Trafficking of fraudulently obtained and sold-but-not-activated smartphones has been a thorn in mobile network operators’ (MNOs) sides for almost as long as there have been smartphones. This is no surprise – wherever there is value, thieves will follow.
What did send shockwaves through the wider telecoms ecosystem recently, though, was Verizon and the GSM Association (GSMA) exposing the extent of the problem.
The GSMA conservatively estimates that over 4 million prepaid devices are trafficked in the United States each year, at a cost of $900 million. Verizon alone lost $190 million in 2018 – a huge increase from the $115 million that smartphone theft and fraud cost the carrier in 2017.
This criminal activity is occurring at all stages of the device lifecycle. Currently, between 5-25% of smartphone theft is committed during supply chain shipments, and in-store robberies are increasing dramatically. In 2017, Verizon reported a 200% year on year increase in store robberies. This impacts much more than the company’s bottom line, as employees and customers are put at risk of physical danger and fraud. Verizon also estimates that more than 7,000 customers have their identity stolen each month by thieves who use these identities to fraudulently order new smartphones and sell them on the black market.
With the figures and impact laid bare, it becomes clear that resolving this issue must be a priority. To do that, we must review the two solutions used by carriers until now, why they didn’t work, and what that can teach us about how to effectively reduce, and even prevent, smartphone trafficking.