BaaS: Getting the full value of A2P SMS

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this article Silvio Kutic, founder and CEO of Infobip explores the potential of A2P SMS, especially when it is delivered through the business-as-a-service model.

Go back a decade and text messaging was the most popular form of mobile communication. Subscribers were happy to pay for each SMS they sent and would even choose monthly phone contracts based on the number of text messages they’d get in return. For operators this was a revenue goldmine, especially when you consider that text messaging was initially designed as a way to make use of idle signalling resources and has a delivery cost that’s virtually zero. However, since then, with mobile internet and the smartphone generation taking hold, and the arrival of applications like WhatsApp and Facebook messenger, the mobile messaging landscape has since changed a lot – but not in the way you might think.

Contrary to popular belief, operator messaging traffic has grown in the face of OTT competition. Although subscribers don’t tend to place the same value on SMS as they did a decade ago, businesses do. Professional SMS messaging capabilities are being integrated into banking databases, web apps and IT systems. Online service providers are using text messages to send time-critical notifications to their users, or to act as a vehicle for extra account features like two-factor authentication, all delivered through the telecoms network.

This approach, application-to-person (A2P) SMS, has been around for as long as text messaging itself. But more recently there’s been a shift in how it’s delivered and managed, opening up a range of opportunities for businesses, operators, and mobile messaging specialists alike.

The reason SMS continues to be a viable revenue stream is due to how – even though it’s remained a constant for consumers – the potential use cases have developed over the last decade while retaining its universal application. The key benefit of SMS is its ubiquitous nature, meaning a text message can be received on any device from the latest smartphone to the most basic feature phone. SMS is also a one-size-fits-all approach to communication making anyone with a mobile number reachable, unlike OTT messaging apps which are only functional for those with the app and when connected to the internet.

Combine this widespread availability with a low cost of delivery and exceptionally high read rate (over 98 percent, according to research by Frost & Sullivan) and it’s no surprise A2P SMS has become a highly attractive proposition for businesses of all shapes and sizes – from banks and governmental institutions, to brands and marketers.

One such example of the benefits of A2P SMS is its use as a security platform. Data breaches, in particular, have been in the spotlight during the last 12 months, with several major technology players hitting the headlines for failing to protect customer data. This has led to the widespread introduction of two-factor authentication with SMS being used in many cases, sending a one-time PIN via text message to help businesses confirm the identity of the person accessing an online account or service.

However, despite being a service delivered via the telecoms network, the driving force behind technical innovation of A2P SMS and its new business growth model has not come from mobile operators themselves. In many cases, specialised messaging providers have been essential in bridging the technological and commercial gap between businesses, which need a mobile messaging service, and telecoms networks, capable of delivering messages en masse.

Developing and maintaining enterprise-level A2P SMS services is a time and resource-heavy undertaking, and traditionally it has been outside the usual scope of an operator’s business. Operators have concentrated on developing technologies their customers demand and do not have the necessary expertise when it comes to A2P SMS. As a result, in many cases they have not accumulated in-depth insight into market opportunities and the requirements of modern enterprises and app developers when it comes to IT systems and integration issues.

Through years of experience and investment in R&D, messaging specialists have blended in-house development and built on existing relationships with mobile operators around the world to satisfy the requirements of today’s businesses, providing high-quality messaging services with worldwide coverage. Now they’re going one step further, taking an active role in managing the business of A2P SMS for operators through a delivery model increasingly known as Business-as-a-Service (BaaS).

This approach lets operators tap into the A2P opportunity through partnership. By working directly with a mobile messaging specialist, operators can capitalise on a market that’s expected to be worth $70 billion by 2020, according to Transparency Research, and is predicted to grow 6.6 percent per year until 2018. The BaaS model is a way in which operators can monetise their otherwise underused mobile messaging capabilities.

The A2P SMS business model can be delivered through the as-a-service principle, both in terms of technical and business considerations. There’s no guesswork involved for the operator – they have a partner that’s already been offering this service for years. Not only does this give them access to a wealth of in house expertise, it also introduces the support infrastructure necessary to meet the A2P demands of enterprise customers. There’s no investment required on the operators’ part, nor any development or sales resources. It’s all handled by the mobile messaging partner, letting both parties in the relationship use their strengths for mutual benefits.

Mobile messaging providers working through the BaaS model offer a lucrative and much needed bridge between operators and the huge revenue potential of A2P SMS. This not only generates funding needed to invest in new technologies, it also leaves operators free to concentrate on meeting the ever-changing demands of their customers while all A2P activity is taken care of by a third party.

A2P SMS can reach all mobile phones on the planet. There are few other technologies with that kind of claim to fame, and constant innovation in mobile messaging will play a huge part in retaining SMS as a robust and reliable professional communication platform. A2P SMS also represents an opportunity to once again disrupt the messaging space and make significant contributions to operator SMS volumes and revenues. And as professional SMS technologies become more sophisticated, it will result in new and innovative applications within the global messaging space.

To make money with little input is every businesses dream. For mobile messaging providers, adding business support and industry expertise to help operators get the most out of the technology they are sitting on is an obvious next step. For 23 years there has been a constant and growing appetite for SMS. With mobile messaging specialists now able to transform unused resources to feed this demand almost independently, they are handing operators the opportunity to run their entire A2P messaging business in the most optimal way – both in terms of business and technology.

Silvio Kutic, founder and CEO of Infobip, earned an M.Sc. at the University of Zagreb Faculty of Electrical Engineering and Computing. Silvio took over responsibilities at Infobip as CEO in 2006. Since then, he has been the driving force behind Infobip’s rapid growth and the strategic shift towards enterprise and MNO solutions.