Consumers lost roughly $470 million to text scams in 2025 – a five-fold increase since 2020, according to the FTC Consumer Sentinel Network – and the damage is no longer limited to the people being defrauded. Retailers are absorbing a secondary cost as shoppers, overwhelmed by smishing attacks (fraudulent SMS messages impersonating brands or delivery services), increasingly delete legitimate texts without reading them.
That behavioral shift is what industry players are now calling a friction tax: an invisible drag on conversion rates, customer engagement, and revenue that retailers absorb even when their own systems were never compromised. For small and independent merchants already operating on thin margins, the effect is disproportionate.
How Scam Texts Disrupt the SMS Channel
The mechanics are straightforward. Fraudsters send mass SMS messages impersonating retailers, shipping carriers, and payment processors – fake delivery notifications, fabricated order confirmations, and counterfeit coupon links that harvest credentials or payment data. After a reported 50% surge in smishing volume last year, consumers have begun treating nearly every text from an unfamiliar number as a potential threat.
SMS was long considered a marketing channel with near-98% open rates, making it one of the most effective tools available to retailers for time-sensitive communications like flash sales, shipping updates, and fraud alerts. That baseline trust is now degraded. Rachid Wehbi, founder of e-commerce research platform Sell The Trend, framed the shift plainly: “Most people think scams are obvious, but today they’re built into normal behavior. People are buying something small, quickly, and moving on. That’s exactly where fraud fits in.”
The FTC’s data shows 92,452 fraud cases tied to online shopping – approximately 17% of all reported fraud, or roughly one in six scams. With U.S. e-commerce surpassing $1.4 trillion, the scale of exposure for merchants is substantial.
The Measurable Cost to Retailers
The friction tax is not a single line item – it compounds. When consumers stop engaging with SMS, retailers lose real-time reach for promotions, order updates, and re-engagement campaigns. Small businesses already face pressure on marketing effectiveness, and losing SMS as a reliable channel raises the cost of customer acquisition through every alternative.
Ariel Reid, VP for customer experience at telecommunications firm GCH Technologies, described the problem as “the psychological retreat of the customer” – a dynamic that goes beyond any single ignored message. When a customer deletes a legitimate shipping update or fraud alert, the downstream effects include missed delivery windows, unresolved account issues, and reduced purchase frequency.
For independent retailers and small businesses, there is an added vulnerability: they typically lack the brand recognition that helps consumers distinguish legitimate texts from scams. A national chain can run a public awareness campaign about what its texts will and won’t say. A small merchant operating across one or two storefronts generally cannot.
What the Industry Is Doing – and What Merchants Can Do Now
GCH Technologies recently modernized the U.S. Short Code Registry, a centralized database of five- and six-digit numbers used in business-to-consumer texting, administered in partnership with the Cellular Telecommunications and Internet Association (CTIA). The modernized registry mandates brand vetting, assigns unique identifiers to approved companies, and raises the cost barrier for entry – a deliberate friction that Reid argues works in legitimate businesses’ favor. “A bad guy isn’t going to pay that premium,” she noted.
Reid pointed out that nine times out of ten, spam and scams do not originate from the short-code channel, precisely because qualification requirements and upfront costs screen out most bad actors. Short codes remain a more trusted pipeline than standard 10-digit numbers, though the distinction is not yet widely understood by consumers.
On a separate track, video verification firm Emovid is developing asynchronous video messages tied to verified sender identities – an approach designed for high-trust communications where text alone is no longer sufficient. Victor Cho, Emovid’s CEO, flagged that AI-generated messages are becoming convincing enough to undermine traditional trust signals entirely: “The old ways of trusting what you see or read are quickly becoming outdated.” That claim hasn’t been independently benchmarked, but it tracks with broader industry concern about AI-assisted fraud. The IRS flagged similar dynamics in its 2026 Dirty Dozen list of scam tactics targeting small businesses, which included AI-enhanced text and email impersonation.
For merchants relying on SMS today, the practical steps are limited but meaningful: use registered short codes rather than standard 10-digit numbers when possible, communicate publicly – on receipts, confirmation emails, and websites – exactly what your texts will and won’t request, and avoid asking customers to click links to confirm sensitive information via SMS. Consumers who suspect a scam text can forward it to 7726 (SPAM) to support carrier blacklist systems, a reporting mechanism that has existed for years but remains underused.
The harder question is whether registry modernization and verification tools can rebuild consumer trust fast enough to keep SMS viable as a retail channel – or whether the scam environment has already permanently shifted shopper behavior in ways that no technical fix can reverse.