review customer acquisition and onboarding processes. Telecommunication Providers should assess if customers’ subscriptions are being adequately evaluated and dealt with accordingly. Providers that fall behind in this area are at risk of being hit hard by fraud and bad debt, directly impacting financial results. Those that have weaker controls in place will sooner or later become a target to fraudsters and abusers, or even just the preferred choice for high-risk customers.

Therefore, the credit risk of any new customer needs to be assessed before agreeing to provide a post-paid plan to that customer. Credit risk is essentially the customer’s creditworthiness or the risk that the customer will default on their payment.

For a Telecommunication Provider, it is paramount to understand where it stands regarding its ability to assess customers’ actual capacity to pay. Before agreeing to sell a post-paid plan, it should make reasonable enquiries about a customer’s financial situation to assess the customer’s ability to meet the plan’s contractual terms. The processes and tools in place should be adequate for the job and should address what’s missing and what improvements are needed to meet best practices. The processes should be efficient and present no friction when it comes to low-risk customers. Ultimately, Telecommunication Providers need to excel in translating credit strategy into business execution.

Use Today’s Tech to Execute Solvency Checks

Once the current situation is identified, the steps to be taken become clear, and very often the need for upscale credit risk capabilities can be recognized. A key aspect involved is typically the technology used to screen and check customers’ solvency. Implementing technology helps Telecommunication Providers prevent subscription fraud as well as reduce bad debt write-offs.

When looking into the technology, the following shall be considered:

  • Do we have the necessary capabilities and skillset required to achieve the credit risk goals and policies set for the company?
  • Are new applications evaluated in real-time? Are we able to provide an immediate response to a new application evaluation? Are we able to do it consistently across multiple origination channels?
  • Is the evaluation supported by an automated process? Is the automation in place able to cope with the existing diversity of service and customer types? Does it support customer interactions properly? Does it allow auditable human interventions during the evaluation and decision process?
  • Is it seamlessly integrated across the BSS stack? Are processes and systems fully integrated and do they deliver a smooth experience to customers, partners and own teams?
  • Do we take advantage of the large volumes of data we have in-house to verify new applications?
  • Do we make use of external data sources and integrate them into the new customer verification process?
  • Do we provide a frictionless experience to our customers, namely a fast-track process for low-risk applications?
  • Do we provide a consistent experience across the multiple channels that applicants might interact with? Are we able to maintain evaluation consistency and reliability independently of the channel being used to interact with the applicant?
  • Do our processes and tools have the flexibility required to easily cope with new products and services as well as with process enhancements?
  • Are we able to review how the credit risk strategy and processes are performing and adjust accordingly?

Technology, People, Processes, Data

After reading through the questions above, it becomes obvious that technology alone is not enough for implementing an effective solvency check program: people, processes and the right data will prove to be vital for successful performance. It is therefore important to have efficient risk management processes deployed across the entire customer lifecycle. Using an advanced customer application evaluation and scoring process can help Telecom Providers upscale capabilities. When combined with the ability to make real-time decisions, telecommunication companies are equipped with a strong basis for identifying risky customer profiles and in turn, preventing subscription fraud.

Closing thoughts

As telecommunication services continue to become engrained in our everyday lives, having best practices and systems in place become the lifeblood of the organization. Through best practices, supported by adequate technology, Telecommunication Providers can improve their financials while providing better customer experience and protecting the community.

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About the author

  • Miguel has over 20 years of experience providing software products and solutions for the Telecommunications and Financial Services industries addressing Revenue Assurance, Fraud Detection and Credit Management.

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