Fraud, Disruption & Monetisation Challenges – The Outlook for Mobile Messaging in 2024

April 2024

Telecoms & Connectivity

Sam Barker

VP of Telecoms Market Research

The global mobile messaging market has undergone significant transformation over the last two years. Rising termination costs, fraud over SMS networks and the growing availability of alternatives threaten a key revenue stream for mobile operators. Building on the extensive research in our messaging research topic portfolio, Juniper Research has identified three key trends that will disrupt established messaging practices in 2024. These are as follows:

• The growth of RCS (Rich Communications Services)-capable users and the implementation of RCS basic messages. Owing to Apple’s announcement of RCS support, our latest RCS Business Messaging report predicted that over 1.3 billion potential users will be added to the addressable user base in 2024. It has been six months since Apple announced RCS support for its iPhone range, owing to the DMA (Digital Markets Act) in the EU.
• International SMS termination price rises, which are driven by the growing prevalence of fraud, such as AIT (Artificially Inflated Traffic) and SMS trashing, over a messaging network. AIT occurs when fraudulent players in the SMS value chain make unnecessary requests to verify users who do no exist, leaving these enterprises paying for SMS traffic that was not needed.
• The rise of telecommunications, the most notable verification APIs (Application Programming Interfaces), which can silently verify users, remains a longer-term prospect to replace SMS. It offers smartphone users a much more seamless experience due to its silent nature.

Where Is Mobile Messaging Today?

Despite being over 30 years old, SMS technology remains a key enabler of many digital transformation projects, as it enables businesses to authenticate anyone with a smartphone without the need to develop a mobile application or website. The real demand for SMS business messaging arises from this need to authenticate users; the strict regulations around marketing via SMS and the need to authenticate users have led to over 40% of business SMS messages being used for OTPs (One-time Passwords) or MFA (Multi-factor Authentication) in 2023.

However, over the past 12 months, the price of internationally terminated SMS business messages has grown in almost all countries, with the price of A2P (Application-to-Person) SMS increasing globally by over 10%. Countries in regions such as Latin America, East Europe and Asia Pacific have seen the greatest prices over 2023. This has led to many larger enterprises looking for alternatives to send over authentication channels; many of these are outside of the telecommunications ecosystem and leave operators facing diminishing revenue from mobile business messaging.

Threats to the SMS Business Messaging Market

SMS has continued to increase as an established technology, providing operators with a steadily growing revenue stream over the past decade. However, the continuing rise of international A2P SMS termination costs has opened the door for other channels to capture traffic. Juniper Research has identified the following three key channels that are most likely to disrupt the SMS business messaging market:

• RCS Business Messages: Parity of pricing will be key to increase demand amongst enterprises. Given that the focus of enterprises is to minimise the cost of authentication users, offering RCS alongside SMS will foster trust in the technology. In the future, we do expect conversational AI to play a key role in driving traffic that previously may have occurred over a website chatbot or email.
• Verification APIs: Under frameworks like CAMARA and Open Gateway, APIs have an ideal platform for standardisation. In turn, we expect APIs that silently verify users through the MSISDN (Mobile Station International Subscriber Directory Number) on their phones to increase in popularity significantly. Indeed, operators monetise this method, but they face challenges in encouraging enterprises to move away from messaging-based identity services.
• OTT Business Messaging: According to Juniper Research’s latest OTT Business Messaging report, this channel will be one of the fastest-growing mobile communications channels globally. We believe that this represents the most significant threat to operators' SMS business messaging revenue. The most notable example of a growing platform is WhatsApp for Business, which has implemented a tiered pricing structure to monetise traffic based on the use case.

In 2023, Juniper Research forecasts that the SMS channel still accounted for 90% of the market value for mobile identity. However, the growth of emerging areas such as flash calling and OTP voice places further pressure on operators to maintain revenue in an increasingly competitive market.

What Operators Must Do to Protect Business SMS Messaging Revenue

Increasing prices, driven by the rise of AIT and the associated wasted spending, have particularly impacted the level of confidence amongst enterprises in using SMS. These price rises have created a vicious circle, leading to an ongoing trend of unsustainable price rises and a reduction in trust in the channel for customer interaction.

Source: Juniper Research

So how do operators retain trust in SMS channels? Firstly, the adoption of SMS fraud mitigation tools is essential; these block traffic before enterprises are charged for the traffic. This is crucial to increasing trust. However, Juniper Research believes that the onus is on operators to break the above vicious circle by agreeing to lowering international A2P SMS termination prices, in order to increase demand amongst enterprises.

As VP of Telecoms Market Research at Juniper Research, Sam produces research on telecommunications technologies and the future of digital content - with recent reports covering CPaaS, 5G Satellite Networks, and Mobile Messaging. He has also been interviewed by leading media outlets, including the BBC and Wall Street Journal, and is a regular contributor to messaging conferences and telecommunications industry events.