Application-to-person (A2P) SMS is an application service that sends SMS to the mobile subscriber. It’s generally used for sending notifications, alerts, marketing messages, and flight alerts. These messages are centrally invoiced and can reach any network worldwide. Text messages are a convenient mode of communication owing to high user awareness and support on all handsets.
With smartphones becoming ubiquitous, industries such as tourism, retail, banking financial services and insurance (BFSI), healthcare, entertainment, and media are surging ahead to reach out to the vast base of mobile and smartphone users through A2P SMS. By the end of 2014, half the world’s population had at least one mobile subscription, totaling nearly 3.6 billion unique mobile subscribers. This number is expected to increase by more than one billion by 2020. Research shows that this factor will have a substantial impact on the overall development of the A2P SMS and API market in the next few years.
The global A2P SMS market is categorized into interactive services, pushed content services, promotional campaigns, inquiry related services, and customer relationship management (CRM) services. Of these, CRM services are expected to emerge as one of the key consumers of A2P SMS, owing to an increased demand for billing and transactional services across the E-commerce and BFSI industries.
On the basis of the end-user industry, the market has been classified into banking financial services and insurance (BFSI), retail, travel and transport, healthcare and hospitality, and media and entertainment (gaming). In industries such as transportation and hospitality, A2P SMS is used for various ticketing applications such as delivering boarding passes for airlines and payments for transportation services. Many financial services companies use A2P SMS for services such as making payments, requesting account information, and account transfers. Mobile network operators provide security for these companies by authorizing them to identify their customers using mobile numbers.
BFSI is expected to emerge as one of the most promising revenue opportunities for the global A2P SMS market. The increased consumer preference for online banking services is expected to emerge as the key factor pushing this possibility towards reality.
A2P SMS for interactive services has gained so much traction in the North America market that interactive services make use of A2P SMS technology for voting, election, and donations. For instance, TV shows such as American Idol use A2P messaging services for public voting on contestants.
North America holds a significant share of the market due to steady and profitable telecom subscriber evolution and the quick adoption of 4G smartphones. The A2P SMS market in North America is governed by a wide range of dynamics such as the presence of leading players, increasing demand for A2P messaging platforms (largely by financial institutions and banks), and the rising number of enterprises moving from a desktop-first to a mobile-first strategy.
The Asia Pacific also holds a huge market share of the global market due to the region’s large population base and a continuous increase in the number of mobile subscriptions.
According to a report published by Zion Market Research, the global A2P SMS market was estimated at US$52.01 billion as of 2017, and it is expected to exhibit a healthy CAGR of 4.2% between 2017 and 2025, with a rise in valuation to US$86.53 billion by 2025.
Meanwhile, the global A2P SMS API market is projected to expand at a 4.1% CAGR between 2017 and 2024. The market, which was worth US$186.0 million in 2017, is expected to rise to US$245.9 million by 2024.
Market Size by Regions
America’s A2P SMS market is expected to grow at a CAGR of 6.2%, to an aggregate of $31.70 billion by 2022.
Changing consumer behavior and lifestyle in the Americas has impacted the market. The customers look for greater ease and are willing to pay more for improved services. In the Americas, the adoption of mobile messaging has been increasing and changing the way enterprises communicate with their customers and business partners. Thus, a mobile marketing strategy is set to be a new revenue stream for mobile value chain players.
Transactional and promotional A2P messaging services both have a high demand in the Americas. Advancements such as mobile banking, online banking, technology innovations in mobile applications, and the rising number of mobile users in the Americas are all driving the market.
In the Americas, emerging IoT technologies such as smart home, identity verification, digital advertising, cloud application programming interfaces (APIs), connected cars, and mobile commerce are major growth drivers. A2P SMS services increase the level of security and privacy of customer data by providing secure authentication services. Most of the companies would like to provide information to their customers in a secure environment and, hence, A2P SMS is gaining popularity.
Americas’ A2P SMS market is segmented by services, verticals, and countries. The A2P SMS market of America has been segmented by the following verticals- Healthcare, Transport, Media and Entertainment, Retail, IT and Telecom, Education, Logistics and Utilities, and Others.
The market is expected to grow at a CAGR of 6.3% during the period 2016–2022, to reach an aggregate of $26.31 billion by 2022.
There is an increase in the demand for A2P SMS services in the Asia Pacific. Its increasing mobile subscriber base (a feature to a smartphone), population, internet user base, and emerging IoT technologies (such as smart home, identity verification, connected cars, smart healthcare devices, etc.) are the major drivers for A2P SMS growth. A2P SMS is set to provide new revenue streams for mobile network operators (MNOs), even as revenue declines in traditional services. Many new players are entering the market, highlighting the desirability of the A2P SMS market.
The increasing adoption of mobile technology in the current business market has led to a massive demand for A2P SMS services. Transactional service held more than 70% of the market share in the overall Asia Pacific A2P SMS market in 2016.
The transactional service segment is expected to contribute to the major market share, followed by promotional service. In the current market scenario, transactional services are widely adopted in enterprises due to the increase in various business activities via mobile phones (e.g., mobile banking/net banking, online purchases, etc.). Furthermore, promotional services are gaining popularity in the market, as they allow enterprises to increase their brand values, offers, and promotional activities. In transactional services, customer relationship management services hold more than 60% of the market share, followed by interactive services.
In vertical segments, BFSI and retail industries are rapidly adopting transactional services and promotional services. The retail industry is aggressively adopting promotional services by offering many benefits to its customers, including real-time access to their products. The BFSI and retail verticals are contributing more than 50% of the share for the Asia Pacific A2P SMS market, followed by IT & telecom, transport, and media & entertainment. The healthcare, education, government, and energy & utility sectors are poised to be emerging verticals for the market in the next 6–7 years.
Developing countries hold more business opportunities than do developed countries. Developing countries including India, China, Indonesia, Philippines, Vietnam, Thailand, Malaysia. Further, an increasing mobile subscriber base, an increasing internet subscriber base, innovation of network technologies, government initiatives, the adoption of advanced technologies (digital technologies, smart technologies, etc.), and increasing FDI investment are some of the factors expected to support A2P SMS market growth. India and China contributed more than 40% of the A2P SMS market share in 2016.
Changes in consumer behavior have resulted in more and more enterprises joining the A2P bandwagon. Since its invention, the communication protocol has been growing flawlessly, and it is now one of the key mobile mediums through which businesses can connect with their customers.
Below are some of the factors that are contributing to the growth of the A2P SMS market.
Increased Demand for Smartphones
Increased demand for smartphones has always been one of the major factors for the growth of the A2P SMS market. With the global smartphone penetration standing at 98.6%, SMS also has become a standard feature in almost all mobile phones. The accompanying trend of mobile app usage by customers has spurred companies to turn to A2P and online SMS messaging in a bid to remain relevant to their customers.
Increased Use of A2P Services in Customer-Focused Industries
A2P SMS is a quick and reliable way to reach customers and also help businesses promote positive customer experiences at every stage of the customer journey. This has led to the wide usage of the communication protocol in customer-centric verticals such as BFSIs. In fact, the banking and financial sectors and the retail sector are set to contribute more than 40% of the A2P market share.
Business and SMS services are continually discovering new and innovative ways to use A2P online SMS.
The undeniable universality of SMS and SMS marketing has seen the use of A2P rise among enterprises. The communication channel is not only cost-effective, but it also boasts a wide reach, enabling businesses to interact with customers anytime and anywhere. Given that 98% of text messages are opened, A2P represents a great opportunity for companies looking to achieve a healthy return on their marketing investments.
Internet of Things
With the usage of the Internet of Things (IoT) on the rise, A2P messaging will serve an essential role in enabling users to secure and communicate with their devices through various alerts and notifications.
With SMS rising in popularity, more industries and service providers are recognizing the benefits of A2P messaging. Here are some of the trends in A2P messaging that businesses can look forward to in the second half of 2019.
Self-Service: The need for real-time cloud communications is on the rise, and businesses are looking for quick, customizable ways to embed messaging and voice APIs into their apps. Communications Platform as a Service (CPaaS) companies like TeleSign now offers self-service capabilities that allow developers to easily test and deploy A2P messaging APIs. It’s as simple as signing up, selecting which products to use, and adding funds to your wallet to start communicating with customers via SMS and voice messaging.
Two-Factor Authentication: To increase account security or verify changes to a user’s account, A2P messaging for SMS-based two-factor authentication (through a one-time passcode [OTP]) is a quick, reliable, and secure method that is becoming an industry standard and increasing in end-user adoption.
OTT Apps: The rise of Over the Top (OTT) apps like WhatsApp and Facebook Messenger may have significantly reduced the use of P2P (Person-to-Person) SMS, but they have actually become an indirect driver of growth for A2P messaging. While consumers are increasingly adopting OTT services in lieu of SMS for their personal communications, SMS for brand/business communications has become the defined channel. Simply put, A2P SMS has become how businesses best reach their customers. Additionally, OTT app integrations with CPaaS companies now make it possible for certain A2P communications to reach users directly through their messaging app of choice.
Though it is huge, the A2P SMS market is fragmented and very competitive, with the presence of a substantial number of players. The large companies present in this market are engaged in allocating budgets to improve their firewall systems and to expand their regional presence, with the hope of gaining a huge market share.
SMS gateway provider. An SMS service provider provides an SMS gateway for its users to send SMS messages to. This SMS gateway then routes the SMS messages to another SMS gateway or SMSC.
Cost of service is an important factor that you need to consider when choosing an SMS gateway provider for your SMS application. Typically, SMS gateway providers can be divided into 2 categories in terms of how they require you to pay for their SMS service:
You purchase a number of credits from the SMS gateway provider. Sending one SMS message will cost you one or more credits, depending on the country you send the SMS message to. For example, sending an SMS text message to India might cost you one credit while sending an SMS text message to the United States might cost you two credits.
You purchase a number of SMS messages from the SMS gateway provider. The cost of sending one SMS message is the same for all destinations. For example, if you purchase ten SMS messages, you can send ten SMS messages, no matter the destination.
In general: Cost per credit (credit-based payment) < Cost per SMS message (SMS-based payment)
- Photo by Kuroko Ukou on Unsplash