On the 5th of June 2021, I opened my email inbox and saw messages from almost all the banks where I have an account informing me that USSD transactions cost N6.98 henceforth, even carbon my favourite bank followed suit some days later. Although I rarely ever use USSD for banking transactions – (I just prefer using the bank apps), still, this news wasn’t pleasant to me. I felt it was going to have a negative effect on many who depend on USSD codes for banking transactions.
As is usual with me, I opened up my web browser that day and went on to read all about how we go to this point, and why. I will be talking about it all in this post.
Firstly, what are USSD codes?
USSD is an abbreviation for Unstructured Supplementary Service Data. It is simply a way by which your phone can connect/communicate with a mobile network operator’s system, through the use of special codes, through the GSM network. Some call it quick codes or feature codes.
The use of these codes and connection allows for quick transactions to be carried out, such as checking airtime balance, loading airtime, getting information about your phone, etc. It is also used for basic banking transactions. And because this connection/communication is made through the GSM network, it is possible to use USSD codes on any phone, including feature phones (phones with limited internet capabilities).
In Nigeria especially, the use of USSD codes has been very beneficial as many still don’t have access to stable internet connections and many still cannot afford to use smartphones. As a result, the use of USSD codes has improved financial inclusion in the country. Also, the fact that USSD codes can be used quickly, and without an internet connection makes it appealing for even people who have smartphones.
The N42 billion debt and the threat to shut down USSD services
The use of USSD codes is a service provided by Mobile Network Operators (MNOs). In the case of banking transactions, the MNOs provide these services to the banks, for their customers.
In 2019, ALTCON (Association of Licensed Telecommunications Operators of Nigeria) said banks must begin paying for the USSD services being provided by the MNOs. Below is a quote of some of the things Gbenga Adebayo, the chairman of ALTCON said
“The USSD is a service we are providing for the banks and there is a cost incurred by telecom operators for providing those services,”
“The bank has given an erroneous impression to the public that it is a sunk cost and it is not because for the service to be allowed, the cell site must be powered, there must be transmission link available and our systems must interconnect with the systems of the banks. It is a recurring cost other than the initial capital.”
“If they think we should not charge, they also should not charge our subscribers,”
“A time will come when we will have to invoke our rights under the Communications Act, which allows us to seek a request to disconnect the link.”
Apparently, banks had been charging customers for USSD services, but the MNOs were not getting anything, and it was time to speak up. So in December 2019, ALTCON threatened to USSD services in Nigeria. Earlier that year, MTN had announced that it would begin charging customers N4 for USSD services.
- MNOs say they can no longer offer USSD services for free – proposes to take a cut of N4.50k per 20 seconds from the charges paid by customers to the banks.
- Dispute about who will pay for the services – the MNOs wanted the banks to pay, but the banks ask the MNOs to charge customers directly
- MNOs say the cost of a USSD session is N12. NCC steps in with a price determination template.
- NCC determines that a typical USSD session lasts 20 seconds and sets a price cap of ₦4.98 for each session.
- MTN Nigeria proceeds to begin charging customers N4 per session for USSD transactions
- NCC says no.
- The issue of who will pay for USSD services lingered on.
While all this was going on, a debt of about N42 billion had accumulated, and something needed to be done, and it needed to be done fast. The MNOs are providing a service, and they needed to be paid for it.
Eventual resolution – Customers to the rescue.
So, after the long-drawn dispute over the appropriate pricing of USSD services provided to the banks, and who to pay for it, and after another threat in March 2021 by ALTCON to suspend USSD services in Nigeria, it was finally concluded that customers will pay N6.98 for every bank transaction carried out using USSD.
This was arrived at after a joint meeting of the CBN, NCC, Deposit Money Banks, and the MNOs. And in a statement jointly signed by the CBN and the NCC it was stated that it will take effect from the 16th of March 2021.
Despite this resolution, there was still clarity that needed to be made regarding how exactly the charges will be implemented. I believe that clarity has been given and that is why we began receiving notifications on the 5th of June 2021 regarding the USSD transaction fee.
As for the outstanding debt, the CBN has asked the banks and MNOs to discuss within themselves and come up with a suitable payment plan. i do hope the CBN or NCC will not need to step in again.
Effect of the N6.98 charge on customers
In Nigeria, a country where a large portion of its citizen still use feature phones, and where internet connectivity is still not commonplace for a large amount of its population, USSD had served to boost financial inclusion, by making banking services accessible to many in this category. Unfortunately, this set of people are yet the ones who will be impacted more by the charge and find it more painful.
The CBN and banks have stated that there are other channels to access banking services that are ‘free’, such as internet banking and using banking apps. Obviously, these other channels exist, but the people that will be most affected by the USSD charges are the same people who find it difficult to use these other channels.
I believe this charge will have a negative effect on the financial inclusion drive, but only time will tell what the actual impact will be.
Thanks for reading.
P.S. Most banks have said USSD transactions for airtime and data purchases will remain free. In other words, nothing will be charged when customers purchase airtime and data using USSD codes. I think that’s a good one from the banks.
Just in case you are curious, check out this article on the difference between Mobile Network Operators (MNOs) and Telecommunication service providers (Telcos).