The future of eSIMs is a bright one, with the number of connected devices supporting eSIMs expected to increase nearly 80% to 3.4 billion in 2025, with the consumer sector making up over 90% of global installations.
Due to their nature, eSIMs eliminate the need for consumers to visit a brick and mortar store to either purchase their SIM card, activate their subscriptions, or both; they can browse plans, fill in their enrollment details, and download their newly created eSIM profile right on their device.
While this is largely beneficial for the consumer, mobile network operators (MNOs) are now faced with the challenge of verifying their customers' identities in this new environment. The growth in eSIM adoption brings about questions of how to perform know-your-customer (KYC) checks and collect documentation for identity verification, all while ensuring both compliance with KYC and anti-money laundering (AML) regulations, as well as a smooth onboarding experience.
AML and KYC compliance requirements for MNOs
AML and KYC requirements are in place to combat money laundering, terrorism, and other criminal activities. Specific to MNOs, over 150 countries mandate proof of identity in order to access mobile services; this extends to eSIM devices as well.
With traditional brick and mortar stores, the KYC process involves physically presenting an identity document to a store representative; this however could result in high fraud rates in case the representative is not trained well enough in document fraud detection. Apart from this, a physical KYC process is cost-intensive and time-consuming, with MNOs having to heavily invest in storefronts or kiosks, personnel and personnel training. For the customer, this requires them to physically travel to the storefront or kiosk, which is not always convenient.
How can MNOs combat this issue? With the digitization of SIMs, the digitization of KYC should follow. Combining eSIMs with an eKYC portal can help MNOs offer consumers a convenient digital onboarding process while ensuring compliance with AML and KYC regulations and requirements around real time fraud prevention.
What kind of fraud do MNOs face?
MNOs are no stranger to fraud; subscription fraud (which includes identity theft and identity fraud), is one of the most prevalent and fastest growing types of fraud in the telecommunications industry. Subscription fraud makes up almost 40% of the telecommunications industry fraud, totalling $30 billion globally. These stolen identities can further be used to maliciously obtain smart phones and service contracts under the stolen identity.
Fraud in the telecommunications industry is not just limited to subscription fraud; physical SIM cards can be removed from a stolen or lost device, thereby allowing malicious people to misuse the SIM card for account takeovers and SIM swap attacks. In fact, back in 2018, an American investor lost over $23 million in cryptocurrency as a result of a SIM swap fraud, leading to the investor suing their MNO for failure to protect their digital identity and gross negligence.
SIM cloning is another type of fraud prevalent in the telecommunications industry, where the physical SIM card is obtained illegitimately, and then used as an enabler for roaming fraud, traffic pumping fraud, or IRSF fraud.
Seamless digital experiences need trusted digital identities
Digital growth and transformation is not just limited to the telecommunications industry. PCs, wearable devices and smartphones, among other smart devices, take advantage of cellular network connections to provide users with a seamless always-on experience. As such, consumers have grown to expect a seamless digital onboarding journey as well.
We’ve previously discussed how FIDO2 can help secure eSIMs. Over 4bn devices are FIDO-compatible, right out of the box, with biometric technology now considered ‘mainstream’ on all smartphones. This means that consumers are actually able to use their fingerprint readers and facial recognition cameras to verify their identity securely wherever they are.
FIDO is the de facto authentication standard that is in line with GDPR and PSD2 principles; adding FIDO2 biometric authentication to the onboarding process will allow MNOs to verify their customers’ identities when they register for a new account using the FIDO-compatible hardware on their smartphones. No longer will customers need to travel to a storefront or a kiosk and take up a representative’s time; everything can be done securely, right from the palm of their hand, wherever they are in the world.
The benefits extend beyond onboarding; MNOs will gain the ability to allow their customers to seamlessly authorize new devices and accounts simply by scanning their fingerprint or scanning their face, behavior that almost all consumers are accustomed to doing on a daily basis, whether to unlock their phones or to initiate payments.
The advantages of FIDO are not limited to the consumer; MNOs also benefit by gaining confidence in the legitimacy and authenticity of the consumers, thereby curbing fraudulent activity due to identity theft or physical SIM fraud.
Solutions like LoginID allow MNOs to respond to the challenges around the rise in eSIMs with ease. MNOs will be able to create a smooth and seamless digital onboarding experience while fulfilling AML and KYC regulations.
Talk to our team today to explore how we can help you enhance your onboarding and authentication experience with FIDO2 passwordless authentication, while helping you meet global AML and KYC requirements.
Alternatively, you can get started for free today.
