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Top Challenges that Threaten CPaaS Revenues

Top Challenges that Threaten CPaaS Revenues

According to a latest report, technology companies are staring at major issues threatening CPaaS revenues in 2022 and 2023. In 2026, CPaaS revenues would grow to $52.8 billion. Currently, the CPaaS market is worth $29.7 billion USD in 2022. With companies looking to consolidate their CPaaS stacks for better customer service, application integration could emerge as a major challenge. Lack of automation to manage Cyber security, fraud, and platform inefficiencies could derail revenue generation opportunities for CPaaS providers. In fact, the latest research from XConnect and Mobilesquared found CPaaS providers could lose $1.4 billion by 2026 due to revenue leakage from platform incompatibility and fraud. Clearly, the research reveals that fighting fraud and achieving consolidation as the top challenges for CPaaS providers.

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Let’s understand the biggest challenges facing CPaaS providers and their effect on CPaaS revenues.

What is CPaaS?

Communications Platform as a Service (CPaaS) is an API-based collection of tools and capabilities that facilitates synergistic integration of various communications software, Cloud and middleware with voice, chat, video, SMS and telephone systems.

According to Gartner, a CPaaS platform programmatically provides developers with “APIs, SDKs, IDEs and documentation to facilitate simplified access to an array of communications tools (spanning voice, SMS, messaging and video).

More on CPaaS Landscape: The Best CPaaS Tools to Deliver Customizable Communications on Existing Business Applications, Based on User Reviews

With heightened demand for better omnichannel customer experience across all communication channels, it is important to look at CPaaS platform as a key investment in strategizing business operations around embedded communications.

Therefore, Mobilesquared defines CPaaS as “the capability to provide real-time, cloud-based omnichannel communications via an API to connect brands with consumers.”

Messaging platforms contribute the most to the CPaaS market, spending close to 70% on these solutions. Other significant spenders include Voice, Email and Mobile messaging channels. Social media messaging, web chat and video make up for the rest of the revenue channels for CPaaS providers. With ever-growing demand for strong data compliance, data privacy and financial auditing of CPaaS transactions, providers are feeling the heat inflicted by fraudulent practices in call center handling.

So, what are the biggest challenges facing CPaaS vendors?

According to XConnect’s recent report, here are the top challenges affecting CPaaS revenues.

  • System integration
  • Platform integration
  • Management services
  • Customization
  • Network integration
  • Offering off-the-shelf solutions
  • Call center operations management (outbound/ inbound integration)

Compared to all other channels, Voice is the channel expected to experience the greatest threat from fraudulent practices. In fact, Voice is expected to experience revenue leakage of 8.1% of total voice spend in 2022. However, by the end of 2026, this leakage would taper off at 5.78% — taking 1% of the fraud costs arising from voice fraud margins (lower than what it is in 2022 at 1.1%)

Here, termination rate charges were identified as the biggest threat to traffic. Overall, an estimated $6 billion will be lost in cumulative revenue between 2022-2026.

The report shows that despite an estimated rise in leakage and fraud-related losses, over a quarter of respondents believe that they are not susceptible to losing revenues to fraud or platform inefficiencies. The survey’s goal was to establish an understanding of the biggest barriers to growth for CPaaS providers and identify future revenue trends. Respondents were located across the globe.

According to the research, around one-quarter of respondents also identified the supplementary threats of information accuracy and premium rate call back.

At the time of this announcement, Tim Ward, VP Number Information Services, at XConnect said-

“The CPaaS industry is a rapidly expanding market that holds many opportunities and challenges for service providers. Over recent years, we’ve seen an increase in threats to omnichannel revenue as robocalling and termination charges affect more businesses than ever before. This is driving the need for greater number intelligence services for CPaaS providers. It is critical that they understand the risk to revenue and have the solutions in place to tackle potential business disruptions and deliver better communications.”

Understanding the Role of CPaaS Consolidation in the Digital Transformation Journeys

The research also revealed that consolidation will play a key role in the growth of CPaaS in the coming years. The biggest business challenge facing CPaaS providers is service integration followed by platform integration.

Nick Lane, Chief Insight Analyst & Founder, Mobilesquared said – “As digitalization becomes more far reaching, the changing needs of modern consumers are pushing service providers to innovate and integrate their service offerings. The research shows that traditional voice and messaging service providers need to be ready to enhance their offerings to drive growth in CPaaS.”

Nick added, “Today’s communications market is ready for evolution. To successfully capture the huge opportunity in omnichannel, service providers must embrace diversity with their end users in mind.”

Mobilesquared predicts that voice will be one of the fastest growing CPaaS channels, with the channel attributing $4 billion to CPaaS revenues in 2022, and $9.5 billion by 2026. Overall, it expects CPaaS to generate revenues of $29.7 billion in 2022, rising to $52.8 billion in 2026.

XConnect, a wholly owned subsidiary of Somos Inc, consolidates, maintains and delivers trusted telephone number intelligence to world leading telecommunication service providers. It processes information from hundreds of different global datasets and ensures that customers solve routing, validation and fraud challenges in real time.

XConnect’s Number Information Services are used for voice and messaging routing, fraud protection and to identify and validate insights. They also support the deployment and evolution of next-generation communications, such as VoLTE and RCS.

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