SIM swapping is a legitimate practice that allows users to transfer their phone number from one SIM card to another. But in the wrong hands, it becomes a powerful tool for fraud. Cybercriminals exploit this process to hijack a victim’s phone number, intercept security codes, and gain access to personal accounts. When used maliciously, this technique is called a port-out scam or SIM jacking.

So how do SIM swap scams work, and why should businesses be concerned? Let’s break it down.

How does it work?

SIM swap attacks aren’t instant hacks, they’re carefully planned social engineering scams. Cybercriminals exploit weaknesses in carrier authentication processes to convince mobile providers to transfer a victim’s phone number to their own SIM card. 

Once they gain control, they intercept OTPs and security codes, paving the way for account takeovers and financial fraud.

Here’s how a typical SIM swap attack unfolds:

Step 1: target selection and data gathering

The attacker starts by researching their victim and collecting enough personal information: full name, date of birth, address, and even answers to security questions. 

This data is often stolen from data breaches, phishing scams, or public social media profiles. The more details they have, the easier it is to impersonate the victim.

Step 2: tricking the mobile carrier

Using the stolen information, the fraudster contacts the victim’s mobile carrier, posing as the legitimate account owner. They request a number transfer to a new SIM card, often providing fabricated details to pass identity verification. 

In some cases, attackers gain direct access to the victim’s carrier account online and update account information themselves, bypassing the need to speak with an agent.

Step 3: taking control of accounts

Once the SIM swap is successful, the attacker receives all OTPs and authentication codes sent via SMS, allowing them to:

• Reset passwords and gain access to banking, email, and social media accounts

• Authorize fraudulent transactions

• Lock the real owner out of their accounts

With control over the phone number, two-factor authentication (2FA) via SMS becomes useless, giving fraudsters full control of the victim’s online identity.

Step 4: covering their tracks

To avoid detection, some attackers transfer the number back to the original SIM card after completing their fraud. This delays discovery and makes it harder for victims to notice the attack until it’s too late.

Why is this attack so dangerous?

SIM swapping is one of the most effective ways to bypass SMS-based security measures. It’s a preferred method for cybercriminals targeting:

• High-value financial accounts,

• Cryptocurrency wallets,

• Corporate and enterprise systems.

Without additional fraud detection measures, businesses relying solely on SMS OTPs for authentication could be exposing their users to a critical security risk, if their OTP provider doesn't take this threat seriously.

Why are SIM Swap attacks escalating?

SIM swap attacks are no longer rare, they have become a major cyber threat impacting both individuals and businesses. High-profile figures have fallen victim to these scams, and the financial damage is escalating rapidly.

Even tech industry leaders aren’t safe from SIM swapping. In 2019, Twitter’s then-CEO Jack Dorsey had his phone number hijacked through a SIM swap attack. Once fraudsters took control, they used Twitter’s SMS-based posting system to send out offensive tweets from his account. According to the New York Times, the attack was made possible because of a weakness in mobile carrier authentication, allowing bad actors to bypass traditional security checks.

The FBI’s Internet Crime Complaint Center (IC3) has tracked a dramatic rise in SIM swapping attacks over recent years:

• 2018-2020: 320 complaints filed, with $12 million in reported losses, 

• 2021: 1,611 complaints, totaling $68 million in losses,

• 2022: 2,026 complaints, with adjusted losses exceeding $72 million. 

On average, victims lose approximately $45,000 per attack, underscoring the severe financial impact of SIM swap scams. These attacks don’t just affect individuals, businesses relying on SMS-based authentication are becoming prime targets.

How does SIM swapping fraud affect businesses?

SIM swap fraud doesn’t just impact individuals, it creates major security risks for businesses. Attackers who gain control of a phone number can bypass authentication measures, access customer accounts, and even infiltrate internal systems. 

The consequences range from financial losses to reputational damage and regulatory issues. Here’s how businesses are affected by SIM swapping fraud:

• Bypassed security procedures: companies that rely on SMS or voice OTPs for multi-factor authentication (MFA) are particularly vulnerable. If a fraudster takes over a user’s phone number, they can intercept OTPs and gain unauthorized access to accounts, making traditional authentication methods ineffective,
  
  

• Compromised customer data: attackers use SIM swaps to reset passwords, take over accounts, and steal personal data. Businesses handling sensitive customer information, such as fintech, e-commerce, and SaaS platforms, risk data breaches, regulatory fines, and loss of user trust,
  
  

• Revenue and budget loss: fraudulent transactions, account takeovers, and increased chargebacks directly impact a company’s bottom line. Additionally, the cost of handling fraud - customer support, security upgrades, and legal consequences - can drain operational resources,
  
  

• Harmed company reputation: a SIM swap attack that leads to customer account breaches or financial fraud can result in negative press, public backlash, and customer churn. When users lose money due to weak authentication security, they often blame the platform,
  
  

• Infiltrated company network: if an attacker gains access to an employee’s phone number, they can reset work-related credentials, bypass internal security controls, and even breach corporate infrastructure. For high-risk industries like finance, healthcare, and tech, a single compromised number can lead to massive security incidents.

Protecting against SIM swapping isn’t just about securing individual users, it’s about safeguarding your entire business ecosystem. Without stronger authentication measures and fraud detection systems, companies risk financial losses, data breaches, and long-term reputational damage.

How to prevent SIM swapping for your users? 

SIM swap fraud isn’t just an inconvenience: it’s a direct threat to your business and your users. If a fraudster takes control of a phone number, they can bypass SMS-based security, reset passwords, and access sensitive accounts. So how do you stop this before it happens?

The answer lies in real-time phone number intelligence. Instead of reacting after an attack, businesses can use SIM swap detection to identify risks before fraudsters take action.

Using real-time SIM Swap detection

A SIM swap check API, like Prelude Watch API, helps companies detect and prevent fraud in real time. It works by analyzing digital signals and number portability history to spot unusual activity that could indicate a SIM swap attempt.

Here’s how it strengthens your security:

• Detects suspicious phone number changes: if a number was recently ported to a new SIM, the system flags it as a potential fraud risk before an OTP is sent,
  
  

• Blocks fraudulent OTP authentication: if an attacker tries to use a stolen number to verify an account, the API can prevent the OTP from being delivered, stopping unauthorized access,
  
  

• Improves user verification accuracy: a legitimate user changing devices shouldn’t be blocked, but a fraudster attempting a SIM swap should. Real-time intelligence helps businesses tell the difference.

When should you check for SIM Swap risks?

SIM swap fraud can happen at any stage of the user journey. To minimize risk, businesses should check phone number integrity at key moments:

• When a new account is created: prevent fraudsters from registering accounts with compromised phone numbers,
  
  

• When a user requests a 2FA code: ensure that OTPs are sent to the real account owner, not a fraudster,
  
  

• Before high-risk transactions: block unauthorized fund transfers or changes to sensitive account settings,
  
  

• When a high-value user logs in: VIP accounts are prime targets for fraud. Extra security checks are a must,
  
  

• During inbound customer service calls: verify that the caller is the actual account owner before processing sensitive requests,
  
  

• Before sending security alerts: ensure that fraud warnings and password reset notifications reach the right person, not an attacker.

Businesses can no longer rely solely on SMS-based authentication to protect user accounts. By integrating real-time SIM swap detection, companies can proactively block fraud attempts before they cause damage, reducing financial loss, protecting user trust, and strengthening security across the board.

SIM swapping is a serious security threat, putting user accounts and business operations at risk. As fraud tactics evolve, relying on SMS-based authentication alone is no longer enough. With real-time SIM swap detection, businesses can block fraud attempts before they happen, protecting both users and company assets. Strengthening authentication security isn’t just an option, it’s a necessity.

Want to secure your platform against SIM swap fraud? Try Prelude for free or contact our sales team to find the best solution for your business.