Consumers love product bundles. Buy this bag of carrots, get another free. Don’t subscribe to one TV channel – pay a bit more and get the whole lot. Buy this SIM card and get 1000 ‘free’ texts a month.
What’s not to like?
Well, sometimes there are unintended consequences – at least for the seller. Take those SIM cards. What if someone decided to send those 1000 texts not to friends, but to business customers? And what if they charged a fee to send them, and kept the proceeds all for themselves?
Sadly, this is not a thought experiment. It’s bypass fraud. And it’s a growing problem for the A2P SMS market.
A2P SMS bypass fraud – how it cuts out the MNO
To fully understand bypass fraud, let’s walk through a hypothetical use case.
Let’s say a popular new US-based social network FriendSpace decides to launch in Vietnam. It wants to secure the registrations of its new users by authenticating them with a one-time password.
It hires an A2P SMS aggregator that has connections with all the Vietnamese MNOs to route these PINs. The aggregator charges FriendSpace 10c for every A2P SMS message it sends to its excited new users. Out of this fee, it pays the MNO 5c for routing the traffic. It keeps the remaining 5c as its fee for managing the process.
But then the aggregator gets greedy. It decides to cut out the MNO. Here’s how. It hires a local contact to buy a stack of consumer SIMs. These SIMs offer cheap local rates for sending texts. They might even come with unlimited SMS allowances.
The third party then combines these SIM cards into a single server – called a SIM box. Now, the aggregator can send all of FriendSpace’s A2P SMS messages from the SIM box – at ultra-low local rates – to their new end customers.
Yes, the recipients might notice their authentication code is coming from a regular phone number instead of an official Sender ID. But they probably don’t care. This is bypass fraud.
A fraud that can slash revenues in half
The important thing, for the aggregator, is that the fraud replaces 10c-a-time international texts with local P2P messages sent for almost nothing. The A2P SMS aggregator keeps the 10c and pays the SIM box operator, say, 3c. The enterprise doesn’t know the difference. The MNO gets nothing (apart from the tiny P2P revenue).
As you can see, this is a big win for the unscrupulous intermediary. It boosts its per-message revenue from 5c to 7c, but retains a happy (if ignorant) client.
Sometimes the aggregator will combine this kind of bypass fraud with other grey route activities.
Here, it sends international SMS messages via an MNO from a different country, which has cheaper rates. These grey routes can be circuitous and therefore unreliable. Many messages fail to reach their final destinations.
The customer loses. But so does the industry as a whole, as enterprises start to doubt the effectiveness of the channel.
Combined, bypass fraud and grey traffic add up to a growing problem. According to Mobilesquared:
- Of the almost 2 trillion A2P SMS projected to be sent in 2024, just under one-quarter of these will be via grey routes.
- The total opportunity for A2P SMS could reach $27.48 billion in 2024 (based on 100% white route traffic).
- Between 2020-2024, revenue leakage to grey routes remains unacceptably high, with a cumulative loss of $37.1 billion, or an annual average leakage of $7.69 billion.
Here at GTC, we know the reality of the situation. Many members of the team have worked for MNOs. We know that more than half of an MNO’s A2P revenues can be lost when bypass fraud is rampant.
Fighting back with the SMS firewall
Regrettably, we also know that aggregators have plenty of margin incentive to keep on committing bypass fraud. What’s more, the punishment if they are discovered is usually minimal – just a fine or some short suspension.
And they are rarely detected. Especially when the fraud relates to local P2P SIM boxes.
Why is this? It’s because the most common ‘weapon’ against A2P fraud is the SMS firewall – and MNOs rarely use it effectively against domestic P2P SIM box traffic. Often, MNOs tell us they lack the firewall management expertise to apply the tech in this way.
Well, we can help. We know how firewall technology works. It just takes some tweaking of the firewall’s rules to detect when messages might be originating from a SIM box. This way, MNOs can claw back some of the revenue lost to international A2P and domestic A2P traffic.
Similarly, we can help MNOs to review the complaint reports that consumers send in. If an aggregator is sending spam to thousands of users, they can analyse the feedback, block the numbers and even log the URLs in the messages to identify the culprits.
We’re here to help
At GTC, we believe we can help the industry to combat bypass fraud. We have the knowledge to apply firewall management technology against it – and bring back millions in lost A2P revenue to MNOs.
Please get in touch.
Global Telco Consult (GTC) is a trusted independent business messaging consultancy with deep domain knowledge in application-to-person (A2P) services. GTC provides tailor-made messaging strategies to enterprises, messaging service providers, operators and voice carriers. We have expertise in multiple messaging channels such as RCS, Viber, WhatsApp, Telegram and SMS for the wholesale and retail industry.
GTC supports its customers from market strategy through service launch, running the operations and supporting sales and procurement. The company started in 2016 with a mission to guide operators and telcos to embrace new and exciting opportunities and make the most out of business messaging. For more information or industry insights, browse through our blog page or follow us on LinkedIn.