Payment Methods

What is an SMS Payment? Utilizing Text to Pay Solutions

Short Messaging Service or SMS is a widely used channel of communication between people on a daily basis. This technology has evolved and can now be used by merchants as a payment solution. 

This method of payment has been growing in popularity. Now, 35% of customers say they want to pay for their goods or services via text message*. 

The payment method may not be as popular as debit and credit cards, but offering your customers more options is never a bad thing. It’s a good idea to keep ahead of the curb by accepting SMS payments, especially as mobile payment options continue to grow.

What is an SMS Payment?

sms payments

An SMS payment is a transaction, done through text messaging, where money can be transferred from one mobile phone account to another. The person paying uses the payment service to transfer an SMS message to another number. This message includes information such as the amount of money being paid, the payee’s mobile phone number, and so on. In most cases, SMS payments are done from one prepaid account to another prepaid account or from a postpaid account to another postpaid account. 

SMS payments minimize the number of actions a buyer must take to complete their purchase. It’s a very secure method of payment. Customers don’t share any personal data such as their account details directly in their text messages. 

How Do SMS Payments Work?

You might be familiar with using text to pay if you’ve donated to a nonprofit. Text payments are a popular way for many nonprofits to fundraise. However, since these SMS payments are billed by the mobile carrier, this method is not a viable solution for merchants. 

The process of using SMS payments for merchants works differently. Depending on your provider, there are some variations of how text payments may work for your business. Here are the general guidelines this payment method uses:

  1. Customer texts a shortcode number to the merchant or merchant sends a text to the customer’s phone to start a sale.
  2. The merchant sends the customer a link to the secure payment after determining what product or service they wish to purchase.
  3. Payment information is entered into the form by the customer; typically the customer can choose to save the card on file for recurring payments or future purchases.
  4. The customer receives a unique code to complete the purchase.

There can be an additional verification text from the payment processing company to confirm the purchase. The specific process may vary by company.

Types of SMS Payments

There are many different ways to pay for goods and services using text messaging. These methods can be used by both customers and merchants, but there are some variations in the process depending on your provider. Here are three types of SMS payments for merchants. Read on to see which one suits you and your business.

SMS payments using a website and code:

The customer text messages an SMS payment number, which is usually provided by the merchant. The number is typically discrete and will be long enough to avoid confusion with any other numbers on the payment provider’s network. The merchant then sends a text message reply with a payment link to the SMS payment number. This number and link will be unique for each transaction and allows the SMS provider to process all relevant information.

Entry of the phone number onto the website

A customer must input their phone number on the merchant’s website. The SMS payment service sends this number a code, which the consumer uses to complete the transaction and access online content.

Sending a direct text payment

Charities and groups like transportation providers frequently use this approach. Customers send a text to the specified number. Then the customer receives a purchase confirmation.

When Should You Use Text to Pay?

Mobile payments have increased from $69.8 billion in 2018 to $98.8 billion the following year in the U.S. Consumers are increasingly feeling more comfortable with making mobile payments. But how do you know if using SMS payments is the right solution for your business? Let’s talk about different scenarios where the text to pay solutions make the most sense. 

Collecting payments from clients

text to pay

If you’re sending invoices to physical addresses or via email, you’ve probably already experienced customers accidentally missing payments by overlooking the email.  

However, people tend to check their phones for text messages throughout the day. This drastically increases the chance of seeing your message the day it’s sent. 

With SMS payments, it’s easy for clients to pay you immediately, simply, and from anywhere. By eliminating cash, and the need to look up credit card payment details, you reduce the number of steps in the process, which increases the likelihood of the customer paying you immediately. 

This method is particularly useful in simplifying your recurring payments like subscription services. 

Rent or bill collection

Sometimes customers need a little reminder that their bill is due. Using SMS payments, you can send your customer an invoice and link to the secure payment platform directly on their phone. 

If your customer is experiencing a problem that’s delaying their payment, they may even be able to respond to your text. This gives you the opportunity to provide excellent customer service without switching channels. 

Property owners may also favor text to pay as a payments solution for their tenants. Your tenants will likely enjoy using this simplified method to make their rent payments. 


sms to pay

Nonprofits like charities should strongly consider using SMS payments for their fundraising campaigns. Donations are the lifeblood of these organizations, making up a significant amount of their annual funds. 

Donors, like other consumers, appreciate the convenience of online ACH payments. Using SMS payment methods will ensure that your organization is maximizing its donations. 

Advantages of SMS Payments for your Business

There are many benefits of offering text to pay as a payment solution. Here are the top three reasons you should consider using SMS payments:

Accept payments anywhere there’s cell phone service

Your customer can be a home, work, or on vacation. As long as they are somewhere that there’s cell service, they can receive and respond to your message.

Easy to use for both parties

Nearly everyone is familiar with using text messages. Using this method to make purchases eliminates the learning curve. Additionally, they don’t have to remember any usernames or passwords and enjoy the benefit of quick and easy payments. 

You can reach more customers

Using SMS payments will give you a higher likelihood of getting in touch with your customers. People view their text messages more often than they check their emails. You can also use SMS payments to help with your marketing efforts to get more customers through SMS.

Provide a secure payment option

People are most comfortable with solutions that they know and use daily. With text to pay, customers have a payment method that they already trust. In addition, you’ll be using the most secure form of payments available with SMS payment gateways. They offer encryption technology for both sending and receiving credit card numbers or bank account details.

What are SMS Fees

SMS fees are costs charged by phone providers for sending SMS messages. These surcharges can be charged per message segment for SSM and per message for MMS. Some carriers also charge fees for long code SMS (sending messages from a 10-digit number), while others charge for a short code number.

How to Set Up Text to Pay

sms payment

If you’re ready to set up SMS payments for your customers, you’ll need to find a company that offers the services that you need. The provider should set you up you with a payment gateway to use for text payments. An SMS payment gateway works just like a regular payment gateway but also supports SMS payments. 

This gateway will transmit the data between the customer and the payment processor. The payment processor or merchant services provider actually processes the payment. 

Establishing SMS payments as a business

  1. Choose your SMS provider and set up the gateway. (Be sure to review the fees and any available rates before signing up).
  2. Upload your payment page to your website
  3. Educate employees about SMS payment requirements and processes
  4. Identify the devices you will be using for text payments (i.e., how do customers pay by text?)
  5. Decide whether you want SMS payment-enabled forms
  6. Identify payment rules for your business practices
  7. Create text alert messages to go out to customers when they do SMS transactions with you
  8. Measure SMS sales performance & determine future practice changes based on results

Signing up for a SMS payments as a customer

  1. Sign up for a Pay by text account with a payment provider
  2. Give your account information to the merchant
  3. In order for an SMS payment to go through on your device, you will need to add a service provider and add money or use an existing balance on your phone
  4. When making purchases from merchants online, make sure to add them under your preferred service provider
  5. For in-store purchases, enter the SMS: keyword and then the merchant shortcode (5 digit number that identifies a specific business or location) and your message (amount and bill to phone number), then text SMS: to confirm, if necessary. If you’re unsure of the shortcode, you can find it out by going to the merchant’s website and looking for a contact or service information page.

Choosing the right provider

Not all text payment providers will provide the same services so it’s important to compare mobile gateway providers and find the one that suits your company’s needs. The following are some key factors you should consider including:

  • Fees – Many service providers charge fees for different aspects of profiles, such as number registration and account management. Most providers offer a different rate for sms and sms credit transactions, so be sure to take those into consideration when determining which provider is right for your business.
  • Security – SMS payments are processed through a secure gateway, so it’s important to ensure you choose a SMS provider that offers adequate security.
  • Customer Service – It’s important that your SMS provider is offering timely responses and knowledgeable support staff
  • Availability – Make sure the SMS payments service has coverage in your area.
  • Delivery – It’s also important to ensure the SMS payments service is accurate and reliable.
  • Number of users – Some SMS providers have limitations on the number of SMS accounts they can provide per company, so it’s best to check with them before signing up for SMS payments.

Final Thoughts

One of the most common ways to transact with businesses today is via SMS. This technology has evolved and can now be used by merchants as a payment solution. Businesses don’t have to worry about additional hardware in order to accept SMS payments. This technology is a quick and easy way for businesses to keep up with the latest marketing trends.

Sources: Weave