Paying by Text: Why SMS Payments Endure
In a digital world packed with wallets, apps and seamless tap-to-pay solutions, the humble text message remains surprisingly powerful. SMS payments, which allow users to charge small purchases to their mobile phone bill, have found renewed relevance in a range of settings. From quick deposits at pay by SMS casinos to emergency charity donations, this method of paying by text offers a uniquely accessible and fast solution for microtransactions.
But with convenience comes complexity. The same tools that make payments frictionless can also lead to misuse, especially in areas like gambling or when dealing with fraud attempts. This article explores why SMS payments continue to matter in the UK, how they work, and the important risks users should understand.
How SMS Payments Work
SMS payments, also known as direct carrier billing (DCB), allow users to pay for goods or services by sending a text. The charge then appears on their mobile bill or is deducted from their prepaid balance. No need for a credit card, bank account, or even a smartphone with internet access.
The process typically involves:
- Sending a keyword or response via SMS.
- Confirming the charge through a reply.
- The payment being processed via the mobile network provider.
Popular use cases include public parking fees, digital content like games or ringtones, subscription services, and online donations.
Why SMS Payments Still Matter
Despite the rise of digital wallets and contactless cards, SMS payments continue to serve specific needs:
- Universal Access: Works on any phone, from basic models to smartphones.
- No Bank Needed: Ideal for the unbanked or underbanked population.
- Simplicity: Transactions take seconds and require no technical setup.
- Perceived Safety: Users do not share sensitive financial data with third parties.
The Gambling Connection: Convenience Meets Risk
A growing use case for SMS payments is in the gambling sector. Some platforms now allow users to fund their online betting accounts via SMS, which then adds the amount to their phone bill. This is often promoted as a quick and easy way to start playing at a pay by SMS casino.
However, this ease of use has raised concerns. Studies have found that frictionless payments can encourage longer gambling sessions and reduce user awareness of spending.
While SMS payments offer fast access, they also remove traditional spending barriers. Without needing to log into an account or pass through a card payment interface, users may spend more frequently without realising the cumulative cost.
Fraud Risks
Another growing concern with SMS payments is fraud. Scammers use SMS to trick people into sending money or providing personal information, a technique known as "smishing" (SMS phishing). UK cybersecurity experts have warned that smishing is now the most common cyberattack affecting individuals and bank.
Authorised Push Payment (APP) fraud, where users are manipulated into sending money to criminals, has also increased. In the first half of 2024, UK Finance reported over £213 million lost to this kind of scam, much of it originating from SMS or voice contacts.
To address these issues, mobile networks and banks in the UK have teamed up on a project called “Scam Signal,” which uses mobile network data to detect and block fraud attempts in real time.
Cost and Accessibility Trade-Offs
Although convenient, SMS payments have limitations:
- Transaction Limits: They are typically capped at small amounts, making them unsuitable for large purchases.
- Fees: Some networks apply premium rates or service charges, which are not always transparent.
- Refund Difficulty: Getting a refund can be slower than through bank or card transactions.
- Limited Merchant Support: Not all UK merchants accept SMS payments.
Still, these trade-offs are often acceptable for people who value accessibility over flexibility.
Who Benefits the Most from SMS Payments?
SMS payments serve several key groups in the UK:
- People without bank accounts, estimated at over one million in the UK.
- Older adults or people with limited digital skills, who may not use mobile apps.
- People living in rural or low-connectivity areas, where mobile data is unreliable.
- Anyone needing a quick, low-friction payment method during emergencies.
The ability to make payments without needing to manage online logins or app installations can be empowering for these users.
Regulatory and Provider Safeguards
In response to the growing use and associated risks of SMS payments, UK regulators have stepped in. The Gambling Commission requires all operators using SMS payments to carry out affordability checks and monitor unusual spending patterns.
Mobile network providers are also taking steps by setting spending limits, sending usage alerts, and partnering with banks to flag suspicious payment activity.
Balancing Convenience with Caution
SMS payments are here to stay because they offer a unique mix of ease, accessibility and speed. But for both users and providers, balancing convenience with safety is crucial.
For users: Be aware of how often you use SMS payments. Check your bill regularly and never respond to unexpected messages requesting personal details.
For providers: Implement clear fee disclosures, fraud detection systems, and education campaigns to help users stay informed.
For regulators: Ensure consistent enforcement of safeguards, especially in high-risk sectors like gambling.
Use SMS Payments, But Stay Alert
In an age of advanced digital tools, SMS payments stand out by doing less. They remove complexity and give users fast, reliable access to essential services. Yet this simplicity can come at a cost, particularly when it enables impulsive behaviour or fraud. By understanding how the system works and staying alert to the risks, users can continue to benefit from this technology safely and responsibly.
