An industry-wide approach to battling SMS fraud

08 February 2019 | James Pearce

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The messaging and SMS industry is facing a problem with fraud. Bart Vandekerckhove, head of mobile messaging at BICS, talks to James Pearce about how the industry can work together to tackle fraud

Fraud costs the global messaging industry an estimated $7.7 billion annually in lost revenue. To put that in perspective, the industry is estimated to see market growth from US$ 11.86bn to US$ 26.61bn, in the same period between 2017 and 2022. So eradicating lost fraud revenue would potentially make up half of that growth alone.

But the damage to the SMS and messaging industry is not solely a monetary one. It also harms the reputation of the industry. In order to overcome that, and to make sure SMS continues to be seen as a reliable service for enterprise messaging, the industry needs to work together.

That was the viewpoint of Bart Vandekerckhove, who is head of mobile messaging at carrier BICS. For Vandekerckhove, this issues is of high important to the industry.

“An industry-wide approach is vital,” he explains. “That takes quite an ambitious approach and you will always have people who opt not to follow the rules. Using official routes creates trust because customers know their traffic is in good hand and that the routes will work all of the time – so that is on the carriers, to create an environment where there is trust in SMS.”

Discussing SMS fraud isn’t always simple, because much of the wrongdoing in this margin-driven industry comes from the efforts of companies operating in the space to route traffic as cheaply as possible. And what is cheaper than free?

Not all of that is fraudulent, however, with things like grey routes perhaps questionable, but not the same.

“We can’t talk about messaging fraud without talking about bypass and arbitrage, which is about terminating SMS traffic and sending SMS traffic to mobile operators in the cheapest way possible, which is a big driver,” explains Vandekerckhove.

Fraud is “still a major problem and very much present in the industry”, driven by the continued growth of application-to-person (A2P) messaging. It is, he explains, “a very lucrative business” – one with intense competition. And that means a high focus on margins.

“Because of this aggregators and SMS providers will always continue to use cheap routes to deliver the messages. There also other types of fraud too.”

The need for an industry-wide approach is key to tackling the issue, with a lot of mobile operators looking to carriers to come up with a solution, while aggregators serve a key role in maintaining best practice.

Maintaining a good relationship across all of the parties involved – from operator to aggregator and carrier – means the industry can seriously work on lowering fraud, thus giving A2P messaging more credibility to enterprises.

“We work with the aggregators,” says Vandekerckhove, “using them to both deliver our traffic and also receiving traffic from them. I see a common drive an incentive to route traffic on direct connections to operators, but on the other side, other routes are still open so all we can do is fight an education game to make operators aware of this phenomenon.

“Aggregators have a key role in the industry as they collect traffic from enterprises and OTTs and we need them. As BICS, we can’t prevent another carrier from using those routes. That is not up to us – it is up to the operators. We can support them to make sure their networks are well protected. That’s what we have been doing and it is what we will continue to do.”

This industry-wide approach is being led in part by the Mobile Ecosystem Forum (or MEF) which launched its anti-fraud initiative last year. The initiative includes an A2P SMS code of conduct aimed at promoting best practice for tackling fraud, and an independent compliance committee which is made up of representatives from trade associations, independent lawyers and local regulators.

Launch signatories include Apprentice Valley, BulkSMS, CLX Communications, Dimoco, Gemalto, IMImobile Intelligent Networks, iTouch Messaging Services, Kaleyra, MMD Smart, Modica, Movitext, Openmarket, Quiubas, rdcom, RealNetworks, TWW, Tyntec and XConnect.

“We have signed up for the MEF fraud programme,” explains Vandekerckhove. “They have been drafting a code of conduct and the idea is to make aggregators respect this kind of conduct, and not use grey routes, in order to fight against fraud. I like the idea – it is a good initiative to make sure SMS continues to be perceived as a trusted channel. It will definitely help by facilitating the anti-fraud approach. For a carrier like BICS, being part of it helps promote our image as a trusted carrier who does not commit fraud.”

Fraudguard

As operators grasp more and more the potential revenue opportunities offered by A2P messaging, they ask for more security in their offering. This is why a number of carriers, including BICS, have launched firewall solutions.

Fraudguard is a tool that helps operators block problematic traffic. Last year, it added a fully-managed end-to-end solution, Local SMS Firewall, to its portfolio.

BICS says that it created Local SMS Firewall in response to the growing demand for SMS and SMS A2P services. Approximately 23 billion SMS messages are exchanged globally on a daily basis and SMS A2P is also accelerating over the coming years due to the increasing number of use cases and the need for customer engagement

“SMS aggregators are always going to look for new ways to disrupt the industry, but with solutions like BICS’ Local SMS Firewall, the industry can protect both their customers and their revenues,” explains Vandekerckhove.

“By stopping spoofed and faked messages, our Local SMS Firewall product releases the network bandwidth for revenue- generating traffic and prevents content providers from bypassing the SMS Termination fee. This means BICS is playing an important role in winning back some of the revenue operators lose to bypass each year.”

Developed by a team of bypass engineers as a result of the partnership with 6D Technologies, BICS’ Local SMS Firewall can filter, identify and block bypass traffic allowing operators to focus on monetising traffic streams.