Short Message Service (SMS) messaging, popularly known as text messaging, is a powerful mobile communication tool that allows financial services institutions to interact with their customers in a cost-effective, timely manner. Aggregate global volumes in the financial service industry will continue a strong pace of growth from an estimated 50 million transactions in 2000 to more than 1.6 trillion in 2015.
Financial services institutions, such as banks, credit card companies, brokerage firms, and money transfer and remittance companies, are experiencing high rates of customer adoption and usage of SMS-based mobile banking services as the services become available on all mobile telephone technologies. SMS messages are suitable for many purposes, such as facilitating small-value purchasing, payments, money transfers, donations, and digital content. Enhancements to the messaging process to provide richer content than the standard SMS offers today are unlikely to match the popularity of the original message form, designed to be short and simple, quick and accurate. Future developments most likely to be adopted will ensure data integrity.
Offering mobile banking is no longer optional for financial services institutions. Customers expect it, and financial institutions benefit from the high-touch/low-cost business model associated with communicating via a personal communications device.
This TowerGroup report provides an overview of the SMS delivery infrastructure, presents best practice uses of SMS messaging in the consumer banking market, and explores future capabilities of SMS in financial services more broadly. The best practices discussed include:
Driving adoption of the mobile delivery channel
Opening the mobile channel to all customers
Utilizing SMS for cross-selling
Leveraging SMS for fraud prevention
THE GENERAL BENEFITS OF SMS
In addition to being a convenient way for consumers to send and receive messages from their mobile devices, SMS is supported by the technology of nearly every mobile phone in existence, providing a way to reach — and be reached by — approximately 90% of the US population, and nearly 66% of the world population.
The electronic nature of SMS makes it much faster than traditional written communication methods like mail or e-mail because the message is sent directly to the recipient's mobile device rather than a physical or virtual mailbox. This allows financial services institutions near-immediate access to their clients, making SMS an ideal medium for quickly distributing time-sensitive information to an individual or to a broad audience. This quality, as well as SMS's message length limitation (which also lowers bandwidth requirements and delivery expense), makes it more cost effective than other communication channels. The store-and forward feature of SMS messaging ensures message delivery, which cannot be guaranteed using other communication channels.
The ability to send simple data as well as links to target Web sites makes SMS a flexible communication method because it allows the recipient to dictate the level of involvement preferred. Customers may be satisfied to simply read text messages if they contain the information required, or they can follow a link to open a Web browser on their smart phones if they want more interaction. The subscriber opt-in function affirms that the receiver selected the mobile channel as a communication line and has an active interest in the financial institution's business and products.
