Allow app pings instead of SMS: Banks

Mumbai: Several banks are making a case for an alternative to SMS alerts due to the growing costs and security risks that they pose. Private lenders are calling for alternatives such as app notifications and password generators to replace the text alerts that banks have to mandatorily send out to customers.

The two main concerns, according to a senior banker with a private lender, was that the number of text messages that are required to be sent will double in the next two years.

The additional cost of these messages will have to be passed on to customers, and there could be resistance to these charges.

Second, since customers blindly grant full permission to apps to scrape their mobile for SMS messages, this poses a security as well as privacy threat. According to RBI data, there were 7,244 crore payment transactions in FY22. Many of these required twin SMS messages — one to the person whose account is debited, and another to the person receiving the money.

“Assuming a cost of 15 paise per SMS, the total cost of the messages sent works out to nearly Rs 2,300 crore. Both private and public sector banks have started passing on the costs to the customer in the form of a flat charge for text messages,” said a banker.

Bankers say there is a growing dependency on text messages, and the recent paper on digital lending also envisages sending SMS alerts to loan customers. Fintech companies have already made a representation to the government to replace text alerts with app notifications since each customer already has an app installed.

“A large number of banking customers already use mobile apps. For the section of customers who do not use apps, the bank can continue to send text alerts,” said the banker. Lenders say that with the RBI now allowing UPI-based cash withdrawals from ATMs using apps, the number of people using banking apps will grow further.