Banks’ Unstructured Supplementary Service Data (USSD) service revenues look set to decline over the approval by the Nigerian Communications Commission (NCC) to disconnect telecommunication operators from its service.

Nigerian mobile telecommunications companies (telcos) consisting of MTN, Glo, Airtel, and 9mobile have said they would halt their USSD service over banks’ accumulated USSD debt of N120 billion.

Findings by BusinessDay show that three out of the five tier-one banks – United Bank of Africa, Guaranty Trust Bank, and Zenith Bank – performed transactions worth N6.24 trillion in 2022, down 8.5 percent from the N6.82 trillion reported in 2021. The volume of transactions performed grew by 15 percent to 2.2 billion in 2022 from 1.9 billion in 2021.

USSD is a critical channel for delivering financial services, particularly for the underserved and the financially excluded, offered by telecom operators to banks.

Banks use different USSD codes to support the transfer of money through the use of mobile devices, without internet data connectivity.

Deposit money banks and the telecom operators had been at loggerheads over the non-remittance to telcos for all USSD fees charged by banks since 2019, accumulating N42 billion as of March 2021 and N80 billion as of November 2022.

In 2018, the Central Bank of Nigeria (CBN) released a regulatory guideline for the use of USSD in the Nigerian financial system. According to a statement, all deposit money banks, switches, mobile money operators, payment solution service providers, microfinance banks, and others were regulated to offer the service.

However, when initiating a transaction via USSD, every process comes at a cost to the network provider. This is known as USSD Session Charge, depending on how many steps are required to complete the transaction and the quality of the network.

The partnership agreement between the banks and telcos for the use of its unified service regulates them to pay N6.98 per USSD transaction but they have failed to comply.

This however resulted in the recent approval by the NCC, permitting network operators to disconnect their services. Experts say cutting USSD services would not only affect customers but also constitute a setback for the digital inclusion drive.

Oluwaseun Arambada, a research analyst at FBNQuest Merchant Bank, said the impact of the shutdown of USSD service by the network operators can be minimal.

He said: “If the telcos go ahead with their plan, based on the approval granted to them by the NCC, banks’ USSD revenue will be affected as it is expected to impact non-interest income.

“Also, the impact might not be material, because banks don’t only generate revenue from their USSD service, as income can be generated from other forms of electronic payment channels such as their mobile and internet banking, PoS, ATM, and other channels.”

According to him, this issue of telco debt has been on for more than two years. “If telcos say that the banks owe over N120 billion, it means that the banks have naturally gained a similar sum or maybe more.”

“If the banks are failing to pay up their debt, it is either associated with disputes around what constitutes a complete or failed USSD transactions, as such disagreement on obligation,” he said.

Tajudeen Ibrahim, director of research and strategy at ChapelHill Denham, said the banks had not been charging their customers for USSD transactions, while the telcos are of the opinion that the banks should be charging their customers for their service.

“Banks have accumulated an N120 billion debt that they owe because they haven’t been charging their customers, making it impossible for them to remit their fees as agreed with the telcos,” he said.

Ajibola Olude, chief operating officer of Association of Telecommunications Companies of Nigeria, said while some banks have complied with the agreement and remitted the money to the telcos, some banks refused to remit the money.

“It seems that the money that was collected is being declared as profits by the banks. That’s what caused the money not to be remitted and customers are paying this money,” Olude said.

Olude said telcos had invested about N250 billion in building the infrastructure, hence the USSD fee they are charging is a way to recoup some of the expenses and not a push to make a profit.

Read also: N120 billion USSD controversy: Time for high-level intervention

What CBN says

The CBN has said it is aware of the protracted dispute between the banks and telecommunication operators and has been engaging all stakeholders to ensure an amicable resolution.

A statement signed by Isa AbdulMumin, the CBN’s acting director of corporate communications, said it was due to the direct intervention of the CBN governor in March 2021 that a per session price of N6.98 (including settling any outstanding fees) was agreed upon between the banks and telcos.

“As far as we are aware, since 2021, deposit money banks continue to collect the USSD fees and remit the same on behalf of the telcos based on that agreement,” AbdulMumin said.

He added: “We understand the latest dispute concerns technical issues regarding the definition of a successful transaction from a bank and telco perspective. USSD is a critical channel leveraged primarily by the financially excluded, vulnerable, and critical mass.

“However, the CBN remains committed to ensuring that the areas of contention related to the collection of telco charges for USSD are resolved in the interest of the financial system and overall economy.”

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