April 20, 2024
Ict

The Rise of Enterprise A2P SMS and its Impact on Businesses

The way businesses communicate with their customers is evolving at a rapid pace with new technologies. One such technology that has seen tremendous growth in recent years is Application to Person (A2P) SMS also known as Enterprise SMS. In this article, we will take a detailed look at what A2P SMS is, why enterprises are increasingly adopting it, challenges in this space and future outlook.

What is A2P SMS?

A2P SMS refers to SMS messages sent from an application, as opposed to normal Person to Person (P2P) SMS exchanged between individuals. Essentially, an A2P SMS is an automated text sent from a company’s computer system to a mobile user, for purposes like one-time passwords, appointment reminders, transactional alerts, marketing promotions etc. Unlike P2P SMS which route through consumers’ cellular networks, A2P SMS routes through specialized carriers called Aggregators who handle high volumes of messages for enterprises.

Growth in use of A2P SMS by Businesses

While SMS has been around for a long time, its use for enterprise applications has grown significantly in recent years driven by increasing smartphone penetration, desire for an integrated multichannel communication strategy and lower costs compared to alternatives like phone calls. A MarketsandMarkets report estimates the global A2P SMS market size to reach $76.7 billion by 2025, growing at a CAGR of 4.2% from 2020. Sectors like banking, FMCG, ecommerce, healthcare and transportation have particularly leveraged A2P SMS to enhance customer experience through features like one-time passwords, order confirmations, delivery notifications, appointment reminders and promotional offers.

Benefits of A2P SMS for Businesses

There are multiple advantages that have made A2P SMS a popular choice for enterprises:

– High Delivery Rates: SMS has an extremely high delivery success rate of over 95% given its ubiquitous reach. This ensures important alerts and messages reach customers in a timely manner.

– Immediate & Personal: SMS is immediate, personal and pushes notifications to customers the moment an event occurs unlike email which is often delayed. This allows real-time engagement.

– Low Cost: Compared to outbound calling which has high operational costs, A2P SMS works out much cheaper in delivering individual messages at scale. Aggregator pricing starts from just 1-2 cents per message.

– Better ROI: Studies show SMS delivers high ROI with an open rate of over 98% and a click-through rate 10x higher than email. This amplifies the impact of marketing offers and promotions.

– Multichannel Integration: SMS integrates seamlessly with other digital channels as part of an omnichannel customer experience strategy. It works as an effective final-action trigger.

– Global Reach: SMS is a ubiquitous technology that works across geographies and devices, making it suitable for enterprises with an international customer base.

Challenges in the A2P SMS Space

While A2P SMS offers clear advantages, there are a few challenges that both enterprises and aggregators grapple with:

– Regulatory Compliance: Strict spam laws globally have made it important for messages to be fully compliant, have proper subscriber consent and provide an opt-out facility. Enterprises need to ensure this.

– Message Deliverability: Factors like incorrect numbers, blocked messages etc. can impact deliverability. Aggregators constantly monitor this and weed out non-active numbers.

– Grey Routes & Spoofing: Bad actors use gray routes or spoof legitimate shortcodes to bypass regulations. This impacts the reputation of the entire ecosystem.

– Attribution & Analytics: It remains a challenge to track ROI of individual SMS campaigns and integrate them with marketing analytics for reporting. Advanced tools are helping.

– Complex Infrastructure: High volumes require robust scalable systems which is an ongoing investment area for SMS Aggregators to ensure reliability.

Future Outlook

With evolving customer expectations and the power of integrated digital experiences, A2P SMS is expected to maintain steady growth riding on developments like:

– Emergence of Rich Communications Services (RCS): RCS will enhance SMS with features like group chat, OTT capabilities, high resolution media sharing and read receipts over the next 5 years thus blurring the lines between apps and SMS.

– Personalization & Automation: Advancements in AI, ML and big data will help deliver hyper-personalized SMS communications based on individual profiles and behaviors for deeper engagement.

– Bundling with Other Channels: SMS will be increasingly bundled with other digital channels like push notifications, emails and in-app to provide an omnichannel customer journey orchestration.

– New Use Cases: Blockchain, IoT, 5G and rich media will open up more commercial use cases beyond transactions like companion chatbots, augmented reality, social engagement and polling.

To conclude, A2P SMS is emerging as the invisible bridge powering digital transformations across industries by facilitating real-time contextual engagement at scale. With a host of new technology angles unfolding, its role in the overall marketing and customer experience ecosystem is set to significantly amplify in the times ahead.

*Note:

  1. Source: Coherent Market Insights, Public sources, Desk research
  2. We have leveraged AI tools to mine information and compile it