Earlier this year MEF’s DCB working group kicked off a new program to look at tackling fraud in Direct Carrier Billing (DCB). The cross-stakeholder group is currently developing a fraud framework to seek industry alignment and help market education to ensure a sustainable trusted channel.

When looking at fraud detection solutions the topic of business models for solution providers is a focus area for discussion, with a clear recommendation that revenue sharing models cannot be good for the ecosystem. The analogy of its like ‘the fox guarding the hen-house’ springs to mind – with providers potentially motivated to actually increase fraudulent traffic. Here, members of the working group share their thoughts and consider steps the industry needs to take to clean up this key ecosystem.

Roland Kneisler

Head of Product, Vene Overwatch

 

 

 

 

 

Fraud in the DCB ecosystem is an ongoing issue and nearly everyone in the value chain is exposed to it. One solution to this problem is anti-fraud products to block fraudulent transactions, but there is one key consideration here, which commercial model is being used?

The four types of commercial model are:

  1. Monthly fee – A fixed amount that includes a defined amount of traffic or fraud checks.
  2. Click-based fee – a price for each fraud check (e.g. attempts on the payment page).
  3. Conversion-based fee – a price for each sale.
  4. Revenue share – a defined percentage of the MNO, Aggregator or Merchant’s revenue.

To prevent fraud, conversion-based (3) and revenue share models (4) should be avoided. They give the wrong incentive because:

  1. The fraud company needs to block fraudulent transactions, but also needs to earn money for their service.
  2. A lot of sales are coming from fraud and need to be blocked.

In these two commercial models, the better a company is at blocking fraudulent transactions, the less they are getting paid. In order to make a profit, employees may even knowingly allow suspicious transactions or block less traffic.
So that the fox is not guarding the henhouse, we think that commercial models between anti-fraud companies and their clients should be based on fixed prices and / or click transactions, rather than the amount of sales or revenue.

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