Unstructured Supplementary Service Data (USSD) has evolved from being a channel employed predominantly by Mobile Network Operators (Telcos) to one deployed by a broad spectrum of service providers. Most financial institutions have sought the services of different Telcos to deploy unique USSD codes, allowing millions of Nigerians to enjoy basic banking services from the comfort of their homes and without the need for internet connection.
How do USSD codes work?
USSDs are sometimes referred to as "quick codes" or "feature codes". They are communication protocols that allow customers to send queries or requests and receive solutions simply by dialling a short code that begins with an asterisk (*) and ends with a hash(#) symbol. Some examples of USSDs include GTBank's *737#, Zenith Bank's *996#, Ghana Commercial Bank's *422#, Kenya National Bank's *625# e.t.c. Practical uses of USSDs in the finance space include the transfer of funds, airtime top-ups, account balance checks, BVN checks etc.
Are there any regulations on the use of USSD services for financial transactions?
USSDs for financial transactions are majorly regulated by the Central Bank of Nigeria (CBN) Regulatory Framework for the Use of Unstructured Supplementary Service Data (USSD) for Financial Services in Nigeria, 2018; and the Nigerian Communications Commission (NCC) Guidelines on Short Code Operation in Nigeria, 2011.
Financial institutions who wish to provide USSD services to their customers are required to obtain a letter of no objection or introduction from CBN before being considered for the issuance of the USSD shortcodes by the NCC.
How have customers been billed for USSD services?
For over two years now, Telcos and Deposit Money Banks (DMBs) in Nigeria have had prolonged disagreements over the appropriate USSD pricing model for financial transactions. The crux of the issue has been whether the Telcos are to adopt the End User billing model i.e. charging customers directly; or the Corporate billing model i.e. charging the financial institution directly. NCC issued a publication on the 24th day of July 20201, prohibiting Telcos from using the End User billing model and instructing that they employ the Corporate billing model. The basis for this was that granting access to USSD channels was a service delivered by Telcos to financial institutions and not customers.
What are the current directives by the CBN and NCC on USSD billing?
On the 12th day of March 2021, the Association of Licensed Telecommunication Operators of Nigeria (ALTON) threatened to withdraw USSD services from DMBs until the ?42 billion debt they owe for the services is settled2. In response to the above, the NCC and CBN on the 16th day of March 2021, issued a joint statement to the effect that DMBs and other financial institutions will be charged a flat fee of N6.98 per transaction; in accordance with the Corporate billing model. The new charge is to be deducted from customers' accounts by the financial institutions on behalf of the Telcos. Financial institutions are now prohibited from charging customers any other fees for the service.
Conclusion
In response to the above, the joint statement finally brings clarity on how payment is to be made for USSD services and seems to be a win for the Telcos. Although the Corporate billing model appears to have been adopted, customers will ultimately bear the costs. This may adversely affect the popularity of USSD transactions within the general populace, particularly low-income earners.
Footnotes
1 https://www.ncc.gov.ng/accessible/documents/910-determination-of-ussd-pricing-amended/file
2https://www.thisdaylive.com/index.php/2021/03/15/telcos-suspend-withdrawal-of-banks-ussd-services/
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