Decoding SMS Pumping Fraud: Protecting Your Communications

In the digital-first world, SMS messaging remains a common security mechanism for second factor and other verification communication. Whether verifying accounts through one-time passwords (OTPs), notifying customers about transactions, or sharing promotions, organizations across industries often rely on SMS as a reliable channel. Yet, this trust has been exploited by cybercriminals through SMS pumping fraud, also known as SMS toll fraud.

Fraudsters manipulate SMS systems to inflate message volumes and profit from them, leaving businesses to foot the bill. These attacks are stealthy, costly, and increasingly sophisticated. But understanding the mechanics of SMS pumping and deploying advanced, proactive solutions can stop these fraudsters in their tracks.

What is SMS Pumping Fraud?

SMS pumping fraud occurs when attackers exploit messaging systems to generate large volumes of SMS traffic to premium-rate phone numbers. The goal is simple: to profit from the payments made by organizations for delivering these SMS messages.

Here’s how it works:

Creating Synthetic Accounts: Attackers use automation to create fake accounts on a company’s platform, typically with synthetic or randomly generated email addresses.
Triggering SMS Messages: Once the accounts are created, attackers initiate SMS-based actions like OTP verification or password recovery requests. Each message sent to a premium-rate number incurs a charge for the business, while the fraudsters pocket the revenue from inflated traffic.

The fraudsters profit much in the same way the affiliate marketing folks are paid. Affiliate marketing is a performance-based marketing strategy where a third-party, or affiliate, promotes a company’s products or services in exchange for a commission. In a similar fashion, the fraudsters collude with telecom Mobile Network Operators (MNOs) in exchange for a share of the MNO’s profits which result from charging SMS vendors a fee to deliver SMS messages to the MNO’s users.

The motivation for this type of attack also resembles ad fraud, where fake ad impressions generate revenue for fraudsters. However, with SMS pumping, the fraudsters’ success is tied to abusing business messaging services, often in ways that go undetected for extended periods.

The Financial and Operational Toll

SMS pumping fraud doesn’t just bleed money—it also creates operational chaos:

Financial Losses: Costs escalate quickly. For example, in one case, a company was losing $3,000 every four hours due to SMS pumping.
Operational Strain: Fraudulent traffic can overwhelm IT systems, disrupt legitimate services, and leave customer support teams scrambling to address complaints.
Reputation Damage: Due to the fraudulent load impacting systems, legitimate customers may experience delayed or failed OTPs, eroding trust in the organization.

How Does SMS Pumping Fraud Impact Different Industries?

SMS pumping fraud is a universal challenge, impacting any organization that uses SMS for communication. Here’s how it manifests across key sectors:

Telecommunications

Telecom providers serve as intermediaries for SMS delivery, making them both a target and a victim. Fraudsters exploit vulnerabilities in routing systems and SMS gateways, creating inflated traffic and misusing network resources.

E-Commerce

E-commerce platforms rely heavily on SMS for account verification, order confirmations, and promotional campaigns. Fraudsters abuse these mechanisms, driving up costs and disrupting customer experiences.

Financial Services

Banks and fintech companies depend on SMS for secure multi-factor authentication (MFA). By targeting these systems, fraudsters can increase SMS traffic to premium numbers, significantly inflating operational costs.

Healthcare and Technology

Hospitals, clinics, and tech companies use SMS to send appointment reminders, test results, and alerts. Fraudulent traffic clogs these critical channels, delaying legitimate communications.

Enterprises and Organizations Across Industries

SMS pumping fraud is not limited to any specific industry – it is a horizontal problem that applies to all organizations communicating with customers via SMS or text. Whether it’s retail stores sending order updates, educational institutions sending class schedules, or government agencies sending emergency alerts, all enterprises using SMS are potential targets. If your organization sends text messages, you need to secure your SMS endpoints.

This broad applicability underscores the need for a proactive, comprehensive approach to detecting and preventing SMS fraud, regardless of your industry.

Case Study: How a Leading Navigation Device Manufacturer Tackled SMS Pumping

One of the world’s largest navigation device manufacturers recently faced a severe SMS pumping attack, providing a real-world example of the financial and operational toll this type of fraud can take – and how it can be mitigated.

The Problem

Fraudsters targeted the company’s account creation endpoint, using synthetic email addresses to create fake accounts. Each account triggered SMS verification messages to premium-rate phone numbers, costing the company $3,000 every four hours.

The Attack’s Complexity

Fraudsters used unique IP addresses, devices, and account details to make the activity appear legitimate.
The attack leveraged infrastructure across multiple countries, including Russia, Brazil, and Vietnam, to evade detection.
The company’s SMS costs were skyrocketing, but the fraudulent traffic remained hidden in the noise of legitimate requests.

The Solution

Cequence deployed its bot management solution which features an advanced Attack Feature Detection (AFD) model, powered by machine learning, to analyze and block malicious activity at the account creation endpoint. This proactive approach focused on:

Behavioral Analysis: Identifying anomalies in user activity, such as repeated SMS requests from suspicious accounts.
Automated Mitigation: Blocking fraudulent requests in real time, preventing attackers from completing the second phase of their operation.

The Results

Fraudulent SMS traffic decreased by 90% within days.
The attack was stopped completely within a week, with no resurgence since.
The company saved thousands of dollars and restored operational stability.

This case highlights the importance of deploying intelligent, scalable solutions to combat SMS fraud effectively.

Why Traditional Defenses Fall Short

Many organizations rely on traditional methods like rate limiting, geo-blocking, and IP filtering to combat SMS fraud. While these techniques can offer some protection, they are far from sufficient against sophisticated attacks.

Limitations of Traditional Approaches

Rate Limiting: Setting thresholds for message volume can block legitimate traffic, creating a poor experience for real users.
Geo-Blocking: Restricting traffic from specific regions may reduce fraud but often disrupts legitimate global operations.
IP Filtering: Blocking suspicious IPs is reactive and ineffective against attackers who rotate IP addresses frequently.

These approaches are static, reactive, and ill-equipped to handle the dynamic nature of modern SMS pumping attacks.

How Cequence’s Advanced Solution Outperforms

Cequence’s solution goes beyond traditional defenses, leveraging advanced technologies to stop fraud before it starts.

Key Features of Cequence’s Solution

Threat and Entity Behavior Analytics: By analyzing patterns in user activity, Cequence identifies fraudulent behavior, even when attackers use unique IP addresses and devices.
Machine Learning Models: Adaptive algorithms continuously learn from new data, ensuring real-time detection of evolving threats. For example, focusing on the patterns of the synthetic identities used in the above case study example, analyzing payload characteristics like names, email addresses, etc. and finding patterns between them, separating them from the population of normal users, was an excellent and valuable tool for discerning bad actors from legitimate users.
Vertical-Specific Expertise: Cequence’s deployments across industries provide tailored solutions that address each sector’s unique challenges.
Global Intelligence: Insights from protecting Global 500 companies, including eight of the world’s largest telecoms, enable Cequence to detect fraud trends quickly and accurately.

With this combination of technology and expertise, Cequence delivers proactive, scalable protection against SMS pumping fraud.

Practical Steps to Protect Your SMS Channels

Organizations can take several steps to safeguard their SMS systems against fraud:

Monitor SMS Traffic: Regularly analyze traffic patterns for anomalies, such as sudden spikes in message volume or low engagement rates.
Deploy Advanced Solutions: Partner with a fraud prevention provider like Cequence to implement AI-driven detection and mitigation tools.
Educate Your Teams: Train IT and customer service teams to recognize signs of SMS pumping and respond quickly.
Secure Endpoints: Protect account creation and MFA endpoints using behavioral analytics and machine learning.
Optimize Messaging Practices: Ensure SMS systems are configured to prioritize security without compromising user experience.

The Future of SMS Fraud Prevention

As fraudsters adapt, organizations must stay ahead with innovative defenses. Here’s what the future holds for SMS security:

AI-Driven Prevention: Artificial intelligence will play a central role in detecting and mitigating fraud faster and more accurately.
Cross-Channel Integration: Fraud prevention systems will integrate SMS with email, app-based messaging, and voice to provide holistic protection.
Global Collaboration: Industry-wide intelligence sharing will strengthen defenses and create a unified front against cybercrime.

The fight against SMS pumping fraud requires a combination of advanced technology, strategic planning, and global cooperation.

Conclusion

SMS pumping fraud is a costly and disruptive threat, but it’s not insurmountable. Organizations must adopt proactive strategies to protect their SMS systems and their customers, leveraging advanced tools like Cequence’s fraud prevention solution. By combining machine learning, threat and entity behavior analytics, and industry expertise, Cequence delivers unmatched protection against attacks, business logic abuse, and fraud. Don’t let SMS pumping drain your resources or disrupt your communications. Take the first step toward securing your SMS channels today. Schedule a demo and learn about how Cequence can protect your business from SMS fraud.