‘Never Pay’ is a new form of subscription fraud that contributed to revenue losses of $8.1 billion last year. Mobile operators are particularly affected by this fraud.
According to a press release:
In 2013 subscription fraud (use of service with no intent to pay) accounted for $5.22 billion or 11% of total losses worldwide. In 2015, the CFCA’s 2015 survey recognized the seriousness of the problem by increasing the categories of subscription fraud: credit muling or the use of real identity details; application fraud where false details are created; and identity, where an owner’s details are stolen. In total, the category has grown by 155% since 2013 and, at $11.2 billion, now accounts for 30% of overall revenue losses.
In the hyper-competitive mobile communications space, operators frequently run promotional offers whereby they buy out existing contracts and provide heavily subsidized devices. The ‘never pay’ or ‘first default’ scam involves obtaining a subsidized and, usually, post-paid mobile phone, and then failing to pay on the due date of the invoice. In a variation on ‘never pay’, the subscriber pays for a short while but either stops paying or does not pay the full amount, sometimes repeatedly. This is commonly called ‘unable to pay.’
“SEC and equivalent financial filings by mobile communications providers show ‘never pay’ has evolved into a significant revenue drain,” said Dr. Howells [Chief Marketing Officer of Argyle Data]. “It is obvious that traditional checks such as consumer credit ratings and FICO scores are failing to stem the problem. The features of this revenue loss change over time, which adds to the complexity of preventing it. What is needed is a new way to determine whether, to whom and at what level operators should offer subsidized plans.”