More mobile messages are going back and forth across the globe today than ever before in human history; and although SMS is over 20 years old, text messaging appears to be on the verge of a new era.
Since the beginning of the decade, the mobile phone industry has observed the rise of high-end messaging (OTT) apps as Whatsapp; Facebook Messenger e WeChat With cautious interest. While there has been much debate about whether these services will complement or compete with SMS, OTT apps have already eclipsed SMS as the primary medium for person-to-person (P2P) communication across all demographics.
However, instead of OTT messaging completely eradicating SMS as some have predicted; SMS has actually found a happy balance as something of a fail-safe backup in the event of no data coverage or OTT fragmentation.
From P2P to A2P messaging
Despite this fierce competition, this isn't the end of the story for SMS. While SMS may be the preferred choice for consumers, its use for all forms of customer engagement in the business sector is rapidly accelerating—and with good reason.
While messaging apps have improved features, SMS remains the only ubiquitous global messaging platform and the only one with a single, globally recognized addressing system. It works on any phone and any network, and is also the most trusted by consumers. This makes it suitable for all types of business and mission-critical communications.
As a result, companies across multiple verticals, such as finance, retail, and healthcare, are increasingly turning to SMS. In recent years, the so-called A2P (application-to-person) market has seen tremendous growth, with analyst mobileSQUARED predicting it will be worth nearly $60 billion by 2020, up from $12 billion in 2015.
The consensus among industry analysts is that A2P will continue to grow significantly, with Credence Research recently predicting that enterprises will send two trillion SMS messages annually by 2017.
One reason for the optimism surrounding A2P messaging is the ease with which SMS integration has become possible. Developers can easily create apps that send messages to users entirely through software. They don't need to negotiate with MNOs or aggregators, and by using a simple API in their apps, they can send SMS messages to users.
This simplicity has helped accelerate the adoption of A2P messaging. The 2016 Mobile Messaging report from global mobile commerce body MEF found that 76% of consumers receive SMS communications from companies such as banks, healthcare providers, and retailers, while 65% interacted with businesses via chat apps.
Financial services lead the way for messaging A2P
The financial services industry is currently leading the way in A2P messaging, with the 33% of individuals who have received an SMS message from a financial institution. This compares to the 17% of a school, the 16% of a healthcare provider, and even the 23% of a retailer or e-commerce company.
There are likely two reasons for this. The first is that one-time password texts are an important part of banking authentication (for example, when setting up a new payee). In fact, another finding shows that "confirming a password" is the most common use case for A2P SMS. It has been used by 30% of people at least once in the last year.
The other likely reason for so much text activity with banks could be to save on fees. In the UK, for example, text alerts have largely replaced letters as a way to inform customers that they are approaching their overdraft limit. The ability to act on such alerts saves customers millions of pounds.
In fact, in 2015 the Financial Conduct Authority (FCA) said that signing up for text alerts and mobile banking apps reduces the amount of unsolicited overdraft fees incurred by up to 24%.
These developments reflect a steady migration away from brick-and-mortar banking. New "challenger" banks are opening around the world—Fidor, Number 26, Tandem, Mondo, and many others—that exist purely as app-based digital entities.
However, currently the most popular “business use” of SMS is to confirm a password through a two-factor authentication process.
The future of A2P messaging
SMS is entering a new and exciting era, driven by its unparalleled versatility and simple API integration. As a result, businesses are finding SMS increasingly effective for a growing multitude of customer-centric activities, but this could be just the beginning.
Connectivity is at the heart of the growth in IoT device deployment. Furthermore, Machina Research predicts that 2.2 billion devices will be connected via mobile networks by 2024. And how, for example, will a connected car communicate the fact that it has a faulty part to a service technician? SMS, of course.
However, the next stage of A2P growth could herald an even more fundamental evolution in the relationship between business and consumer: the shift towards "conversational" commerce. This describes text-based communications between a customer and a business that occur in real time, like a conversation.
Essentially, customers will be able to "chat" with a bot as if it were a human operator. Many believe that conversational commerce could define the next phase of brand/consumer communications and make messaging apps even more central to people's lives, with SMS playing a central role.
