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1、SAFEGUARDING THELONG-TERM FUTURE OFINTERNATIONAL SMSFEBRUARY 2024IN ASSOCIATION WITHExecutive SummaryPositioning StatementRecommendations from Contributing MEF Members So What is Artificial Inflation of Traffic(AIT)?The Ideal AIT Market ConditionsHigh International Termination RatesStructure of Excl

2、usivity AgreementsAuthentication Use CaseWhat The Mobile Network Operators SayWhat The Brands SayImpact of AIT on Messaging EcosystemAboutThe Contributing MEF membersC NTENTS34467788910121616Mobilesquared has identified 50“at-risk”markets where significant increases tointernational termination rates

3、 are attracting excessive levels of fraud.a.The at-risk markets are primarily in Asia,Africa and the Middle East.Brands are no longer willing to bear the increased costs associated with the delivery ofinternational authentication messages(such as one-time passwords OTPs)in these at-risk markets.a.As

4、 the overall spend is not driven by transaction volumes but rather by abnormal ratesincreases,the spend itself cannot be justified.The high international termination rates are attracting growth in fraud,and ArtificialInflation of Traffic(AIT)fraud in particular.The combination of high international

5、rates and AIT a secondary factor,is potentiallyjeopardising the long-term future of international A2P SMS in these at-risk markets,wherebrands are looking to restrict their spend on SMS business messaging.A number of at-risk markets have now experienced a decline in international traffic up to50%in

6、the last 4 months;this will extend to more markets unless this risk is tackled.Major brands believe high international rates and AIT fraud has made SMS a damagedchannel in selected markets,irreparably so in some brands view.Mobile operators believe they lost$4.7 billion in revenues in 2023(separate

7、from greyroute fraud).The availability of new(and cheaper)verification channels is placing additional pressure onA2P SMS in at-risk markets.EXECUTIVE SUMMARYSource:Mobilesquared ASPIR report,issue 21.2.3.4.5.6.7.8.04POSITIONING STATEMENTHigh international SMS rates in identified at-risk markets wher

8、e authentication is thedominant use case,coupled with the accompanying increase in AIT fraud,are placingincreasing pressure on brands and forcing them to exponentially and unjustifiably increasetheir spend on A2P SMS.The brand response is to limit their use of SMS in at-risk markets,and expedite the

9、ir migration of traffic to alternative channels and solutions.The high SMSrates are having a damaging impact on international A2P SMS,and if measures are notagreed and implemented immediately by the messaging ecosystem to redress existingmarket conditions,the delivery of authentication use cases ove

10、r international SMS coulddisappear.RECOMMENDATIONS FROM CONTRIBUTING MEF MEMBERS Mobile network operators(MNOs)and aggregators operating in at-risk markets to reviewtheir A2P SMS strategy,including:Introducing stable and reasonable pricing equal to market demand on a long-term modeli.e.no price shoc

11、ks within a budgeted year.Review prices where AIT might have distorted reality.Review exclusivity agreements to introduce sound bidding mechanisms based on realistictraffic volume commitments and realistic pricing as per current market demands.Incentivise the messaging service providers to provide a

12、 high and reliable quality of SMSservice.Implement solutions to stop AIT:Enterprises:Protect their authentication services on web forms and apps,to avoid AIT fraud at origin.MNOs:To apply an A2P SMS pricing policy accounting for competitive factors(such asalternative technologies),fraud,and general

13、value for money for brands usingInternational SMS.MNOs need to work with their firewall vendor to identify volumes and share data withenterprises to ensure that AIT is not happening.Aggregators:In at-risk markets to adopt the same pricing policy as the MNOs based on competitivefactors,fraud and gene

14、ral value for money for the brands using international A2P SMS.Aggregators to deploy solutions with the capability to trace,alert,and block AIT traffic.a)I)II)III)IV)b)I)II)III)Collectively the messaging ecosystem to:Establish a Task Force for tracing AIT originators:I)Develop industry best practice

15、s on A2P SMS commercial models,with a view to stoppingAIT at source.II)Establish a tracing solution with MEF acting as independent investigator to review sourceof AIT traffic(no sharing of commercial sensitive information outside of MEF review).Originators of AIT should be revealed and face the cons

16、equences for their actions.MNOs and aggregators to implement revised contract terms to avoid brands paying foridentified AIT fraud.Aggregators to cascade these terms to brands.With action now fromthe players within the A2P industry the downwards trends can be managed to a point whereA2P SMS has a lo

17、ng term and viable future,but it does require attention now.Brands need tosee value for their money and a quality service without AIT.As part of the research for this whitepaper(commissioned by six MEF industry leaders in theA2P space in conjunction with MEF),Mobilesquared spoke to 10 key stakeholde

18、rs in the A2PSMS ecosystem(6 hyperscalers and 4 mobile operator groups with a combined reach of over70 opcos).All of these companies are either some of the biggest users of A2P SMS or some ofthe biggest suppliers.These companies were all united on four major points.1.SMS remains the most effective c

19、hannel and“should”be the most popular channel amongall brands big and small.2.Current international SMS pricing is unsustainable and unworkable in at-risk markets.3.The popularity and trust of SMS among brands in at-risk markets has been rapidlydiminishing over the last 12 months.4.Artificial Inflat

20、ion of Traffic(AIT)fraud alongside significantly high termination rates meansSMS is no longer the preferred channel for brands sending large volumes of authenticationuse case traffic.05According to the Mobile Ecosystem Forum(MEF),there are two overarching types of ArtificialInflation of Traffic(AIT)

21、fraud types.The first is defrauding a business,by having bots in theguise of fake users send out one-time-password verification SMS via the business messagingaccount to a number for which the fraudster is part of the SMS delivery chain and can blockthe artificial traffic when it hits its network nod

22、e.The fraudster makes a profit directly orindirectly from the messages at the business expense.The MEFs second AIT fraud type is defrauding a mobile network operator(MNO),bygenerating fake messages and repeatedly sending the same message to virtual numberscontrolled by the fraudster that generate an

23、 outpayment.The fraudster makes a profit as thecost of sending the messages is lower than the outpayment.Such is the impact of AIT on the international messaging ecosystem,that the messagingindustry now view AIT as the biggest threat to the A2P SMS monetisation,surpassing greyroutes even though AIT

24、fraud accounts for a quarter of the brand spend associated with greyroutes.The Rise of AITSO WHAT IS ARTIFICIALINFLATION OF TRAFFIC(AIT)?06Source:Mobilesquared research 2019-2023Over the last 2 years AIT has emerged as the one fraud-type that could have a moredevastating impact on the international

25、A2P SMS industry than anything that has gonebefore it.It is a fraud type fuelled by the SMS value chains desire to maximise revenues in theshort-term by forcing brands to pay a premium for mission-critical authentication messages.07Three elements have converged to create the perfect market condition

26、s for AIT to flourish.These are:High international termination rates1.Structure of exclusivity agreements2.The rise of the one-time password(OTP)3.THE IDEAL AIT MARKETCONDITIONSHigh International Termination RatesMobilesquareds research revealed that between 1Q 2021 and 4Q 2023,90%of MNOsincreased t

27、heir international termination rates.When broken down,25.3%of MNOs increasedtheir rates by 20%-49%,and 20.5%by 50%-100%.This means that more than one-third ofMNOs(36.4%)increased their rates by over 100%.In fact,3.9%increased their rate by inexcess of 500%.Mobilesquared research has identified 50“at

28、 risk”markets as of 4Q 2023,where highinternational termination rates will attract significantly higher-than-expected levels of fraud.These markets are predominantly in Asia,the Middle East,and increasingly in Africa.MajorSMS markets and regions,such as North America,Europe,Australia,New Zealand,and

29、Singapore,as well as Brazil and India,have not experienced high prices,therefore limiting theAIT potential to fraudsters in these markets.08The high ITRs are very attractive for fraudsters inflating(and generating)traffic,primarilytargeting the 30 major brands(hyperscalers)that make up the bulk of i

30、nternational SMStraffic sending authentication use case SMSes.To date,Tesla CEO and owner of X,formerlyTwitter,Elon Musk remains the only public figure to speak out against this type of SMS fraud.Structure of Exclusivity AgreementsThe second key component is the structure of exclusivity agreements b

31、etween a mobileoperator and aggregator,which can lead to an exponential increase in the internationaltermination rate.Over 200 exclusivity agreements are now in place,which equates to almost one-third ofMNOs,with Mobilesquared research indicating that approximately one-third of theseagreements have

32、resulted in a significant increase in termination rates,primarily in at-riskmarkets.Authentication Use CaseMission-critical authentication traffic,such as one-time passwords(OTPs),rely on theeffectiveness of SMS to provide a compelling user experience.No other channel can matchSMS effectiveness and

33、reliability in the delivery of authentication use cases.AIT fraudstersare exploiting this.Such is the demand for OTPs that they now account for 89%of totalinternational A2P SMS traffic.Brands are being forced to pay the going market rate to ensure their authentication traffic isdelivered to their cu

34、stomer anywhere in the world,regardless of the cost.One major brandtold Mobilesquared that AIT fraud had increased their spend on A2P SMS for the delivery ofOTPs in the last year by almost 40%.Another brand explained,“we are being chargedexcessive amounts of money for a worse service”.Source:Mobiles

35、quared ASPIR issue 2.The MNOs believe they have adopted a long-term A2P SMS strategy with the ability toadapt to reflect changing market dynamics.This latter point clearly accounts for the primaryelements of their existing strategy focusing on“capitalising on the A2P SMS opportunity”and“maximising r

36、evenues”.Evolving to RCS was viewed as a secondary level strategy,but stillahead of the tertiary element of“A2P SMS longevity”.Three external factors are shaping their“changing market dynamic”element of their A2PSMS strategy.This is to compensate for the loss of voice revenue,losing traffic to Whats

37、App,and a belief that A2P SMS was on the decline.All MNO groups said that they had increased their international termination rates over thelast year,with one group citing that the increase was on the recommendation of theiraggregator partner.The MNO groups said their opcos were“acting opportunistica

38、lly”withregards to their pricing strategies.Adding that while group are not always in agreement withthe price increases,their role is to advise if they feel the price is to high(or to low).MNOs believe the fall in SMS traffic as a direct result of AIT fraud would result in a 16%dropin revenue in 202

39、3(separate to the lost revenue from grey routes),which would be 4.7billion based on Mobilesquareds data for 2023.Consequently,mobile operators are now inthe process of reviewing their commercial models.09WHAT THE MOBILE NETWORKOPERATORS SAYUberThe high international termination rates and excessive l

40、evels of AIT fraud on SMS isexpediting our need to limit the amount of traffic and spend using SMS.MetaWe are on a painful journey with SMS right now.Not knowing how much we will need toallocate to SMS from one day to the next is a frightening prospect and one that is notsustainable in the short-ter

41、m,let alone the long term.SMS costs need to come down.Brand speech bubble“AIT fraud is making SMS a damaged channel.”“AIT fraud has increased our spend on A2P SMS in the last year by over 30%.”“Our trust in SMS has gone.”“The excessive levels of AIT fraud is expediting our need to limit our spend on

42、 SMS.”“Carriers are guilty of allowing this to happen on their watch.”“There will be a rude awakening.”10WHAT THE BRANDS SAYThe brands that Mobilesquared spoke to as part of this research believe that AIT fraud hastransformed SMS into a damaged channel in at-risk markets,irreparably so in some brand

43、sview.Trust in SMS as a channel has gone permanently for some brands in these markets,while others readily admit their trust is diminishing but it could be restored with swift actionto address the existing market conditions enabling this perfect storm.Brands are exploring alternative channels for th

44、e delivery of authentication use cases,and inthe meantime,are trying to restrict their usage of SMS where possible.One of the brands interviewed admitted that they were paying more in SMS traffic chargesthan the total revenue generated in the country.For the brand,the impact of AIT broughtthem to co

45、nsider terminating the use of SMS or stopping services in the country.11As a direct consequence of high SMS costs and AIT,some of the biggest users of SMS havenow switched a percentage of their traffic to alternative channels in at-risk markets,(such asflash calling,call-out,silent network authentic

46、ation,and RCS),or in the process of exploringomnichannel options.Passkey and similar verification services are attracting a lot ofattention from brands and creating a more competitive medium in the security space.From an omnichannel perspective,WhatsApp Business launching an authentication use casew

47、as incredibly timely,and potentially poses the biggest threat to A2P SMS traffic.ButWhatsApp does not offer the universality of SMS and is also constrained by its own stringentopt-in guidelines.Email and in-app push notifications are alternative avenues beingconsidered,but both have their own user l

48、imitations and challenges.A2P SMS,therefore,stillremains the ideal channel for the distribution of OTPs for brands provided the businessmodels are reflective of the channel.Ultimately,it is the high SMS prices that are forcing the brands to seek cheaper alternativesin at-risk markets.Were the high r

49、ates to remain,according to the contributing MEFmembers to this report,the shift in traffic on alternative channels which has seen a drop intraffic of 20%-to-30%in the likes of Indonesia,Bangladesh and a number of Africancountries,will continue.12The industry now views AIT as the biggestthreat to th

50、eir monetisation of internationalA2P SMS,but AIT is a consequence of thehigh SMS termination rates.High SMS costs and AIT reveal a concerningshort-termism regarding the potential andwell-being of international A2P SMS.Whether it is the primary cause(high SMSrates),or the secondary cause(AIT),or thec

51、ombination,either way,the existing marketconditions are having a direct impact oninternational SMS brand spend,andultimately could be held responsible for killing the Golden SMS Goose that isauthentication traffic.Mobilesquared believes that AIT directlycost brands a total of$585.4 million in2022,an

52、d that leaptto$1.16 billion in 2023,before dropping to$655 million in 2024.Between 2022 and 2024,AIT will costbrands a cumulative total of$2.4 billion.Thedrop in AIT between 2023 to 2024 canprimarily be attributed to the drop in brandspend on international SMS authenticationtraffic.IMPACT OF AIT ONM

53、ESSAGING ECOSYSTEMSource:Mobilesquared13Aside from the significant drop in brandspend,there are additional reasons for thedrop in AIT fraud from 2024 onwards,including a number of messaging industryinitiatives designed to make AIT lessattractive to fraudsters and make thepractice harder to execute.T

54、hese include:Greater transparency relating to BotcreatorsAggregators refusing to enter inflatedexclusivity agreementsMNOs rejecting aggregators known to becomplicit in AIT fraudMNOs and aggregators revisingcontracts to not charge brands foridentified AIT trafficGreater network visibility identifying

55、 AITtraffic and capability to stopFirewall providers able to detect andprevent AIT trafficA reduction in international terminationrates.The rapid emergence of AIT as a result ofthe increase in international terminationrates,has also resulted in an increase ofgrey routes,in particular SIM farms.The d

56、ata reveals that there is a directcorrelation between the rise in internationaltermination rates and AIT,and an increasein grey routes.So not only should brands beconcerned about market developmentssince 2021,MNOs should be concerned also.Collectively brands were haemorrhaging anaverage of$2.19 mill

57、ion per day to AITbetween 2021 and 2023.That is in starkcontrast to the previous years,when AITcost brands a total of$121.24 million in2022,equivalent to$66,430 per daybetween 2017 and 2021.The longer-term picture paints a bleakerview for the international SMS marketplaceunless international SMS cos

58、ts areoverhauled and AIT is reduced.Since Mobilesquared published itsAlternative View,the market conditionscontinue to deteriorate.Based on datashared by multiple companies withMobilesquared international traffic intoseveral markets has plummeted by up to50%over a 4-month period.Source:Mobilesquared

59、14Aside from identifying the 50 at-riskmarkets,Mobilesquared believes a total of80 markets could be considered at-riskwithin 12 months.Research reveals that themessaging industry believes a price ceilingshould be considered to A2P SMSregardless of its use case.In the map,Mobilesquared has highlighte

60、d wheremarkets have at least one mobile operatorwith an international termination rate inexcess of$0.10.These markets will remainhighly attractive to fraudsters.The outcome is not that brands are lookingto use alternative channels and limit theirspend on international SMS in the future,that is happe

61、ning now.The outlook is mostlikely to be considerably bleaker thanoutlined in the below graph fromMobilesquareds global A2P SMS forecastspublished in June 2023,after which,asoutlined in the above,international marketconditions have deteriorated,and continueto do so.Markets that should continue toexp

62、erience growth under alternativecircumstances are now in decline.By 2026,around 60%of A2P SMS markets will be indecline,and based on existing marketconditions,that is a conservative figure asconditions are now deteriorating on amonthly basis.15Source:MobilesquaredThe precarious state of the internat

63、ionalA2P SMS industry is its own making andshould be considered a“pandemic”amongA2P SMS in at-risk markets.The highinternational termination rates can be acatalyst for AIT but also are growthinhibiting in their own right,and the sooner the messaging ecosystem redresses thissituation,the damage limit

64、ation can start inearnest.But for this to happen themessaging industry collectively needs to actnow to safeguard the long-term future ofA2P SMS,before the damage is irreparableand everlasting.As a leading communications platform company,BICS is connecting the world by creatingreliable and secure mob

65、ile experiences anytime,anywhere.We are a global voice carrierand the leading provider of mobile data services worldwide.Our solutions are essential forsupporting the modern lifestyle of todays device-hungry consumer from global mobileconnectivity,seamless roaming experiences,fraud prevention and au

66、thentication,to globalmessaging and the Internet of Things.We are headquartered in Brussels,with a strongpresence in Africa,Americas,Asia,Europeand Middle East.For more information ABOUTInfobip is a global cloud communications platform that enables businesses to buildconnected experiences across all

67、 stages of the customer journey.Accessed through asingle platform,Infobips omnichannel engagement,identity,user authentication andcontact centre solutions help businesses and partners overcome the complexity ofconsumer communications to grow business and increase loyalty.With over a decade ofindustr

68、y experience,Infobip has expanded to 75+offices globally.It offers natively builttechnology with the capacity to reach over seven billion mobile devices and things in 6continents connected to over 9,700+connections of which 800+are direct operatorconnections.Infobip was established in 2006 and is le

69、d by its co-founders,CEO Silvio Kuti,Roberto Kuti and Izabel JGlobal Message Services(GMS)is the trusted communications service provider forEnterprises and Mobile Operators worldwide.GMS CPaaS solution enables brands to unifymultichannel customer communications via a single API and self-service plat

70、form.Complementing this is an AI-driven chatbots and CCaaS platform that enables brands tobuild engaging,two-way,24/7 communication at any touch point,significantly enhancingthe customer experience.As a valued partner of Mobile Operators,GMS enhances theirmessaging business and protects revenues by

71、optimising A2P,P2P,and P2A trafficexchange,while preventing SMS and voice fraud.Established in 2006,GMS is the leaderand industry ambassador for secure,legitimate,and transparent messaging.It isheadquartered in Baar,Switzerland,with regional offices across the globe.www.gms-A global fast-growing tel

72、ecommunication company offering innovative technology andcommunication solutions.We provide cutting-edge digital products and services for mobilenetwork operators,enterprises,and service providers across different industries.Foundedback in 1998,with its head quarter in UK London and 18 offices globa

73、lly.Serving 1.8 billionsubscribers worldwide,covering more than 120 countries and connected to more than 500Mobile operator and Established in 2004,Route Mobile Limited(RML)is a cloud communications platformservice provider catering to enterprises,over-the-top(OTT)players,and mobile networkoperators

74、(MNO).RMLs portfolio comprises solutions in messaging,voice,email,SMSfiltering,analytics,and monetization.RML has a diverse enterprise client base acrossvarious industries,including social media companies,banks and financial institutions,e-commerce entities,and travel aggregators.RML is headquartere

75、d in Mumbai,India,with aglobal presence in Asia Pacific,the Middle East,Africa,Europe,and the A.Sinch powers meaningful conversations between businesses and their customers throughits Customer Communications Cloud.More than 150,000 businesses including many ofthe worlds largest tech companies rely o

76、n Sinch and its global super network,which isthe most secure and reliable network for messaging,voice and email.Sinch has beenprofitable and fast-growing since it was founded in 2008.It is headquartered inStockholm,Sweden,with shares traded at NASDAQ Stockholm:XSTO:SINCH.Learn moreat .A global fast-

77、growing telecommunication company offering innovative technology andcommunication solutions.We provide cutting-edge digital products and services for mobilenetwork operators,enterprises,and service providers across different industries.Foundedback in 1998,with its head quarter in UK London and 18 of

78、fices globally.Serving 1.8 billionsubscribers worldwide,covering more than 120 countries and connected to more than 500Mobile operator and The Mobile Ecosystem Forum is a global trade association.Our members arecompanies whose products power mobile services such as messaging,content&advertising and

79、IoT.Join MEF to advance in mobile.Mobilesquared:We are recognized as the global#1 for business messaging intelligence,delivering an unrivalled depth and accuracy of data and forecasts.Our data is used bycompanies to identify opportunities&threats in the messaging and customer engagementomnichannel.O

80、ur clients include GMS,Sinch,BICs,Monty Mobile,Infobip,Orange,PWC,Vodafone,Bain,Mastercard.Find out how our data and insight can help you:www.mobilesquared.co.ukMOBILEECOSYSTEMFORUM.COM2024 Mobile Ecosystem Forum Ltd.All rights reserved.DisclaimerMobile Ecosystem Forum Ltd.and the Author make no representation,warranty or undertaking with respect to and does notaccept any responsibility for,and hereby disclaims liabilityfor the accuracy,completeness or timeliness of theinformation provided.