Critics ringing the death knell for SMS too soon as enterprise SMS delivers industry growth

Telecoms.com periodically invites third party experts to discuss the latest trends and challenges in today’s industry. In this piece, James Lasbrey, Head of Wholesale Messaging at Telefónica discusses how SMS messaging still presents a great opportunity for operators.

The mass adoption of smartphone technology, driven by the emergence of iOS and Android operating systems in the late 2000s, opened up a new realm of possibilities in mobile telecoms. Originally, the primary role of mobile technology was to facilitate call and SMS capabilities. As technology advanced, the ability to easily access web services through a mobile device was pivotal in giving birth to the App economy and, consequently, the exponential growth in popularity of digital and mobile services we see today.

From our current vantage point in 2016, following the enormous success of free communications apps such as WhatsApp, Snapchat, Facebook Messenger or services such as Uber, Square and Eventbrite, it would be tempting to give credence to the widely held belief that SMS and texting is not only in decline but also out of favour.

It was in order to investigate and test this assumption, that Telefónica conducted an industry study into the state of the SMS ecosystem, the challenges and opportunities for industry and predictions and recommendations for best practices going forward. The Telefonica Text Economy Report: An investigation into the enduring success and economy drivers of the SMS market in 2015 – a year that saw more than 8.3 trillion SMSs sent globally – found that messaging has moved far beyond Person-to-Person (P2P) communications; now it is among people and machines, push and pull and embedded in application experiences.

Capitalising on this new paradigm, the SMS market is in enviable health with the size and scale of the market opportunity as a tool for businesses and authorities being driven by the growth of Application-To-Person (A2P).

SMS has long been a part of our lives. It is a trusted, secure and effective messaging channel for business and, based on its ability to reach 99.99% of handsets globally, proven to be the most effective way to reach customers. What’s more, in the increasingly crowded mobile communications market, most consumers will move attention to their SMS inbox over all other services, giving SMS an impressive 90% read rate in minutes.

Indeed, SMS is one of the foundation tools of the trade and while messaging apps are chewing into text messaging and displacing text messaging volumes – they have the SMS legacy propelling them along without which they simply wouldn’t exist in the way we have come to know.

The growth of A2P SMS in B2C communications

The A2P market, currently valued at more than US$53 billion according to Transparency Market Research figures, provides businesses with the ability to offer automatic support to customers right at the time it’s most needed. A2P volumes are predicted to continue to rise over the next few years, growing from 1.4 trillion in 2013 to 2.19 trillion by 2018, powered by the shift of many enterprises to a mobile-first strategy.

Further, its widespread adoption in industries such as banking, travel and transport, retail and healthcare means text has become commonplace for events like flight changes, exceeding a bank balance, shipment delay and appointment reminders.

The true value of 1-to-many business messaging is that it enables businesses and organisations to reach large targeted audiences of every age and demography at a low cost, making it a powerful way for businesses to connect with their customers. Supporting this, a new breed of cloud communication platforms utilise easily-deployable technologies to increase quality of A2P message deliverability, making it accessible to a range of companies that weren’t previously able to do it in a cost-effective way.

It is therefore of little surprise that we saw a 22 per cent global growth in the A2P market in 2014-15 and is expected to expand by 6% over the next decade. This trajectory will be supported by wide scale adoption of 1-to-many messaging by global and local businesses in a range of areas such as delivery updates, smart home and local government services.

The ability to service your customers proactively in their moment of need – Forrester Research refers to these interactions as “mobile moments” – improving revenues, customer engagement and satisfaction with products, services and organisations is the new frontline for gaining market share.

Virgin Trains, for example, has embraced A2P communications as a means of managing peak hour commuter crowds as busy train stations such as London Euston. Through SMS, Virgin Trains is able to provide personalised information to its customers with real-time platform information and service updates. This provides a great example of mobile engagement between an enterprise and its customers, and helps differentiate Virgin Train’s service from other transport operators.

Customers are clearly placing SMS at the top of the heap demonstrating that the trusted ‘old school’ option is preferred when there is a message you absolutely have to either send or receive.

We expect to see greater application of A2P as a broader range of organisations, including SMEs and government bodies, capitalise on its potential to improve the efficiency of existing service. For an organisation such as the NHS, use of A2P for reminder messages could save £64 million per year in reducing missed hospital appointments, which can then be put towards other areas such as staff training or enhanced service delivery.

A2P as a tool for fraud prevention

A further development in the growth of A2P has been in its large-scale adoption for enhancing online security. A2P has also played a major part in the movement towards greater fraud prevention through one-time passwords for two-level verification and real-time notification of fraudulent credit/debit card transactions.

Two factor authentication has become the norm for companies like Google, Apple, Facebook, Twitter, Dropbox, PayPal and LinkedIn to protect their members, and its adoption is rising in popularity in industries such as social media, mobile banking and mCommerce.

The simplicity and cross-channel nature of the two-level approach makes it well fitted to security purposes. Customers trust SMS as a means for managing personal security in a way they wouldn’t with email or other communications platform.

As fraud continues to be a risk, businesses must focus on educating and protecting customers, with the highly regulated SMS market a powerful channel for delivering this.

A golden age for enterprise A2P SMS

In the Text Economy report, Telefónica makes the confident prediction that global use of SMS as a channel for business communications will continue to grow over the next 10 years as more organisations adopt A2P services and integrate them into their digital communications.

The SMS market has solidified its position as a valuable and attractive market for businesses, building on its status as an intuitive, trusted and effective form of communication for most people globally, making it perfectly placed for businesses to reach customers regardless of geography and demographic.

This is a proposition no single communications app will ever be able to offer the market.

James is Telefonica’s Global head of messaging. The role covers all of Telefonica’s markets across LATAM and Europe and compliments James’ experience running the UK messaging business for O2. James and his team are responsible for defining the global messaging strategy and sharing best practice across the group to accelerate the growth of the messaging market. Both inside and outside of Telefónica, James is a strong industry advocate for messaging and has helped galvanise the industry. He is focused on building customer trust and driving innovation and evolution of the messaging ecosystem.