SMS payments are becoming one of the growing alternatives for making payments in business transactions. As a result, small and medium-scale businesses must consider this viable option. This article will discuss everything needed to know about SME payments and how businesses can leverage them in their payment operations.
What Are SMS Payments?
SMS is the abbreviation for Short Messaging Service. SMS payment means making payments through text messages. While few businesses already use this payment method, many others are new. An SMS payment is when a customer sends a payment via text. It is also when the business sends a purchase invoice to the customer by text.
In SMS payments, a link is attached to the message. This link redirects to a payment form where the transaction details are entered and confirmed. The process is secure and relatively easy, making purchases convenient for both buyers and sellers. It is a contactless payment procedure. A business should know how it works if it is interested in an SMS payment system.
How SMS Payments Work
SMS payments are pretty easy and fast compared to other payment systems. Although SMS payment service providers operate differently, there are some basic processes they all generally possess. When it comes to how it works, below is what every business should expect from a typical SMS payment process:
- The business must enable the SMS payment option with an SMS payment service provider to start an SMS payment system. These service providers integrate messaging with payment-compliant features.
- The business texts a shortcode number to the customer’s phone number. The code contains a link that shows the purchase invoice. The customer can initiate the sale procedure by sending a shortcode text containing the link.
- The link redirects to a secured payment system where the customer can fill in the required details and finalize the sale procedure.
- The customer approves the payment. They can also save their debit card information to ease subsequent payments.
- The customer may receive a unique code to complete the procedure, depending on the SMS payment service provider.
Some SMS payment service providers operate credit card systems. So, if the business is already working with a credit card facilitator, it can also inquire if an SMS payment system is available. This makes the messaging-payment integration faster. A purely SMS payment service company can also work.
Benefits Of SMS Payment Systems
SMS payments offer some benefits that may not be available in other payment systems. These are why some big businesses now make the payment alternative available to their customers. Below are some of the advantages SMS payments have over other systems:
- All Devices Are SMS-Enabled: Virtually every phone has access to a mobile text messaging feature. This means texts are easily received and read quickly.
- Quick Payment: Since text messages are scanned, payments are made quickly. So, generally, SMS payments make payment delivery more efficient and time-saving. This is a very good leverage if the business has a lot of customers in the payment queue.
- Contactless Payment: Contactless buying is when the buyer orders online and receives the package at their doorstep. It only makes sense that there is contactless payment. SMS payments offer contactless payment, which became more popular during the coronavirus pandemic.
- Invoices Are Read Quickly: Customers can read the invoice quickly when received via SMS. This also means payment can be made immediately. It is fast and convenient for both the seller and the buyer.
- Limits Fraud: SMS payments are a way to curb fraudulent transactions and fake credit card payments. It also prevents counterfeit cash payment since funds are sends virtually through a secured channel.
- Multiple Payment Types: With SMS payments, there are several payment types depending on what the business requires or what the customer wants. For instance, there are credit and debit card options, ACH payments, and digital wallet options (PayPal, Google Pay).
- Convenient Initiation: SMS payments can be initiated from anywhere. There is no need for any hardware purchasing instrument like POS.
What To Consider Before Choosing An SMS Payment System
To be safe when choosing an SMS payment system for any business, below are some considerations that should be made:
- The SMS payment service provider must be PCI compliant and have high data security.
- The operation of the SMS interface and all other functions must be easy to navigate.
- Backup systems to ensure data are saved, and transactions are recorded.
- The provider should provide a unique dedicated number for the business, which can be used by the business and its customers only.
- Check for a provider that boosts high-quality connections to ensure messaging is trouble-free.
- Compare the subscription fees of the providers.
Popular Text-To-Pay Services For Businesses
There are a few SMS payment service providers. However, it is best to get started with a provider that offers what fits your business. Service providers are unique when it comes to functionality and fees so it’s best to go for the one that works well with your business operation. Below are some popular SMS services for businesses.
- Paysley: This service integrates messaging payment through text or email. It also allows POS to scan a QR code linked to the payment. Text and email fees are different and are charged per message.
- PaymentSavvy: This service uses multiple payment options all in one SMS payment package. Customers can also store their payment information here for future use.
- Relay: Formerly Rhombus, this service uses Stripe to initiate payments through debit and credit cards. The service also attaches marketing and customer service features to its functionality. Relay fees are charged monthly, and a specific number of “tickets” is given.
- Everyware: This service pairs with Visa’s CyberSource to provide credit card functions with SMS payments. It is a new, growing system SMBs are using.
- Podium Payments: PP combines marketing features, automated messaging, debit/credit cards processing, and customer service system. The service operates a robust system that large businesses can work with.
Is SMS Payment Option Good For Your Business?
SMS payments are a suitable payment option for all businesses. They are fast, reliable, and secure. Every business should find an SMS payment that works with its processes. An effective SMS payment service helps the business connect with its customers and makes payment easy and convenient.
Pros and Cons of SMS Payments
Pros of SMS Payment
- Convenience: SMS payments offer unparalleled convenience, allowing customers to transact anytime and anywhere using their mobile phones. This ease of use can significantly enhance the customer experience.
- Wide Accessibility: Since SMS payments only require a mobile phone and not necessarily a smartphone or internet connection, they are accessible to a broader range of customers, including those in areas with limited internet service.
- Speed: Transactions via SMS are typically fast, with payments being processed almost instantly. This speed ensures that services or products can be accessed quickly, improving business and consumer efficiency.
- Simplified Transactions: SMS payments streamline the payment process, eliminating the need for physical cards, cash, or an app. This simplification can reduce barriers to purchasing, potentially increasing sales.
- Security: Many SMS payment systems incorporate security measures such as encryption and one-time passwords, helping to protect users’ financial information from unauthorized access.
Cons of SMS Payment
- Transaction Limits: SMS payments often have lower transaction limits than other payment forms, which might not be suitable for larger purchases.
- Dependence on Mobile Network: The reliability of SMS payments is contingent on the mobile network’s stability. Network issues can delay or disrupt transactions, impacting the payment process.
- Security Concerns: SMS-based transactions can still be vulnerable to fraud and phishing attacks despite security measures. Users may receive fraudulent messages attempting to steal personal information.
- Fees: Some SMS payment services charge fees to the sender or receiver, which can deter users from utilizing these services, especially for smaller transactions.
- Limited Acceptance: Not all businesses accept SMS payments, which can limit where customers can use this payment method. The acceptance range is growing but still not as widespread as traditional credit or debit cards.
Conclusion
In conclusion, SMS payments are a convenient and accessible payment solution. They provide quick transactions with the benefits of ease, speed, security, and broader accessibility. There are some limits, though, like security concerns, transaction limits, and variable fees, which must be handled carefully. As digital payment technology continues to evolve, SMS payments represent a vital component, offering a unique blend of accessibility and convenience for today’s mobile-centric world.
Frequently Asked Questions
What are SMS payments?
SMS payments involve sending money or making payments through text messages (SMS) from a mobile phone. This method is often used for small transactions, donations, or purchasing digital goods and services.
How do I make an SMS payment?
To make an SMS payment, you typically send a text message to a specific number provided by the merchant or service provider, including a code or keyword related to your purchase. You may also need to confirm the transaction with a follow-up message or through a mobile payment app linked to your phone.
Are SMS payments secure?
SMS payments incorporate several security measures like encryption and sometimes a PIN or one-time password (OTP) for transaction confirmation. However, users should remain cautious of phishing scams and ensure they only send payments to trusted numbers.
Can I use SMS payments without an internet connection?
Yes, one of the key advantages of SMS payments is that they do not require an internet connection, making them accessible even in areas with limited or no data service.
What are the costs associated with SMS payments?
Transaction fees for SMS payments can vary depending on your mobile carrier, payment processor, and the receiving entity. Some services might charge a flat fee or a percentage of the transaction amount. Always check the fee structure before completing a transaction.
Is there a limit to how much I can send with an SMS payment?
Yes, most SMS payment services have transaction limits to mitigate fraud and manage risk. These limits can vary by service and may be adjusted based on your transaction history and the service provider's policies.
Can I use SMS payments for international transactions?
The availability of SMS payments for international transactions depends on the service provider and mobile carriers involved. While possible, international SMS payments may incur higher fees and require additional steps for currency conversion.
Can I receive refunds through SMS payments?
The ability to receive refunds through SMS payments depends on the merchant's refund policy and the capabilities of the SMS payment platform. In some cases, refunds may be credited back to your linked account or provided as credit for future purchases.
How can I track my SMS payment transactions?
You can track your SMS payment transactions through your mobile carrier's billing statements, the payment service's app or website, or your linked bank account or credit card statement. Some services also send confirmation messages with transaction details after each purchase.
