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Summary – Between exploding telecom costs and the risk of degrading UX, combating SMS pumping demands early detection, defense in depth, and alternative authentication options. Set real-time volume and cost alert thresholds, adaptive controls (geoblocking, velocity limits, lightweight CAPTCHA), and operational dashboards with runbooks to react in minutes. Diversify OTPs (email, TOTP, magic links, FIDO2) and strengthen contract governance (price caps, MCC blocking) to maintain ongoing risk control without impacting conversion.
Solution: deploy a three-phase approach (detect, block, replace) with observability and optimized contracts.
SMS pumping attacks exploit the one-time password (OTP) delivery mechanisms to generate illicit revenues through commission sharing with operators, while causing telecom bills to skyrocket. Product, Security, and Growth teams face the challenge of balancing budget protection with preserving the user experience.
In this article, we outline a three-step approach 6 detect, block, replace 6 to reduce fraudulent OTP costs by 80 to 95% without harming conversion rates. We will first cover how to identify early warning signals and establish alert thresholds, then discuss defense-in-depth mechanisms, observability, and response plans, and finally explore authentication alternatives and contract governance.
Detecting the Attack and Setting Alert Thresholds
Understanding the SMS pumping revenue model is essential to distinguish legitimate use from large-scale fraud. Setting real-time cost and volume alerts enables teams to act before the budget is depleted.
SMS pumping relies on revenue sharing (“rev-share”) between the aggregator and mobile operators for each one-time password sent. Fraudsters exploit poorly monitored SMS routes, multiply requests, and pocket commissions for both delivery and response, sometimes sending thousands of messages per minute.
To spot these abuses, monitor the volumes of OTP requests and successes by country, by Autonomous System Number (ASN), and by route. A sudden spike in messages from an unusual geographic area or an abnormal rise in failure rates often indicates automated pumping attempts.
A financial services company recently discovered that one of its approved providers doubled its OTP deliveries to West African numbers in under ten minutes. Analysis showed that volume and cost threshold alerts, configured per destination, halted transactions before the budget was exhausted and without impacting regular customers.
Defense-in-Depth and Preserving the User Experience
Layering lightweight, adaptive controls limits fraud while maintaining a smooth journey for legitimate users. Each barrier should be calibrated based on risk profiles and measured via A/B testing.
Selective geo-blocking using a country allowlist and denylist is the first line of defense. You can allow OTP deliveries only from countries where your normal activity is established, while redirecting suspicious attempts to stricter mechanisms.
Velocity limits applied per IP address, device, or account are essential to block mass scripting. Adding an adaptive CAPTCHA like reCAPTCHA v3, tuned to risk scores, and a lightweight proof-of-work (a minor cryptographic computation) strengthens defenses without creating constant friction.
Finally, implementing OTP quotas over sliding windows and validating phone number formats adds another layer. Built-in provider protections, such as Vérify Fraud Guard, and destination-based circuit breakers provide additional resilience.
An online retailer implemented a multi-layered strategy combining weekly quotas, format validation, and adaptive CAPTCHA. Fraud dropped by 90% while conversion rates remained stable, demonstrating the effectiveness of graduated defenses.
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Enhanced Observability and Operational Procedures
KPI-focused dashboards enable real-time visibility into one-time password costs and performance. Granular logging and incident runbooks ensure swift responses to anomalies.
It’s crucial to establish dashboards showing cost per registration, success rates, and number of OTP requests. These metrics, broken down by country, operator, and route, provide immediate insights into spending distribution and abnormal behaviors.
Detailed logging of the Mobile Country Code (MCC) and Mobile Network Code (MNC), device fingerprint, and user profile supports event correlation. Paired with anomaly detection tools, this logging triggers alerts once predefined thresholds are crossed.
Runbooks define clear procedures for incidents: contain the anomaly via targeted blocking, activate enhanced protections, analyze logs, and conduct a structured post-mortem. Each step assigns designated owners and timelines to maintain operational tempo.
A healthcare provider experienced a pumping spike on its patient portal. Thanks to real-time dashboards and a validated runbook, the team isolated the fraudulent route in under fifteen minutes and deployed targeted blocking rules, restoring normal service with no notable disruption.
Strengthening Authentication and Governance
Diversifying authentication methods by risk level reduces SMS dependency and exposure to pumping. A clear contractual framework with aggregators secures pricing and alert thresholds.
Email-based OTPs, time-based one-time passwords (TOTP) via dedicated apps, and magic links provide less exposed alternatives. High-risk users can be offered FIDO2 security keys or WebAuthn passkeys, while standard scenarios can use a simplified fallback flow.
It’s recommended to conduct A/B tests for each new option to measure its impact on conversion and fraud. This empirical approach lets you fine-tune the authentication mix and optimize your security-to-conversion ROI.
On the governance side, contracts with SMS aggregators should include rate caps, delivery thresholds by MCC/MNC, and automatic blocking provisions. Documenting an anti-fraud policy and training support and sales teams ensures clear understanding and consistent rule enforcement.
A mid-sized B2B services company renegotiated its SMS provider agreements to include an MCC-based block and budget alert tiers. This governance cut fraudulent requests by two-thirds by automatically adjusting routes without manual intervention.
Adopt a Three-Step Strategy to Tackle SMS Pumping
By combining early detection of subtle signals, defense-in-depth optimized for UX, and contextual authentication alternatives, you can significantly reduce SMS pumping costs. Fine-grained observability and clear runbooks ensure rapid incident response, while rigorous contract governance guarantees ongoing control.
Our open-source, modular experts are ready to tailor this checklist to your business context, co-create a 30/60/90-day action plan, and secure your OTP flows without compromising conversion.
