Insights & Resources3 min read

SMS Payments: 101

SMS payments are a mobile payment method. And, they’re one of the fastest growing segments of the mobile payment market.

Michael Bratschi
SMS Payments 2x
The demand for mobile payment options is growing in almost every region of the world. In 2018, 55 million people in the U.S. used their mobile phone to pay at a physical point of sale. And, that doesn’t even include people who used mobile payment methods to make online purchases.

SMS payments are a mobile payment method. And, they’re one of the fastest growing segments of the mobile payment market. Unlike other mobile payment methods, the buyer doesn’t need a smartphone to use SMS payments. They only need a text capable phone.

So, SMS payments are usable for more people than most other mobile payment options.

If your business doesn’t accept mobile payments, now is a great time to start. Here’s all the ground-level information you need to get started.

What are SMS payments?

SMS payments are useful for almost any transaction. The SMS payments infrastructure is easy and inexpensive to set up. And, the cellular service provider handles the banking transactions.

So, businesses can accept SMS payments for both online and offline purchases. SMS payments can be used for loan and purchase plan repayment. People can even send money to each other using SMS payments.

What about PCI compliance?

Since the financial transactions are handled by the mobile phone provider, PCI compliance is usually not an issue for businesses that accept SMS payments.

PCI data security standards apply to companies that accept, process, store or transmit credit card information. The business that takes the SMS payment essentially sends the bill to the mobile phone provider, and they deal with the monetary transaction when it comes time for the buyer to pay their phone bill.

However, if you’re a mobile phone service provider who sends the cell phone bills, you must handle all credit card payment data in a secure environment, and encrypt credit card information whenever you store or transmit it.

Choosing an SMS provider

Typically, you need to purchase a short code number to accept SMS payments. This means choosing an SMS provider. When you assess an SMS provider, there are three major things to consider:
  • Security. Even though you’re not sending credit card information, it’s best to avoid exposing customer purchase information to potential cyberattacks. So, an ideal SMS provider transmits data over a secure private network, away from the public internet where information is easy to intercept.

  • Deliverability Any undelivered SMS payment message will cause an incomplete transaction. This issue is correctable. But, dealing with undelivered SMS payment messages erodes the convenience of SMS payments for both the business and the customer, and could cause payment delays if the purchase gets pushed to the next month’s cell phone bill.

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

Accepting SMS payments is quick and easy to set up. You don’t even have to add any credit card processing or bank connections. All you need is a short code number and a reliable SMS provider.

If you’re not using SMS payments yet, there’s no reason to put it off anymore. The first step is finding a suitable SMS provider for your short code number. Start by learning about Telnyx programmable SMS.
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