SMS transaction alerts generates N5 billion annually for banks
Ben Uzor Jr
Undeniably, Nigerian banks have found in Short Message Service (SMS) transactions alerts an innovative revenue stream which provides considerable efficiencies in customer service delivery as they generate N5 billion annually from alert charges accrued to bank customers, a Business Day has learnt.
This service is an automatic notification service through SMS that keeps customers informed and updated on activities related to their accounts. Business Day gathered that these 24 banks operating in Nigeria makes a substantial N14 million from SMS on transaction alerts sent to their customers on a daily basis.
Furthermore, each of these banks handles at least some two million transactions daily and for every transaction performed, an SMS is sent to the accountholder’s phone. This however is if the account holder subscribed to the service. Business Day checks reveal that banks procure the service at N3 and vend it to prospective customer at N10 per SMS irrespective of the telecommunications service provider, thereby generating N7 profit on each SMS sent. For that N7, alerts are sent to customer on transactions ranging from withdrawal, deposit, charges on COT, interest rates and other transactions, Business Day has learnt. Industry watchers say that given the reach and immediacy of SMS in establishing and growing customer interaction and commerce, banks are deploying the service to facilitate customer acquisition and retention, as well as increasing market share. They further expound that with the mobile messaging market revenue worldwide exceeding $224 billion by 2013, financial institutions are strategically positioning this service as a viable revenue generator in the long term.
From a technological perspective, Business Day learnt that the service is delivered through Value Added Service (VAS) providers who normally connect to the operator using protocols like Short Message Peer-to-Peer Protocol (SMPP), connecting either directly to the Short Message Service Centre (SMSC), otherwise known as ‘short code’ or increasingly, to a messaging gateway that allows the operators to control and charge for the service. Many banks have expressed their concerns about SMS transaction alerts as it relates to security and operational controls. However, SMS enthusiast claim that whilst SMS banking is not as secure as other conventional banking channels, like the Automated Teller Machine (ATM) and internet banking, the SMS banking channel is not intended to be used for very high-risk transactions. Emmanuel Okogwale, a Lagos based technology expert who spoke to Business Day noted that the lack of encryption on SMS messages is an area of great concern. This he explained sometimes arises within the group of bank’s technology personnel, due their familiarity and past experience with encryption on the ATM and other payment channels. He said: “The lack of encryption is inherent to the SMS banking channel and several banks that use it have overcome their fears by introducing compensating controls and limiting the scope of the SMS banking application to where it offers an advantage over other channels.” However, the convenience of executing simple transactions and sending out information or alerting customers on their mobile phone is often the overriding factor that dominates over the skeptics who tend to be exceedingly bitten by security concerns. Business Day gathered that before a customer can use the SMS alert, he/she would need to register his mobile phone number with his/ her bank. Bolaji Olaniyi, a bank customer said: “SMS alerts are a good initiative but I think banks need to do more with that technological channel. It can act as the bank’s means of alerting it customers, especially in an emergency situation. For example, banks can push mass alert though not subscribed by all customers or automatically alert on an individual basis when an abnormal transaction happens on a customer’s account using ATMs or credit cards. This capability mitigates the risk of fraud going unnoticed for a long time and increases customer confidence in the bank’s information systems.” As a personalised end-user communication instrument, today mobile phones are perhaps the easiest channel on which customers can be reached on the spot, as they carry the mobile phone all the time no matter where they are. Besides, the operation of SMS banking functionality over phone key instructions makes its use very simple. This is quite different from internet banking which can offer broader functionality, but has the limitation of use only when the customer has access to a computer and the Internet. Also, urgent warning messages, such as SMS alerts, are received by the customer instantaneously; unlike other channels such as the post, email, Internet, telephone banking, etc. on which a bank's notifications to the customer involves the risk of delayed delivery and response.