Why text fraud is growing and how the SMS market could regain some stability [Q&A]

Text messaging remains a basic tool for communication, even as new apps continue to gain ground. People still rely on SMS for critical communication, delivery alerts and service updates, and brands continue to view it as one of the fastest ways to reach customers.

However, two issues are now putting pressure on the channel. Fraudulent text activity has increased, and the cost for brands to send SMS, especially across borders, has become too high relative to the value of SMS in many use cases.

We spoke to Tomas Hedqvist, a senior director from Enea, who explains what’s happening and how the SMS market could regain some stability.

BN: Fraud complaints tied to text messages have grown quite a bit. Why is this happening now?

TH: Spam and scams in SMS channels have always existed, but their prevalence is rising. For instance, in the US, spam complaints more than doubled in 2025 compared to 2024. I believe there are several reasons for this. First, it works. If it weren’t effective, scammers wouldn’t keep doing it. Scammers use the channels that are most effective for them. While industry professionals might see email, SMS, and voice calls as very different because of their technical bases, they are all simply channels for scammers to target people, and they pick the one that works best. SMS is particularly effective because messages are read almost immediately, whereas voice calls, for example, are often ignored unless you recognize the number. As for email, people are generally more cautious because they know it often carries spam. So, SMS spam might be on the rise because other channels are becoming less effective.

Another factor is AI. AI has enabled scammers to craft and translate messages at scale, helping them expand their operations to target more people and new regions. With the help of chatbots, scammers can easily generate personalized, human-like messages and even mimic writing styles, increasing the chances that victims fall for the scam. It also allows attackers to rapidly test and optimize messages, making phishing campaigns more effective. There are also indications that AI is enabling conversational spam, which we have seen a significant increase in on SMS channels over the last year. Conversational spam is when scammers start a conversation with the victim, typically pretending to send a message meant for someone else but was sent to the victim by mistake. It is a method that can be both effective and bypass simpler SMS firewalls.

But AI isn’t the only advancement that has made life easier for scammers. Now, you can buy a ‘scam kit’ for smishing, which includes everything needed, such as a fake landing page, text message templates, and access to bulk SMS. You also get to choose which company to mimic, and it generates all the necessary tools. These kits are designed to be easy to use, even for scammers without advanced technical knowledge of SMS.

BN: How are mobile network operators responding to this increase in fraud?

TH: Many operators feel pressure to strengthen their defenses from regulators aiming to tighten compliance, as well as from the market itself in terms of protecting their brand and reducing churn caused by poor user experiences. A recent example of action being taken comes from TextNow, with whom we recently announced a partnership to better protect their users from spam. There is an appetite among mobile network operators to improve user experiences by reducing scams and nuisance messages.

BN: Besides fraud, what other factors are affecting SMS?

TH: The cost of sending business text messages has become a major concern. The market segment known as A2P SMS refers to messages that brands send to people, such as one-time passwords, order notifications, or service reminders. For years, this market grew steadily, and during the pandemic, it recieved a major boost. Over the past two years, however, many mobile operators have raised their international SMS fees, which are now averaging above $0.14. Some increases reached several times the previous price.

What we observe now is that prices have reached a level that significantly impacts traffic volumes and patterns. Recent industry research shows that over three-quarters of respondents believe current prices are unsustainable and need to be lowered for SMS to remain an attractive communication channel for brands.

BN: How do these cost increases affect everyday customer communication?

TH: According to recent data, traffic drops by 2.9 percent for every $0.01 increase in price over $0.10. Higher termination costs don’t typically lead brands to spend more, but push them to find cheaper paths. That includes shifting some traffic to messaging apps, as well as cutting traffic or shifting large volumes to low-cost grey routes. However, grey routes come with sharply lower reliability: aggregators may ‘trash’ messages to avoid termination fees, and mobile operators often block grey-route traffic to force it back onto monetized routes.

For end users, this shows up as delayed or missing verification codes, inconsistent service updates, and generally less dependable communication. Brands are left to choose between reduced reach and unstable delivery channels, neither of which provides long-term stability.

BN: What ideas are mobile operators exploring to address both the cost issue and the drop in traffic?

TH: One approach is to rethink how SMS is priced. Instead of using a single rate for all messages, some operators are exploring ‘value-based pricing’. SMS is perfect for short, urgent communication because messages are read immediately and at much higher rates than any other communication channel. Messages that are more important to the business would carry a higher rate, allowing the full value to be monetized. Conversely, less critical messages would be priced lower to prevent them from being canceled. This approach aims to align cost with the value the sender gains from sending the message as SMS.

To support this model, operators utilize AI-driven systems that can identify the type of message being sent. AI is crucial because it enables interpretation of a message, not just recognition of keywords or phrases, and can be used independently of the language in which the message is written.

Enea, together with Mobilesquared, has modeled the revenue effects that value-based pricing can have for mobile network operators. We found it can save $29.4 billion over five years, helping revenue grow by 130 percent. This results from monetizing the full value of each message type while ensuring that traffic is not lost to cheaper channels or canceled. If operators charged according to message purpose instead of raising general rates, revenue would increase without forcing brands to reduce traffic as sharply.

BN: How does competition from services like WhatsApp influence these decisions?

TH: WhatsApp now offers pricing for business messages that is well below international SMS fees in many regions, especially for authentication and utility messages. These are the same types of messages that brands often send through SMS. This creates a strong incentive for brands to shift at least part of their traffic to app-based platforms, and for mobile network operators to better monetize SMS’s advantages without overpricing it.

SMS still holds an advantage because it works on every mobile phone without any app installation or data connection. Many brands continue to use SMS for exactly that reason. Even so, once other platforms gain more business messaging features, brands may shift more traffic in search of predictable costs and modern engagement tools.

BN: What would help the SMS market regain stability?

TH: A healthier market would rely on reasonable prices, consistent delivery quality, and strong protection against fraud. Users must feel safe when opening text messages, and brands must feel confident that messages will reach their customers without high prices.

Pricing that reflects the value of each message could reduce the raised termination fees that have pushed brands away in recent years. Clearer pricing decisions remove pressure on brands and reduce their reliance on grey routes, thereby helping reduce fraud.

The data shows that when prices match the value of SMS messages to brands, traffic begins to recover. However, this recovery can take time, and only occurs when operators avoid abrupt increases. A steady approach gives brands the confidence to continue using SMS for important communication. With careful planning, SMS can remain a dependable channel for verification codes, alerts and updates for many years to come.

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