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After two decades of relative stability, characterized by the dominance of SMS, the messaging industry is set for a period of change.

With WhatsApp emerging as a viable alternative, brands are reevaluating their reliance on traditional SMS due to escalating termination rates. Yet, transitioning isn’t straightforward – the industry is poised for a gradual evolution as it grapples with these emerging challenges.

In parallel, RCS, spearheaded by the collaboration between Google and GSMA, presents a formidable contender in the messaging arena. Offering OTT capabilities akin to WhatsApp, RCS distinguishes itself with a more symbiotic relationship with the telecom sector, potentially shaping its trajectory towards dominance.

Meanwhile, the advent of AI holds promise as a game-changer in business messaging and fraud prevention. These pivotal themes took center stage at the recent MEF CONNECTS Business Messaging conference in London, hosted by the Mobile Ecosystem Forum, where industry insights, including those from Juniper Research, shed light on the unfolding narrative. In this overview, we encapsulate the key takeaways and discussions from this influential event.

In recent months, WhatsApp has emerged as the primary contender challenging the longstanding reign of SMS. With its revamped pricing strategy and aggressive market expansion, WhatsApp poses a significant threat to traditional telco operators. The question now looms: can telcos effectively counter this challenge, safeguarding their market share by reigning in termination fees and enhancing service quality?

In this dynamic scenario, the partnership between RCS and Google emerges as a pivotal strategy for telcos to consider.

Source: Juniper Research, MEF, 2024

As mobile users increasingly express their preferences for communication channels from brands, it’s evident that email holds sway, with nearly half of respondents favoring it. Following closely is WhatsApp, capturing the preference of around 30% of users, while SMS trails narrowly behind, garnering favor from approximately 25% of the audience. As this paradigm shift unfolds, the adoption and integration of rich messaging platforms become imperative for telcos to remain competitive in meeting consumer demands.

Business messaging faces a spectrum of threats that necessitate attention and proactive strategies for mitigation.

  • SMS Messaging Fraud

    Instances of fraudulent activities within SMS messaging pose a significant challenge, impacting both trust and operational costs for enterprises.

  • Flash Calling

    This emerging tactic exploits missed call notifications to convey messages, presenting a loophole for potential misuse and spamming.

  • APIs

    While APIs serve as vital tools for streamlined communication, their misuse or vulnerabilities can expose businesses to security risks and breaches.

  • OTT Messaging

    Over-the-Top messaging platforms like WhatsApp pose a formidable challenge to SMS, gradually eroding market share, particularly in regions with high OTT penetration.

  • Biometrics vs. OTPs

    Advancements in biometric technology offer an alternative to conventional one-time passwords for authentication, potentially reducing reliance on SMS-based security measures.

Despite these threats, SMS retains a resilient outlook, especially in less advanced economies and in use cases like IoT. However, the sustainability of SMS as a dominant business messaging tool hinges on various factors, notably pricing dynamics and regulatory landscapes. The prevelance of SMS pricing fluctuations, often fueled by fraudulent activities, is expected to temper demand from enterprises in the coming years.

Consequently, the growth trajectory of SMS business messaging is anticipated to decelerate, particularly in advanced economies with high penetration of OTT players. As we approach the close of the decade, the evolving interplay between traditional SMS and disruptive OTT platforms will redefine the landscape of business messaging.

MNOs must maintain competitive A2P messaging pricing for long term sustainability of SMS. This includes price caps that are agreed and a movement away from volume-based pricing. Operators must also collaborate with CPaaS providers to develop new pricing models such as subscription-based pricing or fair usage policies.

Market collaboration will be required to reinstate trust in SMS as a business channel. Price transparency across operators is needed, as are whitelists to combat fraud. Network APIs provide a way for enterprises to maintain traffic on telco networks as the growth of SMS slows. Operators must fully integrate themselves with this migration to API-based authentication while continuing to support the demand for SMS business messaging.

For RCS business messaging, the outlook is positive. The total number of active RCS subscribers will rise from 1.2 billion this year to 2.9 billion by 2028. Increased consumer awareness, coupled with rich messaging capabilities, such as blue tick verification, will make it the fastest growing messaging channel from now until 2028.

Adoption of RCS / RBM has been painfully slow but it is set, after many years, to become an “overnight success”. It is likely that marketing and customer support use cases will drive enterprise adoption of the channel. This wide scale adoption may hinge on operators coming on board to support RCS in an existential battle with the looming growth of WhatsApp.

Juniper Research forecasts that the total operator revenue lost to OTT business messaging will rise from $380 million in 2024 to $906 million in 2028. However, an enterprise’s use of OTT channels is dependent on its technological maturity. SMEs that operate nationally will be more likely to try using OTT messaging apps for A2P communication. For larger businesses like Meta and Microsoft the opportunity for OTT business messaging to be used is even stronger as they tend to contract A2P on a full country basis.

As consumers are required to download a third party app, regional fragmentation is an issue for adoption. WhatsApp is probably the most widely used third party app in messaging worldwide, but it has just circa 2 billion users worldwide compared to full coverage with SMS. It has particularly high penetration in countries like Brazil, India, Mexico, Spain and the UK.

WhatsApp’s pricing model is also evolving from the point where they had just two message types in 2022 – user-initiated and business-initiated. Those two have now expanded to four:

1. Utility conversations
2. Authentication conversations
3. Marketing conversations
4. Service conversations

All of these ‘conversations’, as opposed to messages, include a number of messages in a short time, rather than a price-per-message model as with SMS.

Authentication messages are seen as the main point of competition with SMS A2P messages as these make up the majority of messages being sent on the SMS channel to date. In fact, WhatsApp recently announced it will introduce international rates for authentication use cases in a number of countries. These rates are clearly designed to undercut the prevailing international SMS termination fee rates and capture market space.

Reports recently from Eurasia indicate that this pricing strategy is winning huge amounts of market share of business messaging in a short time. Defection from even one or two companies like TikTok or Amazon to WhatsApp can significantly redirect revenues in this industry.

Source: Juniper Research, MEF, 2024

The rise in revenue potential from SMS inevitably attracts a surge in fraudulent activities aimed at exploiting this channel for illicit gains. Leveraging advancements in AI and machine learning presents a pivotal strategy for detecting and thwarting such fraudulent endeavors within SMS networks.

Telecom organizations are urged to proactively prepare for this impending challenge. Initiating small-scale AI proofs of concept enables hands-on learning and experience accumulation. Concurrently, investing in employee training and upskilling endeavors is paramount. Establishing a flexible and ethical AI strategy serves as a guiding framework throughout implementation. Crucially, ensuring the integrity, organization, and security of data underpin the foundation of effective AI integration.

In the realm of messaging fraud prevention, AI assumes a pivotal role in both offense and defense mechanisms. Defenders can harness AI capabilities to orchestrate real-time threat detection and predictive security protocols, fortifying defenses against malware and smishing attacks. Furthermore, the customization of personalized privacy settings and security measures aligns with individual user behaviors, bolstering overall resilience against emerging threats.

To learn more about the topics covered in this article, or to discuss how Openmind Networks can help you navigate the future of business messaging, please get in touch or contact our team of messaging experts online here.

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