SOS for SMS?

Published on:

January 24, 2024

The Short Messaging Service (SMS) is under pressure from apps that can do far more than just send messages. Despite being essential for two-factor authentication and online banking TANs, its overall importance has declined. Messenger services like WhatsApp, with over 2 billion users globally, have become the preferred choice for communication, offering text, image, and video sharing, even for calls. Concerns arise over data privacy as these apps monetize user information, contrasting with regulated local telephone companies.

SMS (Short Messaging Service) has been an integral part of telecommunications since 1992. After reaching a peak of 59 billion text messages in Germany in 2012, however, its importance has steadily declined - even though there was a slight increase from 2020 to 2021 (from 7 to 7.8 billion). Two of the functions for which SMS still seems essential are two-factor authentication, e.g., for Google, and sending TANs for online banking. As more and more banks are making it mandatory for users to use their own apps, however, which are then also used to send TANs, the relevance of SMS for this purpose is likely to continue to decline. So will SMS soon disappear completely as a means of communication? Dr. Christian Stredicke, CEO of Vodia Networks, doesn’t think this will happen. And he has good reasons. . 

Although telephone companies now largely waive additional charges for sending text messages, more and more people are using messenger services such as WhatsApp for text messages, sharing images, photos and videos…even for phone calls. According to market leader WhatsApp, the service currently has over 2 billion users worldwide; in Germany, 51.94 million people were using WhatsApp in 2023. In China, where WhatsApp is blocked, 75.7% of the population uses WeChat, a similar app, at least once a month.

All from a single source

The functions of messenger services go far beyond just SMS. Given the massive number of users, it makes sense for operators to offer additional services. For example, you can transfer money on WeChat and take part in discussion forums on WhatsApp; both chat apps are suitable for phone calls. Although mobile phone operators hardly charge by the minute anymore and instead usually offer a flat rate for calls, calls with chat providers are equally free thanks to generous data volumes, both nationally and internationally. In this way, chat providers ensure users do as much as possible from within the app and remain within it.  

Caution is advised, however, because chat providers are not exactly known for keeping their users' data private - unlike the local telephone companies, which are subject to strict legal requirements. Users shouldn’t forget that free doesn’t mean app providers don’t earn any money. These providers usually earn revenue in other ways, often by selling user data. It must be clear to everyone that data obtained in this way isn’t only auctioned off online to the highest bidder, but also used as training data for artificial intelligence (commercially exploited). "Most users are either unaware of this or don't care. Why pay for an MMS when it's free and easier with WhatsApp?" says Dr. Stredicke. Europe plays virtually no role in this business. The most important providers come from Asia or the USA - their profits therefore don’t accrue in Europe.

Dr. Stredicke adds: "Fortunately, there is significant resistance from Rich Communication Services (RCS) - what you could call the next generation of SMS. A few months ago there was an announcement by Apple and Google to better support RCS. With virtually all traffic coming through cell phones, it makes sense for the two to team up and give users a viable alternative. After all, Apple has a real alternative to WhatsApp with iMessage, which could help keep everything out of the grip of Meta and Tencent."

Business clients

For companies that want to remain in contact with their customers, the question arises as to which services they should use. In Germany the landline number is still considered the best, most reputable option for communicating with customers; solutions from chat providers still have a "bad taste" and may deter customers from using them to contact a company. What's more, no chat provider can reach 100% of a company's customers, but every cell phone can be reached by SMS.

SMS makes sense in business communication, especially when customers first call a landline number and then want to switch between text and voice. Technically there is no reason why this number shouldn’t also be used for text messages: this assumes both the telephone system and the SIP provider support SMS. 

"The Vodia PBX has had SMS built in for years, especially for the American market, where there are no special numbers for cell phones. In DACH, it is expected some SIP providers will also make this possible in 2024, and that landline numbers can then also be called via SMS," says Dr. Stredicke.

"When searching for a company's address on the Internet, customers will hopefully soon see a button for texting next to the button for calling - and under the same number,” Dr. Stredicke concludes. “If both are on the same number, it will be much easier for users to see at a glance to whom they are talking and texting. Customers can then conveniently contact restaurants, doctors and other companies via text without having to install a special app. It would keep the phone network public for a little longer."

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