The Business Side of Phone Number Verification

Phone number verification is the new digital gatekeeper. Nearly every online platform, from social media to money management, requires some form of identification now involving a verified phone number. Yet such an innocuous operation on the surface involves a complicated operation across business, technology and fraud.

Gone are the days when email verification was sufficient. Email fraud – and the creation of disposable email addresses with bots – became too easy. Although carriers still require identity verification of physical SIM cards to acquire phone numbers (rather than a mere swipe of a hand to create email accounts) this assumption about phone number security has done just as much to complicate the situation.

The Financial Considerations of Verification

Companies spend a fortune developing their versions of verification. A one-time SMS message costs companies anywhere from $0.01 to $0.10 per message sent, depending on the destination carrier; for companies boasting millions of users, this represents a massive financial hit. For example, if a social media company had ten million verifications a month, it could pay over $500,000 a year just to send SMS messages.

When companies want dependability and ease of bulk verification options (multiple accounts, for example), there are third-party platforms that enable temporary use of phone numbers for limited time purposes. BEE-SMS, for example, allows companies to essentially borrow a number for one-time verification across platforms at a low cost. Yet companies should also seek compliant verification professionals who can lend access with guaranteed compliance and delivery.

Yet it’s not as simple as sending a message; it’s much more complicated with multiple carriers and international delivery, confirmation and retry logic in the event of failed messages on behalf of companies who assume they’ll get their inquiries answered. Companies rarely consider these operational costs until their verification rates drop and customers start complaining.

Fraud and Detection

Yet such purchases only get companies so far. In today’s world, fraud perpetrators have become savvier than ever in bypassing systems created to get around them. They use VoIP numbers, SIM farms (companies that compile thousands of phones in one space) and recycling to get past verification requirements. In fact, many fraud organizations promote messaging options where thousands of numbers are generated for false accounts across platforms.

Now companies have to distinguish between legitimate use with unconventional numbers and sophisticated criminals attempting to get around the verification system as quickly as possible. A number overseas to a tourist may be flagged the same way as someone utilizing a SIM farm. There has to be a balance in verification requirements that allow legitimate use while preventing fraud.

This is especially true for financial services as nothing is worse than a compromised number beyond lost money – institutional penalties can occur if fraud happens. Therefore, most financial systems create layered systems requiring additional identity verification such as digital fingerprinting, behavioral analysis and risk scoring which could cost financial institutions millions to develop per facility.

Technological Reliability

Phone-based verification systems fail more often than companies anticipate. SMS messages never arrive, carriers shut down spam-related messages and network stress puts a pause on urgent codes sent at the last minute. Up to 5-15% of verification-related messages never get received as studies consistently show.

International messaging is even worse. Each country has different commercial messaging requirements, limited delivery and higher rates than domestic settings; companies could pay $0.20 for a confirmation to a specific African or South American nation – but only $0.01 to a domestic one.

Therefore, companies must build strong backup systems; when SMS doesn’t work, some platforms offer voice call messaging with automated short codes; others lend verification through authenticator apps, generated tokens or backup email addresses for confirmation. Each subsequent means of verification boasts its own complication – and cost of development.

Regulatory Compliance

The telecommunications industry surrounding messaging has become stricter over time. 10DLC (10-Digit Long Code) regulation in the United States states all businesses must register their messages and note specifics surrounding consent – failure to comply means intrusive carriers filtering messages out or completely blocking them.

Add the European GDPR regulations in the mix and companies are further troubled by complexities that require in-house justification as to why they’re collecting phone numbers in the first place (how long they’re retained, why they’re shared). Phone number compliance continues to change all the time meaning companies need frequent awareness checks.

There are also standards developed by industry standards, too; health care requires HIPAA-compliant updates while KYC (Know Your Customer) regulations exist in finance – e-commerce has data protection laws it needs to mind across international borders.

User Experience

From the user end, phone number verification is often frustrating. Users fail to receive codes; they enter them in the wrong fashion; they hit time limits – they’re less likely to engage further if challenged along this process.

Mobile number portability presents an issue as well; if someone changes mobile carriers but keeps their phone number, there’s no guarantee their SMS will reach its destination – international travel proves even more challenging as tourists who hit foreign carriers often can’t utilize their numbers at all for international texting.

Companies struggle between protecting their user base for compliance purposes but also avoiding situations where legitimate customers are flagged as fraudulent. Overly aggressive systems drive away good buyers while lenient ones allow fraudsters entry – which is why such systems require constant monitoring and adjustments based on fraud patterns.

The Future of Verification

It’s clear that systems related to phone-based verification are changing rapidly. Biometric authentication is being piloted along with device-based trust and blockchain identity systems – but it’s hard to supplant something so integral into today’s infrastructure either way with eSIMs and virtual numbers making it even easier for criminals – as well as legitimate users – to obtain multiple numbers.

AI is becoming increasingly popular in fraud detection thanks to machine learning which assesses attempts, picks up patterns and divulges when something suspicious occurs – but it requires an agile team with tons of data collection at play.

The business side of phone-based verification reveals an increasingly complex landscape. To navigate it successfully, companies require an overview outside of any technical implementation that considers the carriers involved, regulatory compliance and basic user expectations that surround who is trying to create digital access in the first place.