As we confront the ever-evolving landscape of messaging and communication technologies, it's essential to think about the future and consider the implications of price inflation and Artificially Inflated Traffic (AIT). Could price inflation and AIT mark the end of A2P SMS as we know it? Will they prompt a migration to platforms like WhatsApp or Viber? These questions make us think about how AIT might change messaging. Will it make regular SMS outdated? With alternatives like in-app authentication and emerging communication platforms gaining traction, the risk of losing this revenue is more pronounced than ever.
A2P SMS Price Inflation
In the realm of Mobile Network Operators (MNOs), A2P SMS has long stood as a dependable source of revenue. However, a pressing issue demanding collective attention has emerged in the form of rising inflation of A2P SMS prices by MNOs around the world. This challenge poses a significant threat to the mobile ecosystem, demanding proactive measures to mitigate its far-reaching consequences.
Many operators seek to achieve substantial revenue margins primarily through A2P SMS services, relying heavily on this channel as their primary income source. In doing so, they have somewhat prioritized short-term financial gains over a more diversified and sustainable revenue strategy. Building target revenues predominantly around A2P SMS does not align with the long-term interests of their customers and the industry as a whole. Some operators have even adopted a rather shortsighted approach by demanding higher message volumes than what their clients actually require, all in the pursuit of maximizing their revenues. In doing so, they may have overlooked a fundamental principle in the telecommunications industry: the scalability of message volumes, which is intricately linked to the size and dynamics of the market. These Telcos, driven by high A2P SMS revenue targets, may inadvertently or intentionally, partner with aggregators involved in Artificially Inflated Trafficking (AIT) to increase their revenues and reach their targets, thus damaging the reputation of the A2P messaging industry.
Numbers Don’t Lie
As referenced by Mobilesquared’s updated report on A2P SMS, entitled Global A2P SMS: The complete overview 2017-2027, recent findings indicate a significant surge in the international A2P SMS cost, nearly doubling from $0.033 to $0.0646 since mid-2021. This escalation prompted 90% of mobile operators to increase their international SMS fees, with 36.4% imposing rate hikes exceeding 100%, and 3.9% of operators raising rates by over 500%. Consequently, some brands are now facing costs exceeding $0.25 for sending a single SMS to specific markets. It's projected that the A2P SMS industry may face a revenue loss of $14.36 billion by 2027 due to these market developments over the past two years, with anticipated total spend between 2022 and 2027 at $224.47 billion, compared to projected cumulative market spend of $210.11 billion.
The Unavoidable Consequence
One prominent consequence of this price inflation is the potential migration of businesses and Application Service Providers (ASPs) toward alternative authentication methods. As the costs associated with A2P SMS continue to surge due to inflation, these entities may begin to explore alternative channels for communication and verification. Such a migration not only jeopardizes the revenue stream that MNOs have come to rely on but also disrupts the very foundation of A2P SMS as a communication channel that has facilitated secure transactions, two-factor authentication, and vital interactions between businesses and consumers. Therefore, failure to address price inflation and its associated risks could have repercussions that extend beyond financial considerations, fundamentally impacting the core essence of this essential communication service.
In light of these challenges, it becomes evident that striking a balance between profit and customer satisfaction is essential. MNOs must reconsider their revenue strategies to ensure they remain competitive, adaptable, and responsive to market dynamics, all while delivering value to their customers.
The Fight Against Artificially Inflated Traffic (AIT)
Moreover, the growing prevalence of AIT (Artificial Inflation of Traffic) poses a direct threat to the legitimacy and trustworthiness of A2P SMS as a secure channel for business messaging. Therefore, countering the Artificial Inflation of Traffic (AIT) is of great importance. AIT, which involves manipulating messaging metrics through automated bots, is a threat that goes beyond financial losses. It strikes at the core of trust, security, and reputation for both telcos and businesses.
AIT is a fraudulent scheme that artificially inflates requests for one-time passwords from businesses. It is orchestrated by fraudsters who deploy automated software to send a large volume of password requests, aiming to generate revenue at the expense of businesses. Distinguishing these "fake" requests from genuine ones poses a challenge for businesses. AIT can ruin trust in the digital world, hurting telcos and businesses' reputations. It even raises questions about the reliability of A2P SMS for 2-factor authentication, jeopardizing its position as a go-to channel for secure business messaging.
Main Messaging Use Cases for AIT
AIT primarily targets time-sensitive, user-generated messages like one-time passwords (OTPs) or messages that prompt user-initiated conversations. Businesses commonly use OTPs for onboarding, user logins, and password resets. In regions with high SMS rates, bad actors can easily exploit this by creating bots to generate fake traffic.
The High Stakes for Telcos and Enterprises
Telcos have used A2P SMS for a long time, particularly one-time password delivery, as a dependable revenue source. However, AIT fraud threatens to drive enterprises towards alternative authentication methods, which may not be as accessible to all users. A2P SMS's ubiquity and ease of use for 2FA are its main advantages, and losing this option is not viable for account security.
The Paradox of AIT: Everyone's a Potential Beneficiary
The paradox of AIT is that, despite its costs, almost everyone in the ecosystem can potentially benefit from it. While enterprises are typically the victims, a few entities exploit AIT to inflate user counts and exhibit growth. However, this short-term gain leads to long-term harm to the entire messaging ecosystem. It results in fake A2P SMS traffic, revenue loss for enterprises, reputational damage for telcos, and undermines SMS as a trusted channel for business messaging.
Best Practices to Prevent AIT
Preventing AIT can be challenging but not impossible, each of the main affected parties should have their own procedures to counter AIT:
Deploying advanced traffic analysis and filtering technologies enables telcos to determine legitimate user activity from fraudulent behavior. Also, choosing trusted partners and implementing robust security measures, including SMS Firewalls, is essential for monitoring network traffic, identifying anomalies, and responding promptly to ensure the integrity of their services.
For OTTs (Over-The-Top Service Providers):
OTTs can contribute to the fight against AIT by implementing encryptions and authentication mechanisms to protect user accounts and data from unauthorized access, while restricting IP and making Captchas harder helps in detecting bots.
The Call for Collective Action
To combat the rising threat of AIT, it's imperative for telcos, OTTs, aggregators, communication providers, and enterprises to collaborate. Protecting customers and businesses from fraud and abuse and securing the business messaging ecosystem are shared responsibilities. This collective effort is essential to rebuild trust within the digital messaging landscape.
Creating a Safer Messaging Ecosystem Together
In conclusion, the battle to maintain A2P SMS revenues demands collective action. Telcos must manage the price inflation carefully, and should unite with businesses and aggregators to deploy solutions that prevent AIT and preserve trust and security within the communication industry.
OTTs can leverage their exclusive partnerships with the MNOs' aggregator, thereby limiting the aggregator chain, potentially posing a threat. This approach offers an opportunity to contain AIT more effectively.
Failure to act could result in a loss of credibility and the migration of messaging use cases to other channels. Monty Mobile stands at the forefront of this effort, working to secure the messaging ecosystem and ensure its reliability for all stakeholders.