SMS payments, also known as Short Message Service payments, are a contemporary option to conventional payment methods like cash, checks, and credit cards. They enable users to pay by text. The process involves initiating a purchase via SMS and then completing it using a smartphone. SMS payments have grown in popularity alongside the rise of e-commerce sales and the need for alternative payment systems. Businesses aim to provide a seamless shopping experience to their customers, and alternative payment systems using mobile phones are one of the top options available.
SMS payment is becoming a popular choice for businesses and customers due to the highly effective communication channel of text messaging, which boasts a 98% open rate. SMS payments are designed to offer a quick, safe, and hassle-free method of buying products and services. Customers can pay by text message without needing personal information using a simple messaging system. It is advantageous since many individuals have their phones nearby at all times, making it an effective way to communicate and increase sales. In this discussion, we will explore the concept of SMS payments, how it works, and the situations where this payment option can prove advantageous to you.
What is SMS Payment?
A text message payment, known as an SMS payment, involves sending text messages to a short code or using a mobile payment app to make a payment. The mobile network operator processes the payment.
SMS payments offer convenience by eliminating the need for physical cash or cards. They are particularly beneficial for individuals without access to other payment methods or a bank account, allowing them to send and receive payments through their cellular plan.
Although not always the first choice for small, casual purchases, SMS payments can be highly effective in specific circumstances and are increasingly popular each year for businesses and customers.
How Does SMS Payment Work?
An SMS payment works when a shopper shares their mobile number with a business. The first step to accepting payments via SMS is to capture your customer’s number. Capturing contact information is crucial for reaching out, whether you’re using an automated tool or collecting it manually.
Your task is to process payments once customers provide their phone numbers and opt-in to receive texts. You can direct customers towards a purchase using digital tools and then send them a short link to a secure payment processing platform via text.
Once the buyer taps the link, they can access their invoice. They can make the payment by entering their account information. That’s all that is needed to complete a sale or bill payment. Your business can then send a receipt to the customer as a follow-up.
You can expect to see some standard elements when making a payment using text messaging services, even though some details might vary depending on the specific company.
- The business may text the customer’s phone number, or the customer can initiate the sale by texting a shortcode number to the company.
- Once the customer has indicated which product or service they want to buy, the business will send them a link to a mobile-friendly payment form that is also secure.
- After entering their payment information, customers can usually save the card on file for future purchases or recurring payments.
- To complete the purchase, the customer might receive a unique code for their SMS billing.
- Businesses may also send SMS payment reminders for overdue accounts and ensure payment is accessible through text-to-pay systems.
The payment processing company might send an additional text message to the customer to confirm their purchase intention. While the process may differ from one company to another, you can anticipate a similar procedure to finalize the transaction. For example, some services may require the customer to enter a PIN code after purchasing.
What is the Purpose of SMS Payment?
The purpose of using SMS payments is to provide a faster and more convenient way for customers to pay by SMS for goods or services. This type of mobile payment cuts out tedious steps, like filling out credit card forms, making it an ideal choice for busy shoppers who are on the go.
SMS payments allow you and your customers to quickly finalize transactions by completing them with just a few clicks, without complicated website navigation or lengthy email exchanges. There are several purposes for SMS payments – sending text commands to complete payments, sending payment links, using SMS invoices to take payments or a text-to-pay service.
To use SMS payments via text commands, send a text message to your customer containing a unique keyword once you are ready to process payment. The customer can reply with the same keyword to initiate the payment process.
Sending an SMS invoice is a conventional method to receive payment. You can send your customer an invoice as an image in an MMS message or a PDF attached to the text message.
You can also include a link allowing them to complete their payment online. When notifying your customer about their payment being due, you must include a secure payment link in your message which they can click on to make their payment.
Finally, using text-to-pay is an efficient method of receiving payment from customers and clients. Rather than a payment link, the recipient will get a text message requesting confirmation to proceed with the payment.
What are the Benefits of SMS Payment?
SMS payments can be made simply by using a mobile phone, and an internet connection is not required as it operates through cellular networks. Customers can easily make payments using their mobile phones, which they carry throughout the day. In addition, there are other benefits to using SMS payments.
- Quick payment – SMS payment solutions require only one or two clicks or a brief text response, making payment easier for customers. This setup avoids the need to navigate confusing interfaces and increases the likelihood of successful payment.
- Customer satisfaction – Sending payment requests through text messages can be a more practical option than emails, which often get buried or ignored. Text messages are straightforward and avoid being annoying to your customers.
- Instant customer verification – It is unlikely that the person who clicks on a link in a text message is not the owner of the phone number. Therefore, there is no need to verify customer information before payment.
- Automated delayed payment notification – SMS payment solutions can help you automate payment reminder notifications. This way, you can be sure that your customers receive your reminders since texts reach almost all mobile devices.
- Less human error – To process customer payments, you sometimes need to input their payment information manually into your credit card processing or payment platform. This process can result in errors that slow down payment processing. SMS payments provide payment information in a format that’s easy to copy and paste, reducing the risk of errors.
- Integration with marketing initiatives – If you want to maximize the benefits of marketing and loyalty programs, promoting SMS payments and providing discounts to customers who choose to use them is a good idea.
- Paperless billing – One sheet of nonrecycled paper creates 60 grams of carbon dioxide emissions. However, switching to running your billing process via text instead of paper can remove these emissions and decrease your company’s carbon footprint.
What are the Risks of SMS Payment?
SMS payments have many benefits, making them an ideal payment option for businesses. However, some risks come with its use.
- Costs – SMS payment platforms come with costs like any other small business technology. However, some experts believe these platforms have excessively high fees and unclear pricing structures. To address this issue, you can request that potential SMS payment vendors provide all pricing and fees in clear writing before signing up. It is also recommended to familiarize yourself with the credit card processing agreement to know what to expect.
- Security Risks – There is a debate about the security of SMS payments. While some experts believe that SMS payments are secure enough, others disagree. However, the fact that there are security concerns can make customers hesitant to use SMS payments. It could negatively impact your business. We will explore the SMS payment security debate in detail later in this article.
- Unusual Option for Customers – While SMS payments are convenient, people cannot organize them into separate work and personal inboxes like they can with email. As a result, some customers may find SMS payment messages intrusive. However, according to experts, negative reactions to SMS payment messages from clients are uncommon, and it’s important not to strike the wrong tone with them.
How To Use SMS Payment?
SMS payments offer many benefits for businesses in different scenarios. As texting is a popular communication channel for modern shoppers, it presents a convenient and versatile option for mobile payments. In the following sections, we will highlight a few situations where your business can leverage SMS payments.
- Receiving Payments for Your Services or Products – By providing the option for SMS payments, you significantly improve the chances of your customers receiving and responding to your message. When the buyer receives your text, they can conveniently pay from anywhere, regardless of whether you provided a windshield repair, logo design, or any other service. Sending payments through text messages is convenient for going cashless and cardless. It incentivizes customers to make payments quickly and easily. Additionally, your SMS payment system streamlines recurring payments for subscription services, phone bills, and software.
- Follow Up for Overdue bills – It can be difficult for customers to always keep up with their accounts, even if they intend to. Sometimes, sending a payment reminder is necessary to help them get back on track. Using an SMS payment solution, you can send an invoice, check in on your customer, and offer a secure payment link – all through one channel.
- Extend your SMS Marketing Campaign – One efficient way to speed up sales and conversions is by using SMS payments. For example, if a customer inquires about a dining table’s measurements through text, a furniture store can send them an invoice immediately if they express interest. You could close the deal even before the customer visits the store.
Who Can Benefit from the SMS Payment?
SMS payments are an excellent option for various industries such as retail, food and beverage, healthcare, and hospitality. They offer a simple and convenient payment method for customers and particularly benefit small businesses.
SMS text payments can benefit retailers by reducing payment processing time, minimizing the risk of fraud, and enhancing customer loyalty and satisfaction.
Food and beverage businesses can use SMS text to pay system to make ordering and payment processing more efficient. Similarly, healthcare businesses can also use SMS payments to simplify patient billing.
Also, businesses in the hospitality industry can adopt SMS payment solutions as a means of simplifying the check-in and check-out process. These solutions offer guests a convenient way to pay for additional services or products. Additionally, businesses can use two-factor authentication via SMS to verify the identity of customers.
But to ensure customer information is adequately secured and not vulnerable to compromise, businesses must be PCI compliant when using SMS payments before establishing any system. It can also enhance customer trust in the company.
Customers may feel at ease doing business with a PCI-compliant company as it assures them that their information will be safeguarded. In addition, certain financial institutions may require PCI compliance for SMS payment processing. Thus, non-compliant businesses could face a disadvantage in this regard.
What are the Things to Know About SMS Payment?
Businesses need to be aware of certain factors when utilizing SMS payments. Before setting up an SMS payment service, it is vital to consider the customer’s experience.
- Several SMS payment systems exist – peer-to-peer, cardless payments, and two-factor authentication. Each system offers different advantages and disadvantages to consider. Businesses can choose which payment system will work best for their industry.
- Payments Are Not Processed in the App – Although you can start a payment conversation and confirm it through a texting app, the app does not process the payment. The payment is usually processed through a secure system where the customer has a previously saved account or is added to their phone bill.
- Donations via SMS Payments Require Pricey Set-Ups – Non-Profit Organizations must check with their SMS payment systems for setup fees or transaction costs. If so, this could be a pricey setup and may not be worth the price, depending on the size of donations they receive.
- SMS Payments Have Transaction Fees – All transactions, including those paid through a separate system, will typically add interchange fees and other transaction fees. Therefore, it cannot be assumed that paying through a different method will avoid these fees.
- Multi-Channel Payments – Certain services allow you to use a single texting and social media messaging system. It is beneficial because it enables you to reach your customers through their preferred mode of communication and also makes it possible to replicate your user flow across different platforms.
- SMS Payment Systems Doubles as a Marketing Tool – You can send promotional messages to customers, such as discounts or new products. It allows you to reach out and connect with your customer base without spending too much time on marketing campaigns.
Should You Consider SMS Payment?
Yes. SMS payments can streamline business operations and make it easier for customers to pay for products or services. It is also secure, cost-effective, and efficient. However, before utilizing an SMS payment system, businesses should ensure that they are PCI compliant so that their customer’s information is not vulnerable to compromise.
Can SMS Payment be Fraud?
No. Businesses can ensure safe payment transactions by implementing PCI-compliant measures to prevent fraud in SMS payments. Cardless payments or two-factor authentications can also provide an additional layer of security. Customers can also protect against fraud by closely monitoring their accounts and contacting their banks if they notice any suspicious activity. Hackers can intercept messages with sensitive financial information and use it to convince people to send payments.