Why WhatsApp is a great alternative to SMS for transactional notifications?

Introduction

In our fast-paced digital world, the efficiency and effectiveness of business communication channels are paramount. Transactional messages stand at the core of this communication revolution, defined as automated, non-marketing messages sent by businesses to facilitate a transaction or provide a service update to the customer.

These messages include order confirmations, shipping notifications, appointment reminders, authentication OTPs, and much more. Traditionally, businesses have relied on SMS (Short Message Service) to send these critical communications, given their wide reach and direct access to customers.

However, the landscape of transactional communications is rapidly changing, driven by evolving technology and changing consumer expectations. Despite the ubiquity of SMS and email, recent statistics reveal a shift towards more interactive and feature-rich platforms. According to a study by Twilio, while SMS and email continue to dominate, an increasing number of businesses are exploring alternative channels like WhatsApp, which offer enhanced engagement, security, and brand visibility.

Before understanding why WhatsApp is picking up pace or how newer channels like Rich Communication Service (RCS) is finding an opportunity, it is important to understand what's going wrong with the legacy platforms like SMS and Email.

The Inefficiencies of SMS for Transactional Communications

While SMS has been a leader for many years, its limitations are becoming more apparent. The SMS technology is now considered ancient and non-evolving, leading to survival risk. Here are the top 11 problems that persists in SMS technology that is leading to the downfall:

1. Lower Delivery Rates: SMS delivery are unreliable, impacted by carrier issues and signal availability. The best delivery rate that businesses are able to achieve at scale are ~ 90%.
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   - If SMS is used as a channel for delivery OTPs for authentication at the time of login, it means 10% of users are dropping off at the time of login.
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   - If SMS is used for confirming a payment, it means that 10% of the total users are not able to complete the purchase, which directly results in revenue loss. Infact, this is one of the biggest reason for payment failures on credit and debit cards. Niyo banking companies like OneCard, have eliminated this issue by eliminating SMS for authentication and using its swipe technology on the application as authentication.
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2. Vintage technology: SMS works on a complex SMPP protocol which is an age old technology in the world where people are building advanced applications on block chain. There has been very limited innovation on this technology. Most of the innovation is happening on internet led messaging platforms like WhatsApp.
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3. Lack of Trust indicators: SMS, with its limitations on sender ID formatting, often reduces brand names to unrecognisable abbreviations, with random prefixes (such as TX/VX/KX) followed by a mere six characters for the actual name. Moreover, the inability to include logos or images further diminishes brand presence in SMS communications.
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4. The blockers for global businesses to send SMS in India: Global companies like Amazon, Google, Youtube and Facebook cannot send messages to their users in India under the normal route. They have to specifically use the International Long Distance Operator route to send SMS in India. Under this route, they are forced to use random numbers to send messages in India which can confuse customers and erode trust (look at Figure 1 below for a screenshot of SMS from Facebook under the ILDO route).This also costs them ~ INR 4 for each SMS. Every time you trigger a 2 factor authentication code via SMS from Facebook or Google, they spend ~ INR 4 to send you the code.
   
   Recognizing these challenges, many global companies are now migrating their transactional communications to WhatsApp. This shift not only overcomes the inherent limitations of SMS but also leverages WhatsApp's robust platform to enhance customer engagement and trust through a more polished and recognizable brand presentation (look at Figure 2 below for a screenshot of Amazon using WhatsApp for sending transactional alerts to Indian users).
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5. ‍Lack of Engagement Metrics: SMS cannot provide engagement metrics that analysts look for to better their product. Without open or read receipts, businesses cannot gauge the effectiveness of their SMS.
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6. ‍Rich Media Incompatibility: The inability to support images, files, or rich text diminishes the customer experience. In the world where people are conveying their intent, feeling and requirement by use of simple emoji's, SMS continues to only permit the traditional alphanumeric approach to communication.
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7. ‍Character limitations: SMS confines messages to 160 characters, with costs escalating for longer messages.‍
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8. Manual Approval Processes: Regulatory mechanisms like DLT require cumbersome manual approval for each message template.‍
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9. Inability to Support Responses or Interactive Elements: SMS cannot incorporate call-to-action buttons or links, limiting engagement potential. Not only that, users or customers cannot even respond to businesses on SMS as the current technology is incapable of handling responses.
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10. ‍Cost Inefficiency: Despite its limitations, SMS costs significantly more than email and in some cases SMS as well, which offers far greater functionality.‍
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11. Lack of transparency in invoicing: A lot of cPaaS companies charge for SMS consumption/ usage irrespective of whether the message was delivered to the user or not. This means that the business end up paying for SMSs that are not delivered as well.

While we believe that SMS technology is heading towards its doomsday, there are very strong reasons why we believe that it will continue to dominate transactional messaging for at least this decade. We have separately covered this in our article here.

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The Shift Towards Rich Messaging Platforms

As businesses seek to overcome these challenges of SMS, rich messaging platforms like WhatsApp are emerging as the future of transactional communications. WhatsApp not only addresses the inefficiencies of SMS but also introduces a suite of features that enhance customer interaction. With capabilities for end-to-end encryption, multimedia support, verified business accounts, and detailed engagement analytics, WhatsApp provides a more secure, interactive, and brand-aligned communication channel.

This shift signifies a broader trend away from traditional SMS towards platforms that can meet the modern consumer's expectations for immediacy, interactivity, and security. As we move forward, the transition to rich messaging platforms like WhatsApp is not just an alternative but a necessary evolution for businesses aiming to thrive in the digital communication landscape.

10 Reasons Why Businesses Should Use WhatsApp for Transactional Communications

1. Ubiquity and Accessibility: WhatsApp boasts over 2.5 billion active users worldwide, making it one of the most accessible messaging platforms. Its ubiquity ensures that businesses can reach a vast audience, including those in regions where other communication channels might be less prevalent. This widespread use translates into higher engagement rates and a more seamless communication experience for customers.
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2. API protocol: WhatsApp's business messaging platform is built with the modern API protocol and the ecosystem that WhatsApp has developed for technology companies like Fyno to partner with them will foster continuous innovation, ultimately making it easy for business to access and use WhatsApp solutions. Checkout our detailed article on the Meta's tech partner ecosystem here.
   
3. End-to-End Encryption: One of the paramount concerns for both businesses and customers today is data security. WhatsApp offers end-to-end encryption, ensuring that messages, files, and even voice notes are securely transmitted. This level of security builds trust among users, making it an ideal platform for exchanging sensitive information such as payment confirmations and personal data.
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4. Trust: WhatsApp allows businesses to fully configure their brand name, incorporate their logo, and even achieve verified status through a green tick. This verification not only enhances brand visibility but also significantly boosts customer trust by validating the authenticity of the communication.
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5. Conversational and response management: As against SMS, WhatsApp has the capability of managing responses from customer and allows businesses to configure automatic replies or set up a support assistant to help the user.
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6. Efficient Customer Support: WhatsApp enables real-time customer support, allowing businesses to address queries, resolve issues, and provide assistance promptly. The platform supports rich media, including images, videos, and documents, making it easier to clarify customer questions and offer detailed support. This immediacy and multimedia capability significantly enhance the quality of customer service.
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7. Cost-Effective Communication: Compared to traditional SMS or email marketing, WhatsApp is a more cost-effective solution for transactional communications. It allows businesses to send notifications, alerts, and updates without incurring the high costs associated with other channels. This efficiency makes it particularly appealing for small to medium-sized enterprises (SMEs) looking to optimize their communication budgets.
   
   While SMS costs ~ 12 paise - 15 paise for each 160 character message to users, WhatsApp charges ~ 32 paise once for a 24 hour session between the business and the user. In fact user initiated messages are completely free for businesses. For companies that have a high frequency of engagement with their users, WhatsApp will almost always be a better alternative from a cost perspective.
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8. High Open and Read Rates: WhatsApp messages boast exceptionally high open and read rates compared to emails. The personal and direct nature of messaging results in quicker responses from customers, making it an effective channel for time-sensitive communications such as order confirmations, shipping updates, and appointment reminders.
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9. Automated Messaging and Chatbots: The platform supports the use of automated messages and AI-driven chatbots, enabling businesses to scale their communication efforts efficiently. These technologies can handle routine inquiries and transactions, freeing up human agents to focus on more complex customer needs. Automation also ensures that customers receive instant responses, even outside of regular business hours.
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10. Global Reach with Local Presence: WhatsApp allows businesses to establish a local presence globally without the need for a physical office in every country. With features like WhatsApp Business API, companies can manage communications across different regions and languages, tailoring their messages to meet local market needs and preferences.
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11. Integration with Business Systems:WhatsApp can be integrated with various business systems and platforms, including CRM, ERP, and e-commerce systems. This integration streamlines workflows and ensures that customer communications are aligned with other business processes, enhancing efficiency and reducing the potential for errors.
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12. Feedback and Customer Insights: Finally, WhatsApp facilitates easy collection of customer feedback through polls, surveys, and direct messages. This feedback is invaluable for businesses seeking to understand customer preferences, improve products and services, and make informed decisions based on real-time insights.
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13. Continuous innovation: Meta has only recently started monetising WhatsApp. The innovation team at Meta is continuously working towards building amazing feature sets on WhatsApp that is making it the centre of customer experience. With billions of dollars getting into continuous innovation, WhatsApp is poised to become a technological marvel for communications, with limited to no competition in the foreseeable future.

Conclusion

Incorporating WhatsApp into a business's transactional communication strategy offers numerous benefits, from enhanced security and customer support to cost efficiency and personalized engagement. Its global reach and high user engagement rates make it an indispensable tool for businesses aiming to stay competitive in the digital landscape. By leveraging WhatsApp's capabilities, companies can significantly improve their customer communication and operational efficiency, ultimately driving growth and customer satisfaction.