In 2018, the global cost of fraud exceeded $3 trillion. There are countless types of fraud that contribute to these losses, including identity theft, telemarketing scams, insurance fraud, and so many more.
But if you’re working in the mobile device market, there’s one specific type of fraud that can’t be ignored—trade-in fraud.
As the secondary market continues to mature, mobile device trade-in programs will become an increasingly valuable stream of revenue for your business. You can’t afford to let fraud derail your success.
However, identifying mobile device trade-in fraud can be a challenge. Once you understand what to look for, you can take steps to safeguard your trade-in program and mitigate any potentially-costly issues.
What Is Mobile Device Trade-In Fraud?
There are many nuances to your mobile device trade-in program and fraud can occur at any point along the way. However, all forms of trade-in fraud start with your ability to assess individual mobile devices as consumers submit them.
Better quality trade-in devices increase your revenue when you bring them to the secondary market. That’s why it’s so critical to properly assess the value of devices at the point of sale. If you make a mistake, the value has to be readjusted in the processing facility. Readjustments will negatively affect your margins on device trade-ins. And in the worst-case scenario, you’ll find a device is actually worth less than what you paid out to the consumer at the point of sale.
Whether you’re a carrier or a retailer, your sales reps are the front line of your trade-in program and assessment process. You might give them specific guidelines to follow, but in the end, you’re just hoping employees follow the honor system in the assessment process.
Even if you trust your employees completely, human error opens the door for multiple forms of mobile device trade-in fraud:
- Purposeful Value Tampering: In perfect condition, an iPhone 8 Plus was worth about $540 when traded in (at most in 2018). Purposeful value tampering is when your sales rep assesses the device as in “excellent condition” despite a cracked screen or other defect. He or she would be offering over $500 for a device that’s only worth $200.
- Lack of Attention to Trade-In Detail: Not all fraud in the trade-in process is purposeful. Even if human error is the cause for improper device assessments, it’s still considered fraud. For example, if no one notices that a slight crack in the screen, you won’t be able to sell the device for enough to recoup the trade-in value you provided.
- Buying Back Stolen Devices: One challenge of many trade-in programs is that you’re giving consumers money upfront and recouping the value later. To exploit this process, consumers could bring stolen devices to your sales reps in the hopes of getting cash to spend in-store. You lose money from paying out stolen devices while also hindering operational efficiency as you deal with authorities.
These are just a few examples of how fraud can plague your mobile device trade-in program. But no matter how you look at the problem, some form of human error at the point of sale is almost always the root cause.
If you want to minimize mobile device trade-in fraud and maximize your profits, you need to take human error out of the equation.
Preventing Mobile Device Trade-In Fraud with Automation
You don’t want your sales reps wasting time in the back room assessing trade-in devices. Not only does it introduce opportunities for fraud and human error, but it also takes away from valuable face time with customers. The more time your sales reps spend upselling high-margin accessories, the more revenue you’ll bring in.
By automating the assessment process, you can reduce fraud and free up employee resources to improve in-store customer experiences.
HYLA’s Device Collection solutions allows your salespeople to easily evaluate devices and reduces fraud in two key ways:
- IMEI Verification: We ensure that trade-in devices aren’t stolen by automatically verifying IMEI numbers at the point of sale. Luhn algorithms verify the correct codes are entered while also checking IMEI numbers against the GSMA database to spot fraudulent trade-ins before you offer payment.
- On-Device Diagnostics: Our Diagnostic and Trade-In value app and web capabilities can quickly run an automated diagnostic assessment that provides an objective report of a device’s condition—without the potential for human error or fraud.
Using the right tools to automate trade-in assessments will increase accuracy and help you minimize pricing adjustments on the backend. Fraudsters will always look for new ways to exploit your processes, but automated systems will shore up many of the vulnerabilities that have diminished trade-in revenues in the past.
If you’re ready to maximize the performance of your trade-in program (and avoid becoming yet another victim of fraud), download our white paper and learn how.