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A working dispute between Nigeria’s banks and telcos stepped up final week when the Nigerian Communications Fee (NCC) gave the telcos permission to disconnect banks that haven’t paid their money owed for USSD companies, in a transfer that would exclude thousands and thousands of shoppers.
Over the past decade, USSD (Unsupported Supplementary Service Information – a expertise courting again to the Nineteen Eighties), has been more and more utilized by clients with out smartphones to entry digital banking companies. Dialling a code permits holders of characteristic telephones to hold out capabilities reminiscent of transfers, checking account balances and producing financial institution statements.
The dispute between the telcos and the banks started in 2019 when the previous threatened to close down the latter’s entry to USSD platforms. They argued that banks ought to foot the invoice for USSD periods. On the time the telcos estimated the debt at $70m.
“After extended negotiations, they lastly reached an settlement that the banks would pay, and the regulators intervened to ascertain a charge,” says Olayinka David-West, a professor of data techniques at Lagos Enterprise Faculty. The worth for USSD was pegged at N6.98 (roughly $0.015) per transaction by the Central Financial institution of Nigeria (CBN), to be remitted to telcos instantly from clients’ financial institution accounts.
The persevering with dispute revolves across the technical definition of a transaction. The banks argue that charges are solely charged after a banking transaction has been carried out, however many shoppers finish their session earlier than one has taken place. The telcos argue that banks ought to cost clients as quickly the related code has been efficiently dialled.
“The banks are nonetheless refusing to pay, leaving the telcos burdened with a major quantity of accounts receivable associated to USSD session charges,” says David-West.
The excellent USSD debt has now risen to $260m.
Progress on monetary inclusion threatened
There are considerations that if entry to USSD is shut down or the fee handed on to clients, progress achieved in monetary inclusion by cell cash expertise might be reversed.
The predominantly poorer clients with out smartphones, who depend upon USSD for entry to digital companies, might be both be disadvantaged of companies or deterred by the price. Techpoint Africa estimates that 17.3m folks might be excluded from digital banking companies if USSD is reduce off.
Nigerian banks reminiscent of Constancy Financial institution and GTBank started providing cell banking companies by USSD codes following the successes of M-Pesa in Kenya within the 2000s. The expertise has enabled a large number of low-income households to be financially included and has helped the CBN to implement its Nationwide Monetary Inclusion Technique.
As of 2021, 51% of Nigerian adults have been utilizing formal monetary companies, together with banks, microfinance banks, cell cash, insurance coverage, or pension accounts, up from 40% in 2018.
Many Nigerians resort to utilizing airtime sharing for monetary transactions resulting from exorbitant knowledge prices and restricted smartphone penetration. Final yr, USSD transfers accounted for greater than $9.75bn, based on current knowledge printed by the CBN.
“Now the telcos are threatening to disconnect these companies, which might lead to a considerable portion of transactions being affected and everybody struggling losses,” says David-West.
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