The Invisible Burden: The Impact of Fraud Impacts on MVNO Financials

MVNOs operate on razor-thin margins, with leaders focused on managing acquisition costs, reducing churn, and tackling network fraud. Yet, one critical threat often flies under the radar and can have a huge impact on MVNO financials: Payments Fraud.

Fraud-related payment failures—due to false flags, insufficient funds, chargebacks, or blocked transactions by acquiring banks—can severely undermine profitability. Many MVNOs underestimate the scale of this revenue leakage, which, if left unaddressed, diverts funds from growth and damages the bottom line.

The Fraud Threat Landscape

MVNOs are uniquely exposed to fraud through digital channels. High-value handsets, low upfront costs, and prepaid services create opportunities for fraudsters targeting sign-ups and ongoing payments.

1. Subscription Fraud: The Day-One Risk

Fraudsters use stolen or synthetic identities to access services without intending to pay, leading to:

• Immediate Losses: From device subsidies, SIMs, and activation costs.
• Ongoing Service Losses: Including unpaid data and voice usage.
• Operational Waste: In failed collection efforts. Time & Labor cost yielding little or no return
• Regulatory Risk: From weak KYC processes, leading to KYC penalties and reputational damage

According to industry data, subscriptions fraud accounts for a staggering 30–40% of fraud losses for many MVNOs, with $500–$1,200 lost per fraudulent account when all related losses & operational waste are compounded.

2. Payment Method Manipulation

Fraudsters exploit payment systems using:

• Card Testing: To identify active stolen cards that can be used for more significant purchases in the wider digital ecosystem before the real cardholder is aware their card details have been intercepted
• Card Cycling: Rapid switching of payment methods & devices to avoid detection on user journeys and or across payment channels (WEB, App, Call Center, IVR before payment & fraud management systems mark the device as invalid and declines for suspicious activity.
• Friendly Fraud: Also known as ‘first-party’ fraud chargebacks from legitimate users falsely disputing transactions stating that they had not initiated any payment and that it was a third-party fraud actor. Friendly Fraud is very difficult for a fraud prevention system to prevent. The reason for this is that the cardholder committing the fraud is legitimate, and using a legitimate email address, device, IP address and other attributes used by fraud modelling systems with graph link analysis to identify patterns of fraud directly or indirectly linked to historical fraud activities.

These tactics not only result in direct losses but also drive-up processing fees due to high chargeback volumes.

3. Promotion and Incentive Abuse

Aggressive marketing offers are another fraud magnet:

• Serial Promo Abuse: Repeated sign-ups to exploit new customer offers & incentives.
• Synthetic ID Scaling: Fake identities to amplify rewards.
• Referral Fraud: Fake referrals to claim bonuses, while not generating any incremental business to the MVNO.

One MVNO lost $1.5M in a single quarter from promo abuse—18% of sign-ups were fraudulent.

The Profitability Crunch

With a 6% net margin, a 5% revenue leak can slash profit by 83%. Tack on another 1–2% in operational fraud costs, and profitability nearly vanishes. Without intervention, even modest fraud rates can destabilize an MVNO’s financials.

Revenue Orchestration for MVNOs

To tackle and address some of the key challenges highlighted above, MVNOs need to consider leveraging a comprehensive revenue orchestration platform that both mitigates fraud whilst also boosting incremental revenue with a multi-layered approach:

1. Identity Intelligence: Analyse 2,000+ signals in milliseconds to detect synthetic or stolen identities—stopping subscription fraud early without hurting UX. By examining different attributes such as device fingerprint data, user behaviour pattern, and key identity markers, robust revenue orchestration platforms can stop synthetic or stolen identities before they infiltrate MVNO systems and related customer bases.

2. Payment Optimization: Uses machine learning to increase payment approval rates and minimize false declines.

3. Chargeback Guarantee Protection: Covers 100% of fraud chargebacks, turning fraud protection into a predictable investment and transfers the financial burden of fraud away from MVNOs and reduces the related OPEX and CAPEX costs to manage fraud, allowing MVNOs to focus its resources on core competencies like customer acquisition, brand building and marketing.

Measurable Financial Impact

MVNOs using Next-Gen Revenue Orchestration platforms typically see:

• 5–7% revenue recovery
• 15–20% boost in legitimate payment acceptance
• 40–60% cut in fraud management costs
• Zero chargeback liability

For an MVNO with $50M in revenue, that’s a $2.5M–$3.5M boost to the bottom line, financial health and success.

Conclusion: From Risk to Resilience

Fraud isn’t just a nuisance—it’s a strategic threat. As fraudsters become more sophisticated, MVNOs must adopt proactive, tech-enabled defences. Look for a vendor solution that has specific industry knowledge and experience supporting MNOs and MVNOs addressing these pain points and challenges. Use a tech-partner to turn vulnerability into resilience, empowering MVNOs to protect margins, recapture revenue, and focus on sustainable growth.