Messaging • Last Updated 5/10/2024

SMS Payments 101: The Future of Transactions

Make transactions seamless by setting up an SMS payment system. Learn what SMS payments are and why you should use them.

By Michael Bratschi

SMS payment image of man looking at phone

Imagine being at a bustling coffee shop. You're in a hurry, and the line to the cash register winds around the corner. Instead of waiting, you take out your phone, send a quick text, and voila—you’ve paid for your coffee.

SMS payments are an emerging technology streamlining how we pay for items, driven by the fact that we live in a busy world, and customers want to simplify transactions. Now, seamless transactions are no longer just a nice feature but a necessary payment option for competitive merchants.

In fact, one survey found that 62% of consumers under age 35 would like to make payments via SMS. And the SMS payments market is one of the fastest-growing segments of the mobile payment market, driven by the increasing penetration of smartphones, the growing popularity of online shopping, and the rising demand for secure and convenient payment methods.

In this post, we'll explore SMS payments, from the basics of how they work to the security measures that keep your transactions safe. By the end, you'll know whether SMS payments could be the right choice for you or your business.

What are SMS payments?

SMS payments are a type of mobile payment where a transaction is initiated via a text message sent from your phone. The payment is typically added to your mobile phone bill or deducted from a prepaid balance. Sometimes, it can also be linked to a bank account or a digital wallet.

The process is surprisingly simple. To make a payment, you typically text a specified number with the amount you wish to pay and the account or service you're paying for. The transaction is complete once the payment is authorized, usually via a follow-up text message or a unique pin.

SMS payments are used for various transaction types, from purchasing goods and services to paying utility bills, topping up mobile airtime, and contributing to charitable causes. The possibilities are expanding as more and more businesses and service providers recognize the potential of this efficient and user-friendly payment method.

SMS payments are a practical, quick, and accessible transaction method. They're changing the face of finance, bringing convenience and simplicity to people's lives worldwide.

Methods of initiating SMS payments

There are a few different ways vendors can initiate a mobile payment. The types of mobile payments vary depending on vendors’ preferences and the nature of the customer’s purchasing journey. Here are a few ways customers can make SMS payments:

Through a website and a code

The customer is directed to a web page, where they’re given directions to text a code to a number on the screen. They’ll then receive a text confirming their purchase and access to their ticket or receipt. This method of SMS payment is the most common and is used for everything from purchasing concert tickets to making reservations.

By entering a phone number onto a website

The customer is prompted to enter their phone number in a field on a website. The SMS payment provider texts this number with a code, which the customer uses to access online content. This method is often used for online courses, videos, and other web-based gated content.

Via direct text

The customer sends a text to an advertised number and receives their purchase confirmation in return. Charities and organizations like transportation providers most widely use this method.

Now that we've outlined what SMS payments are and their various methods, let’s explore why this payment method could be an ideal fit for your financial needs.

Benefits of SMS payments

Below are some reasons individuals and businesses are embracing this innovative payment method.


With SMS payments, your mobile device becomes your wallet. You no longer have to dig through your purse or pocket for cash. SMS payments are especially useful in situations where you've forgotten your wallet.


Transactions made via SMS are completed almost instantaneously, without the need for a physical card reader or the time-consuming process of counting out cash. Whether you're in a rush at a grocery store or paying for parking, SMS payments make transactions quick and effortless.


SMS payments aren’t just for the tech-savvy. Because they operate through text messages, they’re accessible to anyone with a standard mobile phone. SMS payments open up digital transactions to a broader demographic, including those in areas with limited internet access or who may not have access to traditional banking systems.


Despite what you might initially think, SMS payments offer robust security measures. Personal and financial information is encrypted, and transactions often require a unique PIN or one-time password (OTP) for additional security. SMS payments can provide peace of mind and protect against fraud or theft.

Record keeping

Every SMS payment leaves a digital trail, making it easier for both individuals and businesses to keep track of expenditures. SMS payments can help with budgeting, expense reporting, and financial planning. It's also handy for resolving disputes, as each transaction has a timestamp and other important payment details.

Environmental friendliness

SMS payments are more environmentally friendly than traditional payment methods because they eliminate the need for physical cash or cards. They reduce the need for plastic cards and the energy used to produce and transport physical money.

Bill collection

For merchants, one of the most tangible benefits of SMS payments is the ease with which past-due bills can be collected. When customers opt for SMS payments, businesses can send payment reminders directly to their mobile devices. Receiving these text reminders increases the likelihood of timely payments, reduces the time and effort spent on debt collection, and ultimately improves cash flow.

SMS payments offer various benefits that align well with the demands of our fast-paced, digital society. They combine convenience, speed, accessibility, security, and record-keeping into one user-friendly package, all while being kind to our planet.

How to set up an SMS payment system

There are four main steps involved in setting up an SMS payment system for your business:

1. Choose a payment processor

Many payment processors offer SMS payment solutions. When choosing a processor, it’s important to consider your business needs, such as the volume of transactions you expect, the types of payments you want to accept, and your budget.

2. Get a dedicated SMS number

You will need to get a dedicated SMS number for your business. You’ll use this number to send and receive text messages for payments. Many businesses choose short code numbers for payment processing because they’re easily recognizable.

3. Create a payment process

You’ll need to create a process for customers to make payments via SMS. This process may involve sending a text message with a payment link or requiring customers to text a specific code to your business.

4. Promote your SMS payment system

Once you’ve set up your SMS payment system, you’ll need to promote it to your customers. You can do this by adding a link to your website, a button to your checkout page, or sending promotional text messages.

Here are some additional tips for setting up an SMS payment system that works:

  • Ensure your payment processor is PCI compliant (more on this in the next section).
  • Test your system thoroughly before launching it to the public to identify potential problems and ensure it works properly.
  • Monitor your system closely after launch to help identify any fraudulent activity or other issues.

SMS payments can be a convenient and secure way for customers to complete transactions. By following these steps, you can set up an SMS payment system that’s secure and easy to use.

SMS payment regulations

While general regulations regarding sending SMS to consumers still apply, businesses accepting SMS payments should know a few additional, specific rules.

The Payment Card Industry Data Security Standard (PCI DSS) outlines security standards for organizations dealing with credit card information. Although businesses accepting SMS payments don't typically need to worry about PCI compliance since the mobile phone provider handles financial transactions, it's essential to keep a few points in mind.

Avoid storing credit card information

Businesses should never store credit card data on their servers or in any other capacity. This responsibility rests solely with the mobile phone provider.

Encrypt during transmission

Businesses should employ encryption to safeguard data whenever credit card information is transmitted.

Use a secure payment gateway

To process credit card payments securely and protect data from unauthorized access, businesses should always use a secure payment gateway.

As the landscape of digital payments continues to evolve, maintaining a robust understanding of relevant regulations and best practices is key to ensuring secure, compliant operations.

Choosing an SMS provider

Typically, you’ll want to purchase a short code number to accept SMS payments from an SMS provider. When you assess an SMS provider, there are three major things to consider:

1. Security

Even though you’re not sending credit card information, it’s best to avoid exposing customer purchase information to potential cyberattacks. An ideal SMS provider will transmit data over a secure private network, away from the public internet, where information can more easily be intercepted.

2. Deliverability

Any undelivered SMS payment message will cause an incomplete transaction. Deliverability issues can be improved, but dealing with undelivered SMS payment messages erodes the convenience of SMS payments for both your business and your customers. They could also cause payment delays if the purchase gets pushed to the next month’s bill.

3. API connectivity

SMS payments are most convenient when they’re almost entirely hands-free. An SMS API enables you to integrate SMS payments into your payment processing or point-of-sale (POS) system and automatically accept SMS payments.

Getting started with SMS payments is straightforward. You don’t even have to add credit card processing or bank connections. All you need is a short code number and a reliable SMS provider.

Get started with SMS payments

SMS payments offer convenience, speed, accessibility, security, record-keeping, environmental friendliness, and improved bill collection capabilities.

Established in 2009 and licensed in over 30 countries, Telnyx delivers superior products and sets industry standards by eliminating the middleman. With a global network, full API support, and a team of programmable SMS experts, Telnyx makes it easy to port your existing numbers and start sending programmable SMS.

Partner with us to create your optimal communication solution. You’ll get award-winning support, compliance tips, and more affordable pricing than our competitors.

Talk to a Telnyx expert today to get your short code number and start enabling SMS payments.

Looking for more information on SMS? Check out some of these other resources:

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