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Chapter 2

Current market conditions

Current market conditions

The perfect petri dish for AIT

Various elements have combined to create the perfect condition for AIT fraud. Let’s break them down.

 

Firstly, the popularity of SMS authentication, such as one-time passwords (OTP), is at an all-time high.

 

In terms of convenience, reliability, and effectiveness, SMS is hard to beat as a channel when it comes to authentication. The demand is such for OTPs that 89% of all international A2P SMS traffic comes from it (Source: Mobilesquared).

 

Brands demand it, customers demand it, and operators are happy to provide it, so why is this an issue?

The problem is that no fraudster worth their salt could resist the increase in international termination rates (ITR) over the last three years. An increase that has come in part because of the popularity of OTP.

Since 2021, a staggering 90% of MNOs have augmented their ITR, with over a third of them increasing their rates by over 100% (Source: Mobilesquared). The higher the termination rate, the more attractive the target for bad actors.

Markets where this is the case, such as Asia, the Middle East, and, increasingly, Africa, are therefore attracting higher levels of AIT than elsewhere.

On top of this, the structure of exclusivity agreements between a mobile operator and aggregator can also lead to a further increase in ITR.

Mobilesquared has found that over fifty exclusivity agreements have resulted in a significant increase in termination rates, particularly in these at-risk markets.

In essence, the popularity of OTP, mixed with high costs, have created a situation that’s highly attractive to fraudsters. Let’s dive into the impact of this.

Impact of AIT on the messaging ecosystem

  • Impact for brands

  • Impact for operators

  • money_hand

    Economic impact

    It’s estimated that AIT has cost brands a cumulative $2.4 billion between 2022-24 (Source: Mobilesquared). On top of this they are contending with high ITR rates.
  • operations-and-engineering_cog-refresh

    Operational impact

    AIT forces brands to allocate additional resources to monitor and mitigate fraud, disrupting normal business operations.
  • money_hand

    Economic impact

    Persistent fraud issues combined with high ITR are making customers lose trust in SMS, and turn to alternative channels, such as flash calling, silent network authentication, passkeys, etc. The fall of SMS traffic from AIT was estimated to result in a 16% drop in revenue.
  • operations-and-engineering_cog-refresh

    Operational impact

    The influx of fake messages strains network resources, potentially degrading service quality for legitimate users. MNOs must continually upgrade their systems and invest in advanced technologies to keep up with evolving fraud tactics, increasing operational complexities.
  • avatar

    Reputational damage

    The rise of AIT has affected the reputation of MNOs who are perceived as the source of fraud by many brands. For instance, Musk accused telcos in 2022 of “gaming the system” to “literally run up the tab” for X.
AIT in focus

AIT in focus

Discover how industry leaders are joining forces to protect international SMS from fraud and security threats. Our eBook offers easy-to-understand insights on how collaboration is key to keeping SMS safe and secure. Perfect for telecom providers and businesses alike.

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AIT in focus | How can brands and operators combat AIT?

AIT in focus | How can brands and operators combat AIT?

Chapter 3 | The economic, operational, and reputational impact of AIT on brands and operators

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AIT in focus | Securing the A2P SMS ecosystem, together 

AIT in focus | Securing the A2P SMS ecosystem, together 

Chapter 4 | What brands and operators can do to combat AIT, together

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