ROUND-UP 2023 How messaging changed for good, but SMS remained the same

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Connecting consumer with content, along with providing businesses with ways to reach out to consumers, has become big business. And there has certainly been a blurring of the lines between ‘business messaging’, marketing and consumer messaging – a blurring that has seen messaging start to become a vital bridge between content consumption and payments (see page 8).

According to HORISEN’s CEO Fabrizio Salanitri, SMS still dominates the business messaging market, but it is increasingly becoming fragmented as services such as RCS, WhatsApp, Telegram and social media messaging start to becoming preferred channels for consumers to interact with businesses.

But with everyone using it, it is very hard to standout, he says. “Making sure that SMS support offers all the features and services that businesses need for both A2P and P2A messaging with SMS is the most important thing. Reliability and feature-richness are what will attract users.”

Salanitri also emphasises that modernisation and scalability are also key. “A lot of platforms are 10 to 15 years old making them difficult to scale,” he says. “And scalability is key, because the two way messaging we now see with AI driven dialogue will generate so much more traffic that the platform’s has to be ready to swallow and to be able to process reliably without downtime. It also needs to be able to connect thousands of customers and suppliers. So, from an engineering point of view, this is no piece of cake.”

He continues: “Then, if we talk about the basic technology, what is very important is that this platform has to be driven by someone; it needs a pilot and the pilot needs a cockpit. The user which works with this platform needs a user interface that makes even complicated processes look easy. This is something we see as fundamental and where we at HORISEN put a lot of effort to make things look easy for our customers optimise a lot of processes, so that they can focus really on the important stuff.”

Challenges for SMS

But SMS has its challenges. More than 3 trillion A2P SMS messages were delivered globally in 2022, averaging a staggering 8.2 billion messages daily. Despite such robust numbers, many mobile operators are yet to implement optimal pricing strategies that would maximise revenue from this burgeoning business messaging traffic.

While SMS remains a dominant force in the A2P messaging traffic landscape, its market share is projected to decline over the coming years. It underscores the urgency for mobile operators to reassess and recalibrate their pricing strategies to drive positive top line impact, ensuring the long-term sustainability of their A2P SMS business.

According to data from Juniper Research, the wholesale pricing for A2P SMS remains unpredictable with disparities across key regions and the evolving A2P landscape requires dynamic pricing strategies that align with regional benchmarks and discern between national and international services.  The ability to identify SMS use cases, such as OTPs, notifications, and marketing, can aid in more consistent and accurate pricing, finds the study.

“One of the prime challenges that the industry faces is the unpredictable nature of wholesale SMS pricing. This unpredictability is not just a global phenomenon but also a regional one, with stark variations in average pricing across different areas. Therefore, mobile operators need to be agile, employing strategic pricing models that resonate with the market’s needs and drive sustainable growth,” says Ehsan Ahmadi, CEO & Founder of VOX Solutions.

Adding to this, Sam Barker, VP of Telecoms Market Research from Juniper Research says: “The intricate web of A2P SMS pricing is a reflection of the diverse strategies employed by operators. But, as the market dynamics shift, it’s imperative to revisit, realign, and recalibrate pricing structures to remain competitive and relevant.”

Juniper Research emphasises the need for mobile operators to re-evaluate, innovate, and adapt in these dynamic times to ensure they capitalise on the immense potential that the A2P SMS market offers.

SMS and fraud

SMS has another, even bigger challenge, which also plays into edging out its hegemony. Rapidly rising business SMS prices and increasing levels of messaging fraud such as AIT and pumping tactics could see SMS authentication traffic grow by a mere 4% in 2024, hammering a much-needed revenue stream for operators.

According to separate data from Juniper Research, the sector has seen consistent 10% growth year-on-year over the past five years and many MNOs have put faith in business SMS from A2P being a lively revenue stream.

However, the rise of AIT (Artificially Inflated Traffic), where enterprises pay for SMS authentication traffic for users that do not exist, will be a key driver of rising SMS prices. This is leading enterprises to explore alternative authentication technologies, such as one-time passwords over OTT messaging apps and flash calling.

According to the study, more than 50% of SMS traffic will be attributable to authentication use cases in 2024. To combat slowing SMS traffic growth, operators must promote authentication APIs such as Number Verify and SilentAuth, to keep demand for authentication services within operator-controlled environments.

If operators are unable to reduce prices and fraud on their messaging networks, they risk losing vital authentication traffic and revenue to other channels.

The GSMA Open Gateway, launched in 2023, will enable operators to swiftly develop and deploy API-based authentication solutions, eliminating the need for user authentication, silently authenticating at the SIM-level instead. This will provide a frictionless experience for mobile users whilst retaining the use of telecoms networks.

Research author Rosie O’Connor explains: “With high prices and unreliable SMS termination, enterprises are beginning to lose faith in SMS authentication. Operator APIs offer an opportunity for operators to ensure that authentication remains on operator networks.”

SMS has yet to hit potential

While current SMS growth may be slowing and the channel is impacted by fraud and other issues, all business messaging is still way off achieving its full potential. Mobilesquared’s Nick Lane points out that globally there are 5.63 billion unique SMS users, however by the end of 2023, 81% will also be using rich messaging of some kind, with around 3 billion on WhatsApp.

According to Lane, only a tiny fraction of global businesses are using messaging of any kind vicas part of their marketing strategy. Currently it is seen as a customer care tool, however leveraging its reach for marketing could see the level of messaging go stratospheric in the coming years – something that will see MNOs sit up and take note of just how powerful, and lucrative, messaging can be for them if they start to treat it as more than just an addendum to their voice and data businesses.

With Google having a significant presence at the show promoting their (non-messaging) advertising, it is clear that marketing and telemedia are set to collide in the coming 24 months to offer some truly powerful options. Who knows, it may even see Google’s RCS messaging take off.

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