Article

Matthew Winters
Matthew Winters 14 August 2017

Why A2P SMS and chat apps are increasingly favoured by enterprise businesses

SMS was once described by Vodafone founder, Sir Chris Gent, as “the closest thing to pure profit ever invented”. But, a lot has changed since then. Businesses continually strive to find new and effective ways to reach their audience and, due to the ease of adoption and in-built reliability of SMS, A2P is the perfect solution for effective communications.

Historically referred to as A2P, Application to Person or Application-2-Person, is the term used to refer to the automated communication occurring between a business and its customers. Ranging in age from the 25 year old SMS to the brand new RCS (Rich Communication Services), these technologies are at different stages in terms of their development and geographical presence, with adoption rates varying significantly across the globe. Undoubtedly, though, SMS is the most well-established of A2P communications, with the majority of consumers showing a preference to communicating with companies in this way. In fact, a recent Enterprise Messaging Survey found that the use of A2P SMS continues to surge, with Ovum forecasting 1.28 trillion messages by 2019 up from 1.16 trillion in 2016.

But why? Well, we know from experience that businesses find it a safe and cost-effective way to build trusted relationships and communicate with their customers.  In addition, fast delivery is a huge plus thanks to short latency and high throughput rates.

In my mind, the growth of A2P SMS, driven by enterprise to consumer communications, continues to be strong for the following key reasons:

  • It is the only truly universal communication mechanism, which, irrespective of technology, has the ability to reach 7 billion devices and over 5 billion people globally
  • It uses the only global addressing system in the world, ie. the mobile phone number
  • It is a trusted and reliable communications channel
  • It is facilitated by a mature and well-established global technical and commercial infrastructure
  • And finally, customers are now able to send replies by 2-Way SMS

Until recently, solutions such as A2P SMS or Value-Added Services (VAS) were not significant revenue sources for mobile network operators (MNOs) when compared to voice, roaming fees and peer-to-peer SMS. A2P SMS was therefore not given the same attention by MNOs in terms of the commercial opportunities available to them. However, regulatory and market shifts over the last ten years, coupled with the huge adoption rates of smartphones and their effect on mobile usage, have elevated A2P SMS to a key position within an MNO’s business strategy and is becoming an increasingly important source of revenue.

The perception that the opportunity of A2P SMS is limited to marketing has also changed. Many new internet-based services use A2P SMS for mission-critical communications such as verification or notifications, appointment reminders, and a variety of alerts, including those related to public-service announcements by schools and local government. One of the most familiar example comes from its adoption by banks and credit card institutions for the issuance of one-time passwords (OTPs) to verify transactions entered onto a webpage. OTPs can also be applied outside of the financial services industry as a step in verifying a customer for retail e-commerce transactions. SMS messaging supports the security of e-commerce sites whilst providing peace of mind and reassurance to the purchaser receiving the code.

Figures on the actual and forecast size of the A2P SMS market vary but there is consensus amongst analysts that the value of the market is significant: a high-level estimate suggests that in 2016, more than 1 trillion A2P SMS were sent globally on an annual basis, worth between US$ 10 Billion and US$ 90 Billion.

A2P SMS must keep evolving to ensure that it remains relevant in the enterprise messaging context and that it captures the seemingly open-ended opportunities for innovation and market growth. By implementing the fundamental basic requirements, businesses can then shift their focus onto developing more innovative services and continue to support both the wider industry and their own customers.

SMS was once described by Vodafone founder, Sir Chris Gent, as “the closest thing to pure profit ever invented”. But, a lot has changed since then. Businesses continually strive to find new and effective ways to reach their audience and, due to the ease of adoption and in-built reliability of SMS, A2P is the perfect solution for effective communications.

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