SMS Payments

What SMS Payments Are and How Can They Benefit an Organization in 2023

This overview is focused on payments being made by a consumer to a company or an organization by way of the company sending an outbound SMS message to their customer, requesting a payment.


What is an SMS or Payment by Text Solution?

Unless you have been asleep for the last ten years you know what an SMS is – commonly referred to as a text message. An SMS Payment solution allows companies to notify customers with payment reminders and accept payments from customers or donors via a cellular connected mobile device.

Chances are that if you have a mobile phone and are not subscribed to a recurring payment plan, you have likely received an SMS message reminding you that your monthly invoice is past due with an option to remit payment.

SMS messaging is limited to 160 characters, but that is generally more than enough needed to send an SMS Payment reminder.

Recent research shows that the majority of financial transactions conducted across the globe are via SMS, and the volume continues to grow at a rate exceeding 25%. While some large organizations have already adopted SMS as a payment solution, smaller organizations are just starting to wake-up to the possibilities of how SMS can reduce their labor costs and increase their on-time receivables.

SMS Payment technology has now become affordable for even the smallest of companies. What normally costs a company to receive a payment through a customer service channel over the phone can exceed $5 in some instances because the cost is tied to an hourly labor rate, plus overhead and employee benefits. An SMS Payment solution can reduce the cost to under $0.50.

From a cost standpoint alone, any company having monthly receivables due should consider SMS Payments, especially a company with a late payment problem that is in need of being reduced. Being able to text message your customer puts a reminder right to the device that most carry with them at all times. If nothing else, companies should start collecting cell numbers of their customers for the day that the need to start implementing an SMS Payment solution.

How Does SMS Payment Processing Work?

As it relates to Payments, SMS can either:

  1. Send an outbound message that provide the ability for a company or an organization to collect funds owed by customers via their cellular device by replying “Call,” which triggers an outbound IVR call to the customer and allow the customer to remit a payment via the IVR Payment system.
  2. Provide a link in the SMS message that sends the customer to a payments page that renders on their mobile device’s browser. The URL displayed can be external or a subdomain of the SMS sender. The payments page provides the ability for the customer information and amount owed to be pre-populated and provides and number of security options such as account number entry for customer verification purposes.

In most cases an SMS payment solution that is implemented requires that the customer agree to terms that allow the company to begin sending them text messages for receivables that are due. Once implemented, an SMS payment solution to receive messages that contain information such as amount due, past due date and balance information. Your customers will also appreciate the notifications and the convenience of either paying through their mobile device’s browser or by opting for an IVR system to initiate an outbound call to them.

Having the two options provides some security comfort for differing mindsets of the customer base. Some don’t trust remitting funds on a mobile device’s browser, but might feel more comfortable with an IVR call. The API integration capabilities of being able to present things like a customer account number, a rate plan, start date or simply the amount due adds to consumer confidence with either choice.

What are the Business Benefits of an SMS Payment Solution?

  • Reduced labor. In a recent discussion with a current client who is now implementing an SMS solution (and an IVR Payment solution), it was learned that the volume of their current phone calls into the company, that 40 percent of the calls are from customers calling in to remit a payment and the number of payment made over the phone average 1,800 per month. While we’re not yet sure what the savings will be by implementing SMS and IVR for payments, it’s undeniable that the dollar amount put back to their bottom-line will be significant.
  • Customer satisfaction. An SMS payment solution can remember a user who has previously made a payment using the system. This is done securely using a stored payment token that has replaced the sensitive credit card or bank account data. This improves the time required by the customer to complete the transaction. Instead of having to find their wallet or purse and get their physical credit card, the SMS payment system can pre-populate the card number field with the last four digits of their previously used card and ask them if they wish to use the same payment method. Electronic, PCI compliant methods of payment acceptance are more secure than a customer service representative talking a credit card payment over the phone, and most all customer know that and appreciate those additional channels for remitting payments.
  • Increased rate of on-time payments. Most consumers don’t want their payables to be late, but some times they simply forget. No matter the case, an SMS solution for presenting a reminder to pay to a customers’ mobile device, even if they don’t use one of the SMS payment options will remind your customers that they have an invoice to pay.
  • Reduction in paper. With all the available electronic notification and payment methods available today, there’s little reason to keep mailing invoices for many companies. An SMS solution adds another tool in the payments options box to further reducing the amount of paper invoices produced and mailed.

And there’s also benefits to the customer!

  • Ease of use is huge. As mentioned above, not having to go find a credit card – assuming a prior system payment has been made. Even if not having made a prior payment, the system is easy to use and provides a very convenient way for a consumer to remit a payment.
  • The customers don’t have to file and remember a paper invoice. Notifications can be automatic and sent according to your scheduling.
  • It’s a secure transaction processing environment. Protecting sensitive data is one thing, but never knowing it is even better. An SMS payment solution using Zero Knowledge architecture only touches sensitive data for a brief instance, and the manor in which it is briefly stored is via volatile RAM, not accessible to any potential theft of data. Moreover, the system is completely PCI compliant. Only the payment gateway stores the data, and that’s PCI Level One compliant.

What to Look for in an SMS Payment Solution

  • Data population options. Technically savvy companies will likely want to populate the SMS payment system via an API integration to their existing ERP or CRM solution. API integration capability provides the most options for how and what information is utilized with the SMS solution. There should be the ability to self-integrate and also the option for the SMS solution to integrate to your organizations’ API. For smaller and less technically savvy companies, the ability to populate the SMS solution via a csv file upload should be available. While this doesn’t provide the automation that an API integration does, the amount of work involved is minimal. It can be as simple as exporting relevant data from an ERP or CRM system and importing it to a secure hosting environment that the SMS solution can call for data population.
  • Powerful User Interface. An SMS payment system should provide the using organization with tools to make changes as they deem necessary, without the involvement of the SMS solution provider. For example, if the organization wants to make a change in a message script, they should be able to login to the SMS user interface and easily perform the task themselves. Some SMS/IVR solution providers charge large fees to make these changes.
  • PCI Compliance. As mentioned earlier, the SMS solution should be PCI compliant. Even better would be the fact that it uses Zero Knowledge architecture.
  • Telco infrastructure and quality. The SMS provider should have the ability to mass send SMS messages with no throttle limitations. Numbers should be available for your countries of choice, toll free numbers and the ability to port a number of your choice.
  • Workflow environment and configuration. The SMS provider should be able to configure complex workflows for the triggered outbound IVR calls and the flow should be visible in a user interface that is understandable. The ability to branch a flow in order to A/B test the effectiveness of those branched flows should be available.
  • Reporting. The using organization should be able to see and know the SMS messages that were delivered, undeliverable and the transactions that were completed. Insist on a Transaction Funding Report; a report that easily reconciles each and every transaction that is associated with a funding deposit to your bank account.

How to Get Started

Easy! Contact us and let’s discuss your current receivable environment, your goals and how you might be able to start implementing  an SMS payment solution.