Banks in Nigeria are considering charging customers for Unstructured Supplementary Service Data (USSD) transactions after telecommunications companies recently increased their tariffs. This development has raised concerns among financial service users, who fear higher costs for mobile banking services.
USSD (Unstructured Supplementary Service Data), according to experts is a platform that enables bank customers to transfer money digitally using their phones without requiring an internet connection. This SMS-based mobile banking service utilizes a USSD shortcode to provide access to various financial services, including money transfers, bill payments, and purchasing airtime.
USSD is particularly beneficial for users who do not have smartphones or internet access, as it allows them to conduct banking transactions using specific codes assigned to each bank. However, it is worth noting that there has been a significant decline of 150.18 percent in the usage of USSD for financial transactions, as more users are shifting towards internet banking.
Telecommunications firms, under the aegis of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), recently reviewed their USSD pricing structure, citing rising operational expenses, inflation, and regulatory obligations. The move is expected to impact banks, which rely heavily on USSD services to facilitate financial transactions, particularly for customers without smartphones or internet access.
Industry sources indicate that some banks are already reviewing their pricing models to offset the additional costs imposed by telcos. While banks had previously resisted implementing direct USSD charges on customers due to regulatory interventions, the latest tariff hike may leave them with no choice but to pass on the burden.
A senior executive at a leading commercial bank, who spoke on condition of anonymity, stated, “The cost of USSD transactions has increased significantly. If we absorb these costs without adjustment, it will impact our profitability. Discussions are ongoing on how to navigate this challenge while ensuring minimal disruption for customers.”
Consumer rights groups, however, have cautioned against any move that could make banking services more expensive for the masses. “USSD is crucial for financial inclusion, particularly for low-income earners who depend on it for transactions. Increasing charges will discourage usage and could push people back into cash-based transactions,” said Fred Nwaogazi, an expert in digital finance
The Central Bank of Nigeria (CBN) has yet to issue a directive on the matter, but analysts predict that regulatory intervention may be necessary to strike a balance between the interests of telcos, banks, and consumers.
As discussions continue, customers may need to brace for potential changes in USSD banking charges in the coming weeks. Industry stakeholders are calling for collaborative efforts between banks and telcos to ensure a fair and sustainable pricing model that does not hinder financial inclusion.
The disputes regarding the debts owed by Deposit Money Banks (DMBs) for Unstructured Supplementary Service Data (USSD) platforms have persisted for about five years. Currently, DMBs owe telecom companies approximately ₦200 billion related to this issue.
The ongoing conflict between mobile network operators (MNOs) and deposit money banks primarily centers around the pricing of USSD services, the responsibility for payment (whether it should be borne by DMBs or ultimately the consumer), and the compensation for the value added to financial services. Previously, the Nigerian Communications Commission (NCC), Central Bank of Nigeria (CBN), and MNOs had reached an understanding to support banks in extending services to remote and unbanked areas by providing USSD access free of charge.
In October 2019, tensions escalated when telecom companies began charging banks for USSD services, while the banks contended that the charges should be paid directly by consumers. Banks had been charging customers between ₦53 and ₦70 for individual USSD sessions. By August 2020, the NCC reported that Nigerian banks owed telecom companies ₦17 billion (approximately $41.4 million) for USSD services. This situation led to a revision of the pricing model to allow mobile operators to charge subscribers for these services. However, the Minister of Communications and Digital Economy intervened, asserting that these services were specifically intended for the banks.
During this period, the CBN consistently supported the banks, emphasizing the importance of cost minimization and the stability of the financial system. The eventual resolution of this conflict underscores the necessity of amicable dispute resolution. Nonetheless, it raises important questions regarding stakeholder collaboration and the regulatory governance of strategic alliances aimed at promoting financial inclusion. Insights from targeted policy research could provide valuable information on these critical issues.
