SMS payments are text based. They are processed typically through reverse billing i.e. by sending a premium rated text message to the purchaser’s phone and debiting the amount from the prepaid credit or charging it to the purchaser’s post pay phone bill in the next billing cycle.
SMS payments usually are considered a form of micro payments. These are used primarily for smaller value purchases or peer to peer money transfer. SMS payments are processed in real time and provide a cheap and convenient alternate to traditional payments mechanisms available under the formal banking channels where costs for micro payments are considerably higher.