How SMS Banking Works

How SMS banking works is essentially through the texting feature of each customer’s individual mobile phone. SMS, or short message service, allows personalized, real-time communications from the bank to the customer (push messages) and from the customer to the bank (pull messages). When activating the service, customers select what categories of messages they will allow from the bank.

The key advantage of this kind of technology-enabled communication for customers is that they usually have their mobile phones with them at all times. Therefore, it is unlikely there will be a time delay in receiving urgent messages. For example, the bank might text about safety at ATMs in the area. Had that been sent to the customer’s personal computer office email, they might not have checked that in time to prevent being robbed at the ATM.

Typical push messages from the bank range from alerts about activity in the account to marketing information about lower interest rates on mortgages. For instance, the bank received a check for an amount significantly larger than the average written by that customer. They text the customer about this. Immediately the customer can respond if the check is legitimate.

Part of that message from the bank might include a one-time password (OTP) for the customer to use in that one response. This feature enhances security. After the communication notification-response cycle is complete, then the OTP, which is programmed for one-time use only, will be discarded. Customers can request this feature when they sign up for SMS. Some find it more convenient than having to remember and key in a PIN regularly.

Other kinds of push messages could include notification of direct deposit of a payroll check, periodic account balances, delay in transferring funds overseas, and unusual activity on credit, debit, or ATM cards.

Pull messaging—communications from customers to the bank—takes the form of standardized requests. Those could include real time account balances, statement for the last several or the month’s transactions on one or all accounts, closing down a lost or stolen credit, debit, or ATM card, the value of the yen or other foreign currency, electronic payment of a bill, stop payment on a check, and interest rate for a five-year $100,000 certificate of deposit. After receiving the requests, the bank texts the answer.

To sign up for SMS banking, go to the bank’s online site using your mobile phone. Different financial institutions might have a variety of slightly different instructions. However, activation essentially involves the following steps.

There could be a button for SMS banking. Or the initial click will be on Mobile Banking. Once in the SMS field, there will be a prompt to provide the mobile phone number. The bank will text an activation code. Then the process begins. Each customer sets the preferences for what kinds of push communications they want from the bank. There will be a list of standardized requests such as “LAST” for the previous five transactions on a specific account. Now you know how SMS banking works!

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