Replacing SMS OTPs: Risks and Rewards of Moving to RCS for Payment Authentication

Stop losing conversions to SMS delays and fraud: why RCS deserves a hard look in 2026

Payment teams still pay a hidden tax for SMS OTPs: high failure rates, SIM‑swap fraud, unclear delivery SLAs and rising carrier fees that seep into margin and user experience. In 2026 the conversation has changed — RCS adoption and new Universal Profile specifications plus carrier and OS vendor movement (including early iOS RCS E2EE work observed in 2025) make Rich Communication Services a realistic primary channel for transaction authentication. But replacing SMS OTPs with RCS is not a flip of a switch: it requires a practical roadmap that balances security gains, new fraud vectors, fallback strategies, and regulatory compliance.

The state of play in 2026: why RCS now

Adoption, standards and the encryption inflection

By early 2026 RCS is no longer an experimental toy. Three macro trends matter for payment providers:

• Standards maturity: GSMA’s Universal Profile 3.x (rolled out through 2024–2025) formalized Verified Sender, Business Messaging, and clearer security guidance. That standardization reduced vendor lock‑in and enabled more consistent behavior across carriers and clients.
• Platform support: Android clients reached mass RCS feature parity; Apple signaled support and shipped early code paths for RCS end‑to‑end encryption (E2EE) in late 2025 betas with progressive rollouts in 2026. This reduces the fragmentation that historically forced SMS fallback.
• Security upgrades: The shift toward E2EE (MLS‑based) and Verified Sender metadata provides cryptographic provenance for messages and a UX trust signal that users and automated systems can rely on.

Together these make RCS a viable channel for delivering authentication material — but viability is not the same as simplicity. Expect benefits and new risks.

Key security gains over SMS OTP

• Resistance to SIM‑swap and SS7 interception: SMS is vulnerable to carrier‑level routing and SIM takeover. RCS E2EE prevents on‑path interception by carriers or SS7/diameter attacks when both endpoints support E2EE.
• Higher deliverability and richer UX: RCS messages can include verified business badges, inline actions, and biometrics prompts — reducing dropouts during authentication.
• Stronger sender verification: Verified Sender allows cryptographic attestation and UI indicators, making phishing via spoofed shortcodes harder.
• More telemetry for fraud detection: Richer metadata from RCS sessions (client version, device attestations, delivery receipts) improves risk scoring.

New fraud vectors and operational risks introduced by RCS

RCS closes some attack paths but opens others. Payment providers must understand the active threat model in 2026.

Primary new vectors

• Verified business impersonation at scale: If onboarding and vetting of Verified Sender programs are weak, fraudsters can buy or spoof business identities to lure users with rich media — converting to credential theft or social engineering.
• Client and app ecosystem exploitation: RCS clients are apps with complex parsing logic. Vulnerabilities in client renderers or card processors can be exploited to perform phishing, drive malware installs, or exfiltrate data.
• E2EE false sense of security: E2EE protects content in transit but not endpoints. Compromised devices can still leak tokens, and fallback to non‑E2EE paths (SMS) remains a frequent weakness.
• Carrier/Hub compromises: Many deployments route messages through RCS hubs. A malicious or misconfigured hub can subvert metadata or downgrade E2EE, so trust boundaries must be explicit and monitored.
• Rich content abuse: Deep links, payment links, and interactive cards can be weaponized for click‑jacking or token capture unless strict URL validation and domain verification are enforced.

Operational headaches

• Fragmentation and fallback complexity: Not all devices support RCS or E2EE. Designing deterministic fallback behavior that preserves security while minimizing friction is non‑trivial.
• Regulatory implications: Delivering authentication content over messaging channels touches telecom, payments, and privacy regs — from PSD2 SCA expectations in Europe to data residency and consent rules in APAC.
• Vendor management: RCS involves carriers, RCS providers (hubs), client vendors, and cloud messaging services; each introduces a distinct SLA and control surface.

Bottom line: RCS improves security posture and UX but requires layered defenses, attestation, and a robust fallback strategy to replace SMS OTPs safely.

Practical 6‑step roadmap for payment providers evaluating RCS as primary authentication

This roadmap is designed for product, security, and engineering teams at payment providers who must balance conversion, fraud, and compliance.

Step 1 — Business case and risk assessment (2–4 weeks)

• Quantify current SMS failure and fraud metrics: delivery rate, time‑to‑deliver, OTP success rate, SIM‑swap incidents, chargebacks tied to authentication failures.
• Estimate conversion lift: RCS UX improvements (verified badges, inline approve) typically reduce abandonment by 5–15% in pilots — model conservative and optimistic scenarios.
• Perform threat modeling: map existing attack trees (SIM swap, SS7, phishing) and overlay RCS mitigations and new attack surfaces.

Step 2 — Prototype and lab risk testing (4–8 weeks)

• Implement a sandbox flow: register as a Verified Sender with an RCS Hub and send low‑risk transactional messages (non‑monetary OTP) to a user cohort. Test E2EE when available.
• Run adversarial tests: attempt client‑side parsing attacks, phishing simulations, and hub downgrade attempts to validate error handling.
• Measure telemetry: collect delivery receipts, client versions, app attestations, and latency. Build baseline metrics.

Step 3 — Build the auth stack (8–12 weeks)

Replace SMS OTPs with a layered authentication approach rather than a single token channel.

• Primary channel: RCS with Verified Sender + E2EE where available. Deliver an action card rather than plain OTP (approve/deny with tap).
• Cryptographic tokens: Use short‑lived signed tokens (JWT or mac‑based tokens) rather than plaintext numeric OTPs. Tokens should be single‑use and bound to transaction context (amount, merchant, timestamp).
• Device attestation: Tie the RCS interaction to device attestation (e.g., SafetyNet/Play Integrity, Apple device attestation) when possible to detect emulators and compromised devices.
• Fallback authorization methods: WebAuthn/FIDO2, in‑app biometrics, and push notifications as priority fallbacks. Reserve SMS only as a last resort with elevated risk scoring.

Step 4 — Failover design and policy (ongoing)

Design deterministic and auditable fallback logic.

• Define ordered fallback channels and risk thresholds: RCS → App Push + WebAuthn → Email + in‑app OTP → SMS (last resort).
• Enforce step‑up authentication: if falling back to SMS, require additional checks (velocity limits, transactional thresholds, or secondary biometric confirmation).
• Auditability: log channel used, delivery receipts, and user choice with cryptographic signatures for forensics and dispute resolution.

Step 5 — Regulatory and privacy compliance (concurrent)

Authentication methods are regulated differently across regions. Address them early.

• EU (PSD2 & SCA): RCS-based approval actions can satisfy SCA when they provide two independent factors — possession (device) + inherence (biometric) or knowledge. Maintain explicit user consent and clear transaction context in the RCS card.
• Data residency & privacy: Avoid embedding sensitive PII in message bodies; use transaction IDs and server‑side lookup. Store telemetry and attestations in compliant regions.
• Telecom regulations: Confirm opt‑in rules for business messaging, observe Do‑Not‑Disturb lists, and maintain opt‑out flows.
• PCI and tokenization: Never transmit full PANs via RCS. Use tokenized references for payment flows.

Step 6 — Pilot rollout, monitoring and continuous hardening (3–6 months)

• Start with low‑risk segments: frequent customers with modern devices in markets where RCS adoption is high.
• Monitor KPI dashboard in real time: delivery rate, approval rate, fraud rate, fallback rate, chargebacks, and user complaints.
• Iterate: harden sender verification, tighten URL allowlists, and update risk models based on telemetry (new client families or hubs showing anomalies).

Technical implementation details you need to finalize

Verified Sender and message signing

Work with your RCS hub to obtain Verified Sender attestation. Require signed metadata for each message and validate signatures server‑side. Do not rely solely on UI indicators — treat the signature as the source of truth in automated systems.

Designing the action card

• Keep the card minimal: transaction context (merchant, amount), time validity, and two clear choices (Approve / Deny).
• Embed domain‑verified deep links that resolve to your app or a secure web checkout with origin attestation.
• Limit external links; prefer server callbacks so approval is a one‑tap cryptographic acknowledgment.

Token binding and single‑use tokens

Tokens must be bound to user and transaction context. Use short TTLs (15–60 seconds for high‑value actions) and cryptographically sign tokens with keys that are rotated and held in an HSM. Reject tokens reused or presented from unexpected geolocations and device footprints.

Telemetry and attestation

Collect and store:

• Message delivery receipts and read receipts.
• Client and OS version, RCS client identifier, and E2EE capability flag.
• Device attestation results.
• Hub identifiers and Verified Sender certificate fingerprints.

Feed this data into fraud scoring models and automated policy engines.

Fallback channels: strategy and best practices

Fallback is where most security problems occur. Follow these best practices:

• Minimize SMS fallback: Reserve SMS for emergency scenarios. When used, elevate risk controls.
• Prefer app push and WebAuthn: Push messages with secure attestation and WebAuthn allow passwordless strong authentication without the telecom attack surface.
• Rate limit SMS attempts: Throttle delivery and require additional verification after multiple SMS fallbacks in a short window.
• Transparent UX: Notify users why a fallback occurred and provide clear guidance to restore secure channels (e.g., re‑enable RCS, update app).

Regulatory and audit checklist (must‑have items)

• Document how RCS meets SCA and other regional authentication requirements.
• Keep cryptographic logs and Verified Sender attestations for dispute resolution.
• Document consent flows and opt‑in records for business messaging.
• Demonstrate how you avoid transmitting PANs or sensitive auth data over message bodies.
• Maintain vendor contracts that specify audit access to hubs and carrier partners.

KPIs, monitoring and incident response

Key metrics to track

• Delivery rate (RCS vs SMS)
• Approval / completion rate
• Fallback rate to SMS
• Fraud rate post‑auth (fraud per 1,000 auths)
• Time‑to‑approve and abandonment rate
• Number and severity of verified sender incidents

Real‑time signals to feed into decision engines

• Sudden spike in fallback rate from a particular device family or hub.
• Inconsistent device attestation for a single user across concurrent sessions.
• High read‑receipt but low approve rate (possible phishing or confusion).
• Unexpected geographic origin of approval actions.

Advanced, future‑proof strategies

To maximize security and limit churn over the next 3–5 years, consider:

• Make RCS one signal in a risk‑weighted, step‑up model: Combine device attestations, behavioral biometrics, and telemetry so approvals can be frictionless for low‑risk transactions and stepped up when signals are anomalous.
• Push toward passwordless: Invest in WebAuthn/FIDO2 and in‑app attestations. RCS should be a friendly alternative for users without secure authenticators, not the only secure path.
• Adopt domain‑bound tokens and cryptographic receipts: For every approval issue a signed receipt that can be used in later disputes — this adds non‑repudiation that is useful in investigations and chargebacks.
• Participate in industry vetting: Join GSMA or local operator consortiums to influence Verified Sender onboarding and share threat intel with hubs and carriers.

Real‑world example (anonymized)

A mid‑sized European payments processor piloted RCS approval cards in Q4 2025 with 12k users. Results after a 90‑day pilot:

• Authentication completion increased from 84% (SMS OTP) to 92% (RCS action) for eligible devices.
• SIM‑swap related fraud dropped by 67% for the pilot cohort.
• Fallback to SMS decreased 75% after onboarding 60% of active users to the RCS channel.
• Operational headaches emerged from hub‑level metadata inconsistencies, leading to a two‑week vendor remediation plan — a reminder to plan for vendor operability.

The pilot validated conversion and security gains but also reinforced the need for robust vendor SLAs and continuous telemetry.

When not to replace SMS with RCS

There are scenarios where embracing RCS as a primary channel is premature:

• Low device adoption markets where RCS penetration is under 30% of your active users.
• High regulatory uncertainty where messaging records must be retained in‑native carrier formats and vendor access is restricted.
• If your vendor matrix lacks strong hub attestations and you cannot validate Verified Sender signatures.

Final takeaway and immediate action plan

RCS is a powerful tool for payment authentication in 2026: it offers stronger transport protections, richer UX, and better telemetry than SMS. But it introduces new, pragmatic risks that require a layered implementation: Verified Sender attestation, cryptographic tokens, device attestation, prioritized fallback channels, and strict vendor governance.

Immediate action items (first 30 days)

1. Run a quick ROI: measure current SMS failure & fraud costs versus estimated gains from RCS.
2. Engage an RCS hub and request sandbox credentials; start a lab prototype for non‑monetary flows.
3. Draft fallback and escalation policies that make SMS a last resort with enforced step‑up checks.
4. Update legal and compliance teams on plans and capture documentation needs for audits.

Call to action

If you manage authentication or payments, don’t treat RCS as a checkbox — treat it as a program. Start with a small, measurable pilot that prioritizes security and visibility. Need a turnkey checklist or a pilot blueprint tailored to your stack? Contact our team for a customized RCS authentication playbook built for payment providers — including vendor rubrics, pilot templates and regulatory mapping for EU, UK and APAC markets.

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