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Written by
Katy Ratican
11 May 2021
4 minutes

What is SMS payment and how does it work?

Whether you sell products or offer services to your customers, you can unlock easier payments by using SMS payments
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SMS texting is a popular way for people to communicate both personally and professionally. Phone users worldwide use it to communicate with friends and family and businesses use it for marketing and customer engagement.

But did you know you can take payments for your products or services using SMS? Businesses across the world have adopted this way of payment for everything from digital products to physical transportation tickets. The potential for growth is huge because it gives you access to millions of customers who don’t have credit cards or bank accounts, but do have a mobile phone.

But what exactly is SMS payment and how does it work?

What is SMS payment?

As the name suggests, SMS payment is where your customers pay you for your products or services by using SMS. Think of it like credit card payments or using PayPal, except your customers send a text message to pay for the product or service.

How does SMS payment work?

There are basically three ways in which you can use SMS payments for your business:

  • Through a website and code. Customers are directed to a website where they’re given a code. They then send this code to the text number they’re given and they’ll receive confirmation that they’ve paid.

  • Through a mobile phone number. Customers can enter a mobile phone number directly onto a website. Once a customer has entered their mobile number onto the website, the SMS payment provider sends the code which they can use to access the product or content they’ve purchased.

  • Through a direct text. The customer simply sends a text to a specific number as payment for a service or product.

So how do you, as a business, get your money? The customer pays for a premium SMS, which includes the cost of your product or service. This charge is then added to their prepaid account or monthly bill.

When the customer pays their bill, the mobile operator takes their share of the SMS premium price and sends the rest of the amount to the SMS payment provider. It’s this provider that operates the SMS gateway that you use to accept payments by SMS.

The SMS payment provider then takes its share of the premium SMS price and passes on the rest of the price to you. During the entire process, the customer’s details remain confidential to everyone except the mobile operator.

Benefits of using SMS payments

One of the major benefits of using SMS payments for both your business and your customers is that it’s quick, easy and safe. As a result, it’s one of the fastest-growing payment methods globally.

It also has the following benefits for your business:

  • You can accept payments from millions of mobile phones capable of texting worldwide. If you are operating in an area where SMS payment is popular, it is a key payment opportunity for your business to utilise

  • It also enables you to accept payments from millions of customers who don’t have a bank account or credit card. By using SMS payments, you open up a whole new market for your business

  • You can build customer loyalty when you choose to use SMS marketing messages

  • You don’t have to verify customers’ payment details, identities or struggle with credit cards being denied

  • It takes a lot of hassle out of the payment process because the mobile phone operator handles the billing

  • It’s easy to set up and is often free

Is SMS payment right for your business?

Well, if all the benefits outlined above have piqued your interest, then possibly, yes. SMS payment gives you the ability to accept payments from customers globally and takes out much of the hassle of accepting payments.

For your customers, it offers a quick, easy and convenient way of paying for goods or services, while also being safe. Just think about it: they don’t have to give their credit card details and they don’t have to remember usernames or passwords. That is a payment method that many customers might appreciate. SMS texting is already a secret weapon for businesses, so it makes sense to incorporate the ability for customers to use SMS payment where appropriate too.

In short

When considering the right payment methods for your business, you’ll be hard-pressed to find a better option than SMS payments on a global scale. It’s easy, convenient and safe — not only for you but for your customers too.

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