Exposing Mobile's Dirty Little Secret

Date: 18/5/2009

Payment transaction fraud is prepaid mobile's dirty little secret and it's leaving great big holes in operator profits. Surprisingly many don't know about it, the majority don't admit it, and few understand it, and yet it is not an insurmountable problem. The tools and processes to combat this financial drain lie within every operator's grasp, they just need to know where to look.
For example, many mobile operators allow customers to topup prepaid accounts with credit cards - they'd be mad not to. All they would see is that it may cost them a % fee, but there are hidden costs. Most will assume that a credit card it is a protected payment instrument and the bank takes all the risk, which is absolutely not the case. A typical operator will be paying around 1.2% of the transaction value to a credit card company, without any form of fraud protection. 2% of all transactions tend to end in dispute, and will cost the operator an average of £20 each.

Now if a mobile operator has 10 million customers carrying out ten top ups per year, that equals 100 million transactions, of which 200, 000 will be disputed. This equates to a cost of £4 million alone and does not take into account lost prepaid revenues which effectively doubles the figure. In addition there are internal costs from the administration of a dispute, which could vary from £3-£5. The true cost of accepting credit cards for this operator? £9 million per annum.

Operators need to take a step back and look at the true costs of their own business processes. It may be complex, but as mobile markets saturate and recruiting new customers becomes prohibitively expensive, operators will be forced to look in the mirror and tackle their dirty little secrets.