There is a reason your bank texts you a fraud alert instead of emailing it. People open text messages. Almost all of them, almost immediately. SMS open rates run as high as 98%, and roughly 90% of messages are read within three minutes of delivery.
That trust is the whole ballgame for brands – Fintech companies and startups especially.
SMS is not just a marketing channel for these businesses, but the infrastructure behind fraud alerts, account verification, two-factor authentication, and customer onboarding. It is how a startup with no brand recognition yet earns a customer’s attention in the first few seconds of a relationship.
Brands across sectors have spent years building their customer communication strategies around the assumption that a text message will be seen. That assumption is now under serious threat.
The Scam Surge Changing Consumer Behavior
Last year, Americans lost $12.5 billion to text scams – a 25% jump over the prior year. 61% of Americans now receive scam texts at least weekly. These scams were once crude and obvious, but are now increasingly well-timed, psychologically precise, and difficult to distinguish from legitimate messages. For example, a fake package delivery notification lands the day a package is actually expected, or a fraudulent bank alert arrives with the right logo and the right sense of urgency.
The line between real and fake has never been thinner. Consumers know this, and are doing the only rational thing available to them: deleting first and asking questions never.
While that reflex is completely understandable, it creates a problem the industry has been slow to reckon with. Consumers are losing trust with their inboxes, which means scam texts are not the only thing deleted: appointment reminders, shipping updates, two-factor authentication codes, and messages from brands they actually want to hear from never truly reach their recipients.
The erosion of trust in the channel does not discriminate between bad actors and good ones – it just erodes.
How Email and Voice Lost, and What SMS Can Learn
This is how email and voice calls lost. Spam and robocalls became so pervasive that people stopped engaging with either channel entirely. Legitimate businesses have been paying the price ever since.
Fintech companies lived through this firsthand – watching email become so unreliable for customer communication that SMS became the default for anything that actually needed to be seen. Most calls from unknown numbers go unanswered for the same reason.
SMS has been the last channel standing and the one place brands could still reliably reach people. Now, it is facing the same fate if the industry does not get serious about the problem.
The Infrastructure Gap
The frustrating part is that the tools to fight this exist. The short code channel – those five and six digit numbers that arrive from a bank or pharmacy – operates very differently from a standard 10-digit number. To send messages over a short code, a business has to go through a rigorous vetting process, work through a third-party provider, pay a meaningful premium, and submit campaigns for carrier approval. There is a compliance infrastructure built around it by design.
Fraudsters are not going to jump through those hoops. The economics alone price most bad actors out. That barrier to entry is precisely why fraud levels in the short code ecosystem are significantly lower than in other messaging channels.
But, short codes are only part of the picture. The bigger issue is that the industry has not built a unified mechanism for separating good actors from bad ones at the point of entry. Every messaging channel has its own registration process, vetting requirements, and compliance framework. For startups trying to move fast, that fragmentation is its own obstacle. The compliance burden alone is enough to push newer companies toward cheaper and less rigorous channels without fully understanding the tradeoff they are making.
All this to say, there is no shared source of truth. Bad actors exploit the gaps between those silos by moving from one channel to the next when one door closes. It is a game of whack-a-mole, and the industry is always a step behind.
AI Is Accelerating the Problem on Both Sides
AI is making it worse on both sides. On the fraud side, generative AI is producing scam texts that are more convincing, personalized, and generated at higher volume than anything the industry was dealing with five years ago. Digital account takeover – where a fraudster compromises a legitimate sender’s credentials and uses them to push fraudulent traffic – has surged 141% since the first half of 2021.
On the defense side, AI has real potential to flag anomalies in how brands are onboarding and what they are sending. But, the industry has to agree on the infrastructure that makes that possible before the tools can do their job.
What Brands Need to Do Now
For brands, the window to act is narrowing. Fintech companies have more to lose here than almost any other sector. Their entire customer trust model is built around SMS fraud alerts, account verification, and two-factor authentication. These are messages consumers need to act on immediately. If the channel becomes as untrusted as email and voice calls, Fintech brands are losing more than a marketing tool; they are losing the infrastructure their security model depends on.
Startups face a different version of the same problem. Navigating the fragmented, channel-by-channel compliance infrastructure that exists today is complicated and expensive, and smaller companies are the most likely to take the path of least resistance. This lands them on a less rigorous channel with no inherent trust signal behind it. That decision feels practical in the short term, but becomes a liability as consumer trust in those channels continues to erode.
The ones most at risk across the board are those relying on messaging channels with lower barriers to entry, where there is no rigorous vetting process behind the number showing up in a consumer’s inbox. Those are the channels where fraudsters are most active. They are the channels consumers are learning to distrust fastest. If a brand’s messages are arriving in the same place as the scam texts, they are going to get caught in the same deletion reflex.
The answer is not to abandon SMS, but rather treat the trust infrastructure behind it as seriously as the channel itself. That means more friction for bad actors, better accountability when something goes wrong, and a clearer way for consumers to distinguish a vetted business from an unknown number with bad intentions. Brands that invest in getting that right now will be the ones whose messages still get opened when others are getting deleted.
The 98% open rate is not guaranteed. It is earned. Right now, the industry is spending it faster than it is protecting it.
Ariel Reid is Vice President of Customer Experience, GCH Technologies, a vendor-neutral platform specializing in modernizing the wireless messaging and voice ecosystem. At GCH, Reid deals with the complexities of the fragmented business messaging industry including SMS, RCS, and branded calling.