Key Thoughts for RCS: Fraud, Monetisation & Regional Growth

July 2024

Telecoms & Connectivity

Sam Barker

VP of Telecoms Market Research

Apple's announcement of its support for the Universal Profile for RCS on iOS devices in a 2024 software update has sparked a wave of anticipation. The increased visibility of RCS, coupled with the potential revenue surge, is expected to attract more operators to support RCS; and, in turn, will significantly boost the channel's revenue potential.

Apple’s support for RCS increases the value proposition of RBM (RCS Business Messaging) for enterprises, particularly in countries with a high penetration of iOS devices. Therefore, more enterprises are expected to adopt RCS for A2P messaging, with the revenue from RCS traffic expected to reach $21 billion by 2028.

However, as we approach the imminent launch of RCS over iOS devices, there are still some key questions that need to be answered to maximise the growth of the messaging technology:

RCS & Susceptibility to Fraud

Over the last 24 months, there have been well-known and persistent problems with fraud over SMS networks, which has driven the issue of fraud to the forefront of those looking to capitalise on the growth of RCS. Given the richer nature of RCS messaging technology, there has always been a requirement for a more agile approach to fraud detection and mitigation.

RBM will have back-to-back encryption, which provides encryption at various stages in the transmission of the message. This differs from SMS, which has end-to-end encryption, in which the message is encrypted in transit and can only be decrypted at the start and end of the transmission. As a result, if one layer of encryption fails, it can rely on other layers of encryption for security to remain vigilant against fraud.

Tackling the issue of fraud is likely a more pressing matter for the technology than it would look at first glance; as we have seen that as business messaging traffic grows, so does the potential for fraud. The phrase ‘Fraud goes where the money flows’ has been true for the SMS market, given the significant levels of traffic sent daily over networks. Not only is SMS business messaging a market that Juniper Research estimated to be worth over $50 billion globally in 2023, but an estimated 1.8 trillion white route messages were delivered that year. In comparison, we estimate approximately 75 billion messages were sent via grey routes in 2023.

While grey routes have historically been the primary concern for operators in terms of SMS fraud, AIT (Artificially Inflated Traffic) has been the most prominent fraud tactic in the mobile messaging market. The key determinant of how AIT has grown so substantially has been the level of legitimate SMS traffic over messaging networks. Essentially, fraudsters can hide more AIT traffic in countries where there are more white route messages being terminated; enabling them to benefit more financially. RBM is set for substantial growth over the next five years, and implementing processes to deter fraudulent players from implementing similar practices seen via SMS networks will be instrumental in encouraging enterprises to integrate RBM into omnichannel strategies.

A Google-backed Ecosystem Will Better Mitigate Fraud

RBM will be enabled by default, regardless of whether the technology is provided by the network operators or through Google’s services. Google offers two distinct models for RCS; the first is provided directly through the network operator, whereas the second is a complementary service. However, transparency between all market stakeholders is key to minimising fraud over RCS as it grows.

When spam over RBM is reported, this information must be passed to the operator that owns the MSISDN, and it is important that operators can challenge these reports in the future. Indeed, Juniper Research believes it’s a key benefit that operators will have access to historical data, such as call detail records and fraud over SMS channels. In addition, efforts to reduce fraud over RCS will be backed by Google, which will provide comprehensive reports with operators, covering areas such as content drift, malicious originators and, most prominently, non-compliant aggregators.

However, the main goal for Google must be one of support in the RCS ecosystem; it must enable operators to manage the traffic on their own networks and the revenue associated from whichit can be generated. Evidently, a key element of this is allowing the operators to be able to identify and block fraudulent traffic over their networks in real time. This will foster confidence as the number of enterprises adopting RBM grows.

Achieving the End Goal…Maximising Revenue

Maximising revenue needs to be the long-term target for operators, and various strategies must be considered to maximise the chances of revenue growth. For example, enabling enterprises to categorise message content will allow operators to distinguish between authentication and promotional traffic, thus enabling operators to charge a premium based on demand. Indeed, this is already happening in India to ensure parity between SMS and RCS and encourage users to migrate towards rich media channels.

To maximise revenue from RCS, mobile operators must set pricing that competes with SMS and OTT business messaging to ensure that it is an attractive and cost-effective option for enterprises. While familiarity will play a key role, enterprises are evidently looking for the best ‘value for money’ for authentication traffic. With the rise of alternative channels for authentication, such as APIs, Number Verify, and emerging OTT messaging services, it is essential to continue to ensure pricing of RCS business messaging reflects this.

But where will we see the impact of RCS growth first? We expect countries in North America and Europe, as well as Brazil, India and Mexico, to be the first to experience substantial growth and coverage of RCS. Indeed, many of these countries have a well-established mobile messaging market and a strong penetration of RCS-capable users currently. The critical KPI that stakeholders must investigate over the next 24 months will be converting RCS-capable users to RCS-active users; enabling operators to capitalise on RBM revenue, which is expected to reach $26 billion globally by 2029.

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.