Recently, the Central Bank of Nigeria (CBN) released a circular detailing the resolution of a meeting between CBN, the Nigerian Communications Commission (NCC), Mobile Network Operators (MNOs), and Deposit Money Banks (DMBs), following threats by the MNOs to withdraw the Unstructured Supplementary Service Data (USSD) services nationwide. Disputes around the pricing of USSD services had led due to the accumulation of outstanding fees for USSD services rendered by MNOs. At the close of the meeting, the following resolutions were reached;
Related Link: CBN, NCC Issue Joint Statement, Announces New USSD Transaction Charges - Mar 16, 2021
The USSD is a growing means through which banking transactions are facilitated given the increasing use and distribution of internet services in Nigeria, most importantly, with 3G and 4G internet just recently taking centre stage. While other banking apps need internet access and smartphone functionality, USSD banking can work on any mobile device, including feature phones. According to statistia, c. N390.5bn worth of transaction went through the channel as of H1 2020.
Despite the contribution of this service to financial inclusion, which stood at 60.0% as of December 2019, dispute around the pricing of the services has led to a protracted back and forth between the Telcos and Banks. Initially, the MNOs had provided this service for free but as time went on, demanded payment for such transactions from the DMBs. Disputes around the pricing from various telcos and the recommended billing from NCC made many banks to stop funding their payment accounts with the telcos, hence the outstanding payments.
The new billing regime replaces the current per session billing structure, ensuring a much cheaper average cost per transaction. Customers will now be charged for completed transactions rather than for every 20secs they spend on the USSD platform (with a maximum of 120 seconds allowed at once). The previous fee structure set a price floor of N1.63 per 20 seconds, with banks and mobile operators given the discretion to fix a fee above the floor hat was beneficial to all parties .The new structure saves money on longer transactions and is more transparent.
Many banks are still waiting for clarity regarding how the charges will be implemented. Will payment be on only revenue generating transactions? Will the banks have to pay for failed transactions? Etc. Depending on how the charges are implemented, it is more likely that banks will take a hit on their income as banks will be required to pay for accumulated debt on prior services and now begin to pay actively for current transactions which may be difficult to pass on fully to customers.