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CPaaS providers’ trust in SMS will drop by nearly 25% between 2023 and 2025, due to fraud fears – but many may turn to RCS

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Communications Platform as a Service (CPaaS) providers are losing trust in SMS, dropping by 24.9% between 2023 and 2025. In contrast, trust in Rich Communication Services (RCS) is predicted to leap to 75.1% and to 41.7% in WhatsApp over the same period.

According to a new report from XConnect, a Somos Company, the provider of numbering intelligence solutions and analysts Mobilesquared, found that SMS was not impacted in the short-term by increased levels of fraud in 2023, but it will significantly impact the channel in the long term unless action is taken by the messaging ecosystem.

For the report – titled ‘Do We Still Have Trust in Communications?’ – Mobilesquared conducted a survey of 59 CPaaS providers across the globe on behalf of XConnect between July and November 2023. To refine the research process, XConnect focused on the top 5 CPaaS channels as identified in its 2022 research: SMS, WhatsApp, email, RCS, and voice (SWERV).

The full report ‘Do We Still Have Trust in Communications?’ can be downloaded here

The research found that in 2023, traditional channels (SMS, email and voice) accounted for 70% of trust, but by 2025 this will drop to around 50%, with 50% of trust attributable to RCS and WhatsApp. SMS was the top channel for 2023, with its usage almost double that of the next channel (email), and almost three-times greater than voice and WhatsApp.

“The SMS ecosystem has faced numerous challenges over the last 12 months, with concerns raised over the risks of impersonation and increasing costs. Despite this, the research shows the pragmatic view that SMS remains the most engaging and effective messaging channel and the market should consider the value and risk of the alternatives,” says Tim Ward, Chief Strategy Officer, at XConnect. “Enabling these providers to manage termination rates, manage traffic delivery accurately and handle fraud is critical to maximising revenues and profits. That’s where XConnect can step in to provide part of the solution with our number intelligence.”

According to Mobilesquared’s findings, most brands and enterprises use SMS for every use case (alerts, marketing & promotions, reminders, and security), compared to just over two-thirds that use email for every use case, and around half of brands and enterprises for the remaining three channels (voice, RCS, and WhatsApp). Effectiveness remains the top factor influencing a brand and enterprise’s communications channel selection, ahead of the potential threat from fraud.

“The biggest fear expressed by the CPaaS industry throughout 2023 was that SMS fraud was closely following in the footsteps of voice fraud. Smishing/phishing is viewed as the fraud that will have the greatest impact, ahead of artificial inflation/generation of traffic, and grey routes,” adds Nick Lane, Chief Messaging Officer, at Mobilesquared. “This is by no means the end of A2P SMS, but to delay its regression, it will need to urgently tackle fraud in the short-term. CPaaS providers must take proactive measures to mitigate fraud within the channel to move the industry forward.”

CPaaS providers now expect fraud to increase in the coming years, as opposed to decreasing based on the 2022 research. They now expect 8.1% of their customer’s CPaaS spend to be lost to fraud, up from 4.75% previously.

Download the full report here to learn more.

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